1Providing for the regulation of video gaming and for powers and
2duties of the Department of Revenue; establishing the Video
3Gaming Account; and prescribing penalties.

4TABLE OF CONTENTS

5Section 1. Scope of act.

6Section 2. Definitions.

7Section 3. Video gaming generally.

8Section 4. Licensing of manufacturers, distributors and
9vendors.

10Section 5. Licensed establishment license.

11Section 6. Limitations on licensed establishments.

12Section 7. Central computer system.

13Section 8. Video gaming machine prototype.

14Section 9. Fees.

15Section 10. Unlawful use by minors.

16Section 11. Inducements prohibited.

17Section 12. Multiple types of licenses prohibited.

18Section 13. Illegal activities.

1Section 14. Establishment of account and distribution of funds.

2Section 15. Preemption of local taxes and license fees.

3Section 16. Exemption from State gaming laws.

4Section 17. Exemption from Federal regulation.

5Section 18. Effective date.

6The General Assembly of the Commonwealth of Pennsylvania
7hereby enacts as follows:

8Section 1. Scope of act.

9This act permits the Department of Revenue to regulate and
10adopt standards for video gaming in this Commonwealth.

11Section 2. Definitions.

12The following words and phrases when used in this act shall
13have the meanings given to them in this section unless the
14context clearly indicates otherwise:

15"Account."  The Video Gaming Account established under
16section 14.

17"Coin-operated amusement machine."  A machine that requires
18the insertion of a coin, currency or tokens to play or activate
19a game, the outcome of which is primarily determined by the
20skill of the player. The term does not include a video lottery
21terminal.

22"Department."  The Department of Revenue of the Commonwealth.

23"Distributor."  Any individual, partnership, association or
24corporation, licensed by the Department of Revenue to buy, sell,
25service or distribute video gaming machines. The term does not
26include a machine vendor or a manufacturer.

27"Gaming machine."  A device or machine that has the outcome
28of play primarily determined by chance. The term includes an
29antique slot machine under 18 Pa.C.S. § 5513(c) (relating to
30gambling devices, gambling, etc.) when used for profit. The term

1shall not include any of the following:

2(1)  A coin-operated amusement machine.

3(2)  A video lottery terminal that has all of its seals
4or identification plates.

5(3)  Slot machines as defined under 4 Pa.C.S. § 1103
6(relating to definitions).

7(4)  A game of chance under the act of December 19, 1988
8(P.L.1262, No.156), known as the Local Option Small Games of
9Chance Act.

10(5)  Lottery terminals used under the act of August 26,
111971 (P.L.351, No.91), known as the State Lottery Law.

12"Host municipality." A municipality in which a licensed
13establishment licensed under section 5 is located.

14"Licensed establishment."  A restaurant, bar, tavern, hotel
15or club that has a valid liquor or malt or brewed beverage
16license under Article IV of the act of April 12, 1951 (P.L.90,
17No.21), known as the Liquor Code.

18"Machine vendor."  Any individual, partnership, association
19or corporation that:

20(1)  is licensed by the Department of Revenue; and

21(2)  owns, services and maintains video gaming machines
22for placement in licensed establishments.

23"Manufacturer."  Any individual, partnership, association or
24corporation that:

25(1)  is licensed by the Department of Revenue; and

26(2)  manufactures or assembles video gaming machines.

27"Net profits."  All money put into a video gaming machine
28minus the cash awards paid out to players.

29"Service technician."  An individual holding a service
30technician's license issued by the Department of Revenue

1allowing the individual to service, maintain and repair video
2gaming machines.

3"State Lottery."  The lottery established and operated under
4the act of August 26, 1971 (P.L.351, No.91), known as the State
5Lottery Law.

6"Video gaming machine."  A device or machine:

7(1)  that, upon insertion of a coin or currency, will
8play or simulate the play of a video poker, bingo, keno,
9blackjack or any other game authorized by the Department of
10Revenue;

11(2)  that utilizes a video display and microprocessors;
12and

13(3)  in which, by the skill of the player or by chance,
14the player may receive free games or credits that may be
15redeemed for cash.

16Section 3. Video gaming generally.

17The department shall provide for video gaming at licensed
18establishments. With the exception of tickets indicating credits
19won, which are redeemable for cash, no machine may directly
20dispense coins, cash, tokens or anything else of value.

21Section 4. Licensing of manufacturers, distributors and
22vendors.

23(a)  Background investigation and application fee.--The
24department shall have the Pennsylvania State Police conduct a
25background investigation of an applicant for a manufacturer,
26distributor or machine vendor license as to personal and
27business character, honesty and integrity. An applicant must pay
28a nonrefundable application fee of $5,000. The investigation may
29utilize information on the applicant compiled by the
30Pennsylvania Liquor Control Board. The investigation includes

1the following:

2(1)  An examination of criminal or civil records.

3(2)  An examination of personal, financial or business
4records. This paragraph includes tax returns, bank accounts,
5business accounts, mortgages and contracts to which the
6license applicant is a party or has an interest.

7(3)  An examination of personal or business relationships
8which:

9(i)  include a partial ownership or voting interest
10in a partnership, association or corporation; and

11(ii)  bear on the fitness of the applicant for
12licensure.

13(b)  Production of information.--An applicant to become a
14licensee must produce information, documentation and assurances
15as required by the department. This subsection includes the
16following:

17(1)  Each license applicant must:

18(i)  consent in writing to and provide for the
19examination of financial and business accounts, bank
20accounts, tax returns and related records in the
21applicant's possession or under the applicant's control
22that establish by clear and convincing evidence the
23financial stability, integrity and responsibility of the
24license applicant; and

25(ii)  authorize all third parties in possession or
26control of accounts or records under subparagraph (i) to
27allow for their examination as deemed necessary by the
28department in conducting background investigations.

29(2)  Each license applicant must disclose on the
30application form any criminal convictions for offenses graded

1above summary offenses covering the ten-year period
2immediately preceding the filing of the application. The
3license applicant must also include on the application form
4any convictions of the gambling laws of any jurisdiction.

5(3)  If the license applicant has conducted a gaming
6operation in a jurisdiction that permits such activity, the
7license applicant must produce letters of reference from the
8gaming or casino enforcement or control agency that specify
9the experiences of the agency with the license applicant, the
10license applicant's associates and the license applicant's
11gaming operations. If the license applicant is unable to
12obtain these letters within 60 days of the request, the
13license applicant may submit a copy of the letter requesting
14the information together with a statement under oath or
15affirmation that, during the period activities were
16conducted, the license applicant was in good standing with
17the appropriate gambling or casino enforcement control
18agency.

19(4)  Each license applicant must provide information,
20documentation and assurances as required by the department to
21establish by clear and convincing evidence the license
22applicant's good character, honesty and integrity.
23Information under this paragraph may relate to family,
24habits, character, reputation, business affairs, financial
25affairs, business associates, professional associates and
26personal associates, covering the ten-year period immediately
27preceding the filing of the application.

28(b.1)  Felony conviction prohibition.--A person that has been
29convicted of a felony within ten years of the date of
30application shall not be issued a license under this act.

1(c)  Third-party disclosure.--Each license applicant must
2accept any risk of adverse public notice, embarrassment,
3criticism, damages or financial loss, which may result from
4disclosure or publication by a third party of material or
5information requested by the department pursuant to action on an
6application. The license applicant expressly must waive a claim
7against the department, executive director or the Commonwealth
8and its employees from damages as a result of disclosure or
9publication by a third party.

10(d)  Hearing upon denial.--A person who is denied a license
11has the right to a hearing before the department in accordance
12with the provisions of 2 Pa.C.S. Chs. 5 Subch. A (relating to
13practice and procedure of Commonwealth agencies) and 7 Subch. A
14(relating to judicial review of Commonwealth agency action).

15(e)  Sole proprietor vendors.--A sole proprietor vendor must
16comply with all of the following:

17(1)  Be a resident of this Commonwealth for at least two
18years prior to application for a license.

19(2)  Be of good moral character and reputation in the
20community.

21(3)  Be at least 18 years of age.

22(4)  Be current in the payment of all taxes, interest and
23penalties owed to the Commonwealth and political
24subdivisions. This paragraph excludes items under formal
25dispute or appeal under applicable law.

26(5)  Demonstrate sufficient financial resources to
27support the activities required to place and service video
28gaming machines.

29(f)  Partnership vendors.--Partnership vendors must comply
30with all of the following:

1(1)  Be current in the payment of taxes, interest and
2penalties owed to the Commonwealth and political
3subdivisions. This paragraph excludes items under formal
4dispute or appeal under applicable law.

5(2)  Demonstrate sufficient financial resources to
6support the activities required to place and service video
7gaming machines.

8(3)  Have each partner be:

9(i)  of good moral character and reputation in the
10community;

11(ii)  at least 18 years of age; and

12(iii)  a resident of this Commonwealth for at least
13two years prior to application for a license.

14(4)  At all times subsequent to licensing, a majority of
15the partnership ownership interest must be held by residents
16of this Commonwealth.

17(g)  Association and corporate vendors.--Association or
18corporate vendors must comply with all of the following:

19(1)  Be current in the payment of taxes, interest and
20penalties owed to the Commonwealth and political
21subdivisions. This paragraph excludes items under formal
22dispute or appeal under applicable law.

23(2)  Demonstrate sufficient financial resources to
24support the activities required to place and service video
25gaming machines.

26(3)  Have each shareholder holding more than 10% of the
27stock of a corporation be:

28(i)  of good moral character and reputation in the
29community;

30(ii)   at least 18 years of age; and

1(iii)  a resident of this Commonwealth for at least
2two years prior to application.

3(h)  Sole proprietor distributors.--A sole proprietor
4distributor must comply with all of the following:

5(1)  Be a resident of this Commonwealth for at least one
6year prior to application.

7(2)  Be of good moral character and reputation in the
8community.

9(3)  Be at least 18 years of age.

10(4)  Be current in the payment of taxes, interest and
11penalties owed to the Commonwealth and political
12subdivisions. This paragraph excludes items under formal
13dispute or appeal under applicable law.

14(5)  Demonstrate sufficient financial resources to
15support the activities required to sell and service video
16gaming machines.

17(i)  Partnership distributors.--Partnership distributors must
18comply with all of the following:

19(1)  Be current in the payment of taxes, interest and
20penalties owed to the Commonwealth and political
21subdivisions. This paragraph excludes items under formal
22dispute or appeal under applicable law.

23(2)  Demonstrate sufficient financial resources to
24support the activities required to sell and service video
25gaming machines.

26(3)  Have each partner be:

27(i)  of good moral character and reputation in the
28community;

29(ii)  at least 18 years of age; and

30(iii)  a resident of this Commonwealth for at least

1one year prior to application.

2(4)  At all times subsequent to licensing, a majority of
3the partnership ownership interest must be held by residents
4of this Commonwealth.

5(j)  Association and corporate distributors.--Association or
6corporate distributors must comply with all of the following:

7(1)  Be current in the payment of taxes, interest and
8penalties owed to the Commonwealth and political
9subdivisions. This paragraph excludes items under formal
10dispute or appeal under applicable law.

11(2)  Demonstrate sufficient financial resources to
12support the activities required to sell and service video
13gaming machines.

14(3)  Have each shareholder holding more than 10% of the
15stock of a corporation be:

16(i)  of good moral character and reputation in the
17community; and

18(ii)  at least 18 years of age.

19(4)  For at least one year immediately prior to
20application, have maintained and operated a coin machine
21distributorship office and sales staff within this
22Commonwealth. This paragraph does not apply to an association
23distributor.

24(k)  Sole proprietor manufacturers.--A sole proprietor
25manufacturer must comply with all of the following:

26(1)  Be of good moral character and reputation in the
27community.

28(2)  Be at least 18 years of age.

29(3)  Be current in the payment of taxes, interest and
30penalties owed to the Commonwealth and political

1subdivisions. This paragraph excludes items under formal
2dispute or appeal under applicable law.

3(4)  Demonstrate sufficient financial resources to
4support the activities required to manufacture and sell video
5gaming machines through a licensed distributor.

6(l)  Partnership manufacturers.--Partnership manufacturers
7must comply with all of the following:

8(1)  Be current in the payment of taxes, interest and
9penalties owed to the Commonwealth and political
10subdivisions. This paragraph excludes items under formal
11dispute or appeal under applicable law.

12(2)  Demonstrate sufficient financial resources to
13support the activities required to manufacture and sell video
14gaming machines through a licensed distributor.

15(3)  Have each partner be:

16(i)  at least 18 years of age; and

17(ii)  of good moral character and reputation in the
18community.

19(m)  Association and corporate manufacturers.--Association or
20corporate manufacturers must comply with all of the following:

21(1)  Be current in the payment of taxes, interest and
22penalties owed to the Commonwealth and political
23subdivisions. This paragraph excludes items under formal
24dispute or appeal under applicable law.

25(2)  Demonstrate sufficient financial resources to
26support the activities required to manufacture and sell video
27gaming machines through a licensed distributor.

28(3)  Have each shareholder holding more than 10% of the
29stock of the corporation or association be:

30(i)  of good moral character and reputation in the

1community; and

2(ii)  at least 18 years of age.

3(n)  Service technician.--A service technician must comply
4with the following:

5(1)  Be current in the payment of taxes, interest and
6penalties owed to the Commonwealth and political
7subdivisions. This paragraph excludes items under formal
8dispute or appeal under applicable law.

9(2)  Be of good moral character and reputation in the
10community.

11(3)  Be at least 18 years of age.

12(o)  Written agreement.--Each licensed establishment shall
13have a written agreement with a licensed machine vendor for a
14minimum 12-month term. The agreement shall be approved by the
15department and on file at the licensed establishment.

16(p)  Nonaccessibility to minors.--No video gaming machine may
17be in an area easily accessible to minors. A floor-to-ceiling
18wall is not required, but the area must be secure and easily
19seen and observed by the employees or management of the licensed
20establishment.

21(q)  Advertising prohibited.--No licensed establishment with
22a video gaming license may advertise gaming in any form, written
23or electronic, nor may its name include the words "casino,"
24"gambling," "gaming" or any other term that may be interpreted
25to advertise gaming.

26Section 5. Licensed establishment license.

27The department shall issue a license to any licensed
28establishment upon a showing that its liquor or retail dispenser
29license is valid and is in good standing with the Pennsylvania
30Liquor Control Board. The annual fee for a licensed

1establishment shall be $500 per video gaming machine.

2Section 6. Limitations on licensed establishments.

3(a)  Limitations.--Licensed establishments shall be subject
4to the following limitations:

5(1)  No licensed establishment may have more than three
6video gaming machines.

7(2)  No applicant may hold more than one type of license
8authorized by this chapter.

9(3)  Each licensee is responsible for payment of its
10license fee. Payment of the fee by a person, partnership or
11corporation other than the licensee is prohibited.

12(b)  Unlawful acts.--No licensed establishment shall permit:

13(1)  An individual under 21 years of age to operate or
14attempt to operate a video gaming machine.

15(2)  An individual under 21 years of age to receive or
16attempt to receive a prize from a video gaming machine.

17(3)  A visibly intoxicated person to play a video gaming
18machine.

19(4)  An individual to tamper with the connection of a
20video gaming machine to the central computer.

21In addition to any other penalties provided by law, a person who
22violates paragraph (1), (2) or (3) commits a summary offense.

23(c)  Seizure, forfeiture and destruction of gaming
24machines.--Gaming machines shall be considered to be per se
25illegal. Gaming machines and the proceeds therefrom may be
26seized upon view as illegal contraband by agents of the
27department and any other law enforcement agency. The owner of a
28gaming machine shall have no right to compensation for the
29seizure and destruction of a gaming machine or the proceeds of a
30gaming machine.

1(d)  Penalties.--The following penalties shall apply:

2(1)  In the case of a gaming machine seized from a
3licensed establishment, for a first violation, a penalty of
4at least $1,000 and not more than $5,000 and a suspension of
5the licensed establishment owner's liquor license for not
6less than seven consecutive days, and for each subsequent
7violation, a penalty of $15,000 and a suspension of the
8liquor license for not less than 14 consecutive days.

9(2)  In the case of a gaming machine seized from a place
10of business other than a licensed establishment, for a first
11violation, a penalty of at least $1,000 and not more than
12$5,000 against the owner of the business from which the
13gaming machine was seized, and for each subsequent violation,
14a penalty of $15,000.

15Section 7. Central computer system.

16The department shall utilize the central computer system
17utilized by the State Lottery. All licensed video gaming
18machines must be linked to the central computer system at the
19State Lottery.

20Section 8. Video gaming machine prototype.

21The department shall develop a prototype video gaming machine
22that includes hardware and software specifications. These
23specifications shall include:

24(1)  All machines must have the ability to interact with
25the central communications system.

26(2)  Unremovable identification plates shall appear on
27the exterior of the machine containing the name of the
28manufacturer and the serial and model number of the machine.

29(3)  Rules of play shall be displayed on the machine face
30or screen as promulgated by the department.

1(4)  A video gaming machine may not directly dispense
2coins, cash, tokens or any other article of exchange or value
3except for tickets. Such tickets shall be dispensed by
4pressing the ticket-dispensing button on the machine at the
5end of one's turn or play. The ticket shall indicate the
6total amount of credits and the cash award, and the player
7shall turn in this ticket to the appropriate person at the
8licensed establishment to receive the cash award. The cost of
9the credit shall be $.25, and the number of credits played
10per game shall not exceed ten.

11(5)  No cash award for any individual game may exceed
12$1,000.

13(6)  All video gaming machines must be designed and
14manufactured with total accountability to include gross
15proceeds, net profits, winning percentages and any other
16information the department requires.

17(7)  Each machine shall pay out a minimum of 85% of the
18amount wagered.

19(8)  The department may contract with the board to
20develop and verify specifications for video gaming machines.

21Section 9. Fees.

22(a)  Vendors license and fee.--The annual fee for a machine
23vendor license shall be $25,000 for the first 50 video gaming
24machines and an additional $500 per video gaming machine license
25in excess of 50. A machine vendor license permits the vendor to
26sell video gaming machines to another licensed machine vendor or
27licensed distributor.

28(b)  Distributor license fee.--The annual fee for a
29distributor license shall be $10,000.

30(c)  Manufacturer license fee.--The annual fee for a

1manufacturer license shall be $10,000.

2(d)  Service technician license fee.--The annual fee for a
3service technician license shall be $100.

4Section 10. Unlawful use by minors.

5(a)  Minors.--No individual under 21 years of age may use or
6play a video gaming machine. An individual who violates this
7subsection commits a summary offense.

8(b)  Licensees.--Licensees shall be subject to the following:

9(1)  A licensed establishment may not, regardless of
10knowledge or intent, permit an individual under 21 years of
11age to play or use a video gaming machine.

12(2)  A licensed establishment that violates this
13subsection commits a misdemeanor of the second degree.

14Section 11. Inducements prohibited.

15(a)  General rule.--A video gaming machine owner may not
16offer or give any type of inducement or incentive to a licensed
17establishment to secure a machine placement agreement.

18(b)  Definition.--As used in this section, the term
19"inducement" or "incentive" means consideration from a licensed
20machine vendor to a licensed establishment owner as an
21enticement to solicit or maintain the licensed establishment
22owner's business. The term includes cash, gifts, loans and
23prepayment of commissions.

24Section 12. Multiple types of licenses prohibited.

25(a)  Manufacturer restriction.--A manufacturer may not be
26licensed as a machine vendor or own, manage or control a
27licensed establishment and shall be licensed only to sell to
28licensed distributors.

29(b)  Distributor restriction.--A licensed machine distributor
30may not be licensed as a machine vendor or own, manage or

1control a licensed establishment and shall only contract with
2licensed machine vendors.

3(c)  Vendor restriction.--A machine vendor may not be
4licensed as a manufacturer or distributor or own, manage or
5control a licensed establishment and shall be licensed only to
6contract with licensed distributors and licensed establishments.
7This shall not prohibit a licensed vendor from selling used
8equipment to another licensed vendor.

9(d)  Establishment owner restriction.--An owner of a licensed
10establishment may not be licensed as a manufacturer, distributor
11or vendor and shall only contract with a machine vendor to place
12and service equipment.

13Section 13. Illegal activities.

14A person may not sell, distribute, service, own, operate or
15place on location a video gaming machine unless the person is
16licensed under this act and is in compliance with all
17requirements of this act.

18Section 14. Establishment of account and distribution of funds.

19(a)  Video Gaming Account.--There is established a separate
20account in the State Treasury to be known as the Video Gaming
21Account. Fees and fines under this act and the portion of net
22profits under subsection (b)(2)(iii) shall be deposited in the
23account.

24(b)  Distribution of net profits.--The following shall apply
25to the distribution of net profits:

26(1)  Net profits shall be calculated by subtracting cash
27awards from the total consideration played on the machine.

28(2)  The net profits from each video gaming machine shall
29be distributed in the following manner:

30(i)  23% to the licensed establishment.

1(ii)  22% to the licensed vendor.

2(iii)  45% to the Property Tax Relief Fund
3established under 4 Pa.C.S. § 1409 (relating to Property
4Tax Relief Fund).

5(iv) 5% to the host municipality.

6(v) 5% to Category 1, Category 2 and Category 3
7licensed facilities.

8(c)  Department funding.--The department shall derive all
9funding for its operations related to the establishment,
10enforcement and operation of video gaming from the account.

11(d)  Payments to municipalities.--In addition to the funds
12distributed under subsection (b)(2)(iv), the department shall
13pay each municipality from the account $500 per licensed machine
14located in the municipality.

15(e)  Funds maintained in account.--An annual minimum balance
16of $2,000,000 shall be maintained in the account. Money in
17excess of this amount at the end of each fiscal year shall be
18distributed to the Property Tax Relief Fund.

19(f)  Funding for compulsive gambling programs.--The
20department shall allocate from the account at least $1,000,000
21annually for the purpose of treating compulsive gambling in this
22Commonwealth.

23(g)  Continuous appropriation.--The money in the account is
24continuously appropriated to the account and shall not lapse at
25the end of any fiscal year.

26Section 15. Preemption of local taxes and license fees.

27(a)  Statutes.--Video gaming machines shall be exempt from
28taxes levied under the following:

29(1)  The act of August 5, 1932 (Sp.Sess., P.L.45, No.45),
30referred to as the Sterling Act.

1(2)  The act of December 31, 1965 (P.L.1257, No.511),
2known as The Local Tax Enabling Act.

3(3)  53 Pa.C.S. Pt.III Subpt. E (relating to home rule
4and optional plan government).

5(4)  Any statute that confers taxing authority to a
6political subdivision.

7(b)  Licensing fees.--Licensing fees shall comply with the
8following:

9(1)  Video gaming machines are exempt from local
10licensing fees.

11(2)  Local licensing fees imposed on all other coin-
12operated amusement machines shall not exceed $150.

13Section 16. Exemption from State gaming laws.

14Video gaming machines authorized under this act and their use
15as authorized under this act are exempt from 18 Pa.C.S. § 5513
16(relating to gambling devices, gambling, etc.).

17Section 17. Exemption from Federal regulation.

18The General Assembly declares that the Commonwealth is exempt
19from section 2 of the Gambling Devices Transportation Act (64
20Stat. 1134, 15 U.S.C. § 1172). Shipments of approved video
21gaming machines into this Commonwealth in compliance with
22sections 3 and 4 of the Gambling Devices Transportation Act (64
23Stat. 1134, 15 U.S.C. §§ 1173 and 1174) shall be deemed legal
24shipments into this Commonwealth.

25Section 18. Effective date.

26This act shall take effect in 60 days.