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HomeMy WebLinkAbout2006-045 Imposition of Gambling Tax On Nonprofit Organizations; YMC Amendment 5.49.020 ORDINANCE NO 2006- 45 AN ORDINANCE of the City Council of the City of Yakima, Washington, amending Yakima Municipal Code Chapter 5 49, section 5 49 020, relating to the imposition of gambling taxes upon charitable, nonprofit organizations WHEREAS, as stated in RCW 9 46 010, the Washington State Legislature has declared that the raising of funds for the promotion of bona fide charitable or nonprofit organizations is in the public interest; and WHEREAS, charitable or nonprofit organizations may use the profits from gambling activities to support necessary community services, programs, benefits and assistance, and WHEREAS, the City Council of the City of Yakima recognizes the work of charitable, nonprofit organizations, and in particular such charitable, nonprofit organizations specifically organized for the benefit of and that provide services to United States military veterans, and that limit membership in said organizations to veterans of the various branches of the United States military; and WHEREAS, the City Council of the City of Yakima does seek through this Ordinance to increase the amount of funds realized through gambling - related activities and social pastimes that are available to charitable, nonprofit organizations organized for the benefit of and that provide services to United States military veterans, and that limit membership in said organizations to veterans of the various branches of the United States military; NOW, THEREFORE, the City Council of the City of Yakima, Washington, does ordain, that effective November 1, 2006, that no gambling taxes be collected upon bona fide charitable, nonprofit organizations organized for the benefit of and that provide services to United States military veterans, and that limit membership in said organizations to veterans of the various branches of the United States military, as follows Section 1 That Section 5 49 020 of the Yakima Municipal Code be, and the same is hereby amended to read as follows 5 49 020 — Taxes imposed -- Amounts -- Exemptions A. Tax Imposed There is levied a tax upon all persons, associations and organizations who conduct or operate gambling activities within the City of Yakima and who have been duly licensed by the Washington State Gambling Commission to conduct or operate such gambling activities Such tax shall be paid on the following gambling activities in the following respective amounts 1 Effective through December 31, 1999, any bingo or raffle, at the rate of ten percent of gross receipts less the amount awarded as cash or merchandise prizes in the conduct of such activity; ORDINANCE - 1 718 129 \rhg \yakima cit \river road \ordinance 2 Commencing January 1, 2000, any bingo or raffle, at the rate of five percent of the gross receipts less the amount awarded as cash or merchandise prizes in the conduct of such activity; 3 Any amusement game at the rate of two percent of the gross receipts less the amount awarded as cash or merchandise prizes in the conduct of such activity; 4 Any punchboard or pulltab, a tax computed at the rate of ten percent of gross receipts less the amount awarded as cash or merchandise prizes in the conduct of such activity; 5 Any social card game, a tax computed at the rate of ten percent of the gross receipts from the conduct of such activity; 6 Any public cardroom operated as a commercial stimulant, a tax computed at the rate of ten percent of the gross receipts from the conduct of such activity B Exemptions (1) A bona fide charitable or nonprofit organization as defined by RCW 9 46 0209 conducting or sponsoring bingo games, raffles or amusement games when such organization has no paid operating or management personnel and has gross income from bingo, raffles or amusement games or any combination thereof not exceeding five thousand dollars per year, less the amount paid for prizes, shall be entitled to exemption from the provisions of this chapter upon compliance with the requirements of Section 5 49 030 of this code (2) A bona fide charitable, nonprofit organization as defined by RCW 9.46.0209 organized for the benefit of and that provides services to United States military veterans, and that limit membership in said organizations to veterans of the various branches of the United States military, conducting bingo, raffles, amusement games or gambling within the City shall be exempt from payment of the taxes imposed by this chapter upon compliance with the requirements of Section 5.49.030. (32) Activities carried out by public or private schools or by organizations sponsored by or related to public or private schools, including parent organizations and student body organizations, shall be exempt from the provisions of this chapter upon compliance with Section 5 49 030 of this code when the proceeds of such activities are applied for the benefit of any such school, or school sponsored or school - related organization (43) Any deviation from exemption restrictions enumerated herein shall subject such organization to the requirements of this chapter to the same extent as if such exemption had not been granted, including required payment within ten days after written demand of the city department of finance of any taxes formerly granted exemption hereunder Section 2 Severability If any portion of this Ordinance or its application to any person or circumstances is held invalid, the remainder of the Ordinance or the application of the provision to other persons or circumstances shall not be affected ORDINANCE - 2 718 129 \rhg \yakima cit \river road \ordinance Section 3 Effective Date This Ordinance shall be in full force and effect thirty (30) days after publication of the Ordinance PASSED BY THE CITY COUNCIL, signed and approved this 19 day of September ,2006 /// A J 1 r DaviiEdler, Mayor ATTEST ,. A L) / i A o 4 , , , 1 I SEAL is City Clerk g 4 ,, t� � ,J Publication Date 9 -22 -2006 �4 ff D ate 10 -22 -2006 ORDINANCE - 3 718 129 \rhg \yakima cit \river road \ordinance BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No 1 For Meeting Of 09 -19 -06 ITEM TITLE An Ordinance amending the Yakima Municipal Code (5 49 020) relating to the imposition of gambling taxes upon charitable, nonprofit veteran organizations SUBMITTED BY Finance and Legal Departments CONTACT PERSON / TELEPHONE Rita DeBord, Finance Director; #575 -607s SUMMARY EXPLANATION Out of respect for our military men and women and in recognition of the many sacrifices they make on behalf of all Americans, the Council Sub - committee on Community and Economic Development directed staff to research the option of exempting veteran organizations from the City's current gambling tax, with the intent that more funds would then be available to these organizations for the benefit of and support to our United States Military veterans Based on staff's research, it was determined that Federal regulations do allow for a veteran preference and, therefore, the City is authorized to provide this tax exemption to charitable, nonprofit organizations which are specifically organized for the benefit of and that provide service to United States military veterans and that limit membership in said organization to veterans of the various branches of the U S military It appears there may be two organizations that currently pay gambling tax that would qualify for this exemption, however, without further review of the organizations' charter and makeup of their members, staff cannot say with certainty that these organizations would qualify for this exemption The City currently receives approximately $1 million in gambling tax revenues annually If this exemption is authorized by City Council, staff estimates a reduction in City gambling tax revenues of approximately 0 9% or $9,000 annually (based on a four year average) and recommends an effective date of November 1, 2006 Resolution Ordinance X Other (Specify) Contract Mail to (name and address) Phone Funding Source APPROVED FOR SUBMITTAL/City Manager STAFF RECOMMENDATION This is a Council policy decision BOARD /COMMISSION RECOMMENDATION The Community and Economic Development Council Committee supported this exemption and directed staff to bring the appropriate legislation to the full Council for consideration COUNCIL ACTION Ordinance passed. ORDINANCE NO. 2006-45 LYON LAW MEMO TO Ray Paolella FROM Russell H Gilbert DATE September 13, 2006 RE City Ordinance re Gambling Tax Exemption Issue Whether the City Council may enact an ordinance exempting nonprofit and charitable veterans groups from taxation on their gambling operations under Municipal Code Ch 5 49 Short Answer The City Council may enact an ordinance that exempts charitable and nonprofit veterans groups from taxation on gambling operations under Municipal Code Ch 5 49 Discussion and Analysis As might be expected, legal research did not result in the identification of any legal authority that was on point for this very narrow issue I did, however, speak with Heidi Wachter, the Lakewood's city attorney about the recent enactment of a similar statute by that municipality Ms Wachter informed me that they did not do much research before their ordinance was enacted In fact, upon review her files, she found no research documents pertaining to the ordinance As no on -point law was identified, the basis for this analysis was the equal protection clause of the U S Constitution's Fourteenth Amendment and article I, section 12 of the Washington Constitution The Washington Supreme Court has held that the equal protection clause of the Fourteenth Amendment and article I, section 12 are substantially identical and, therefore, are subject to the same analysis State v Osman, 2006 Wash LEXIS 606 at 12 (August 3, 2006)(citing State v Shawn P , 122 Wn 2d 553, 559 -60, 589 P 2d 1220 (1993)) Analysis of equal protection is, therefore, identical under the provisions of both constitutions MEMO -1 Prohibited classifications under the equal protection clause are those based explicitly on race, color or national origin "All such classifications, imposed by whatever federal state, or local governmental actor, must be analyzed by a reviewing court under strict scrutiny —that is, such classifications are constitutional only if they are narrowly tailored measures that further compelling governmental interests " 16B Am Jr 2d Constitutional Law § 848 In order to prevail on an equal protection claim, it must be established that the complainant "received disparate treatment because of membership in a class of similarly situated individuals and that the disparate treatment was the result of intentional or purposeful discrimination " Osman at 13 (citation omitted) Equal protection does not necessarily require that all persons be treated identically; however, "any classification must be relevant to the purpose for the disparate treatment." Id If it can be shown that disparate treatment of those within and without a designated class is rationally related to the achievement of the state's objective and that the distinction serves a legitimate state interest or purpose, there is no violation of the equal protection clause Simpson v State, 26 Wn App 687, 693, 615 P.2d 1297 (1980) In the instant case, the City has a legitimate interest in the ongoing operations of charitable and nonprofit organizations organized specifically for the benefit of and that provide services to veterans of the United States military These organizations provide a valuable and necessary venue for social events, meetings and various other activities for this specific group As membership in such veterans organizations is specifically limited to those that have served in a branch of the United States military, the base for prospective members is rather limited This in turn limits the sources of fund raising for these groups Enacting legislation that assists these groups in achieving the necessary fund raising that will enable them to continue to function and exist is a legitimate objective of the City The legislature has declared "that the raising of funds for the promotion of bona fide charitable or nonprofit organizations is in the public interest as is participation in such activities and social pastimes as are hereinafter in this chapter authorized " RCW 9 46 010 It can be well argued that the City has a legitimate interest in ensuring the viability of such charitable and non - profit veterans groups as they serve a valuable and needed role to a specific group of the City's citizens The services that are provided by these organizations cannot be reasonably be replaced or supplied by any other organization As the City has a legitimate interest in promoting the ongoing financial viability of charitable or nonprofit veterans organizations that provide valuable and needed services to this unique group of citizens, it is very unlikely that an allegation that waiving gambling taxes on these groups violates the equal protection clause would be viable MEMO -2