New Small Games of Chance Law Impacting Local Clubs

On Feb. 2, 2012, Gov. Tom Corbett signed into law Act 2 to create new definitions, increase prize limits, provide additional licensing rules and regulations for organizations and amend enforcement provisions.

This law mainly impacts small local clubs run by organizations like the VFW and American Legion.

Despite the endorsement and support of the state Chapter of the Veterans of Foreign Wars, the state Federation of Fraternal and Social Organizations and Pennsylvania's Association of Nationally Chartered Organizations, many local clubs have expressed confusion and frustration over the changes.

It seemed as though the parent organizations didn’t really confer with their members before endorsing the changes, which is hardly unusual inHarrisburg.

The problem is legislators like myself didn’t know there was a problem until after the law was passed, so now we have to figure out what changes need to be made to make Act 2 workable.

I have reached out to the clubs in my district and volunteered to come speak to the officers and members so I can better understand how it impacts us locally and find out what we need to do to improve this law. But with so much confusion, I thought it would make sense to try and explain the changes in better detail.

The newly updated Local Option Small Games of Chance Act increases the prize limits for games and attempts to prevent exploitation of the system by providing additional licensing rules and regulations for eligible organizations.

The types of gambling authorized by the act are punchboards, pull-tabs, raffles (including special-permit raffles), daily drawings and weekly drawings. Some of the changes of Act 2 are already in effect, which include:

• Individual prize limits are increased from $500 to $1,000, and the maximum amount of prizes that may be awarded during an operating week increases from $5,000 to $25,000. The monthly prize limit for raffles is increased from $5,000 to $10,000.
• Club licensees (eligible organizations with liquor licenses) must now spend at least 70 percent of proceeds for “public interest purposes” and no more than 30 percent of proceeds for “operational expenses.”  Proceeds must be spent in the same calendar year in which they were obtained.  Eligible organizations that do not have liquor licenses are not considered “clubs” and are regulated differently under this act.  These organizations must spend 100% of their proceeds for public interest purposes.
• Applications for licenses to conduct small games of chance must now include the results of a criminal history record information check, obtained from the Pennsylvania State Police, on the executive officer and secretary of the eligible organization making the application. Club licensees must include with their application (for renewals) to the Washington County Treasurer a copy of the most recent small games of chance report filed with the state Department of Revenue.

On February 1, 2013, the rest of the changes kick in. Among the changes, all eligible organizations must now electronically file annual proceed spending reports with the state Department of Revenue by entering in requested information to a reporting system to be located on a department website.

In these reports, groups will be asked to provide the following information from your records: the number of W-2G forms issued, the total gross winnings reported on W-2G forms, the gross revenue collected from small games of chance, the total expenses associated with small games of chance, total prizes paid, proceeds and amount of proceeds used for public interest purposes.

Club licensees (again, organizations with a liquor license) will have to complete semi-annual spending reports with even more information itemized by week and type of game, the amount of proceeds used for public-interest purposes, including details regarding the date(s) distributed, name of recipient(s) and the amount(s) distributed; and the amount of proceeds used for operational expenses.

Additionally, a club licensee that retains games of chance proceeds for a substantial purchase or project is required to give notice of the retention to the department via the club licensee’s semi-annual report.

These changes, particularly the reporting requirements, have many local clubs concerned about their future, and perhaps rightfully so.

Those concerns make it that much more important for officers and members of these organizations to speak up and work with us to make sure we can go back and fix Act 2 to strike a fair balance to make sure none of our clubs are forced to close their doors.