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BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item NoK
For Meeting of: 6/4/2013
ITEM TITLE: Report on Gambling Tax on Nonprofit Corporations
SUBMITTED BY: Helen A. Harvey, Senior Assistant City Attorney
Cindy Epperson, Budget & Finance Director
SUMMARY EXPLANATION:
In response to an inquiry from a Council Member, this report is to provide information on the
Yakima Municipal Code ( "YMC ") gambling tax on nonprofit corporations. As required by RCW
9.46.113, all revenues from the gambling tax must be used "primarily for the purpose of public
safety." Approximately $35,755 of revenue from the gambling tax was collected from two
nonprofit corporations in 2012; however, one of the nonprofits which paid $32,437 in gambling
tax has discontinued its gambling activities as of December 31, 2012. If the gambling tax were
eliminated on nonprofit corporations, annual revenue of approximately $3,300 will no longer be
received for public safety purposes as of the current time. YMC 5.49.020B(1) exempts nonprofit
corporations from paying gambling taxes on bingo games, raffles or amusement games if the
combined net receipts from these games are no more than $5,000 per year and the
organization has no paid personnel. The attached memorandum from the Legal Department
provides additional information on the YMC gambling tax as compared to State gambling law
and to other cities.
Resolution: Ordinance:
Other (Specify):
Contract: Contract Term:
Start Date: End Date:
Item Budgeted: Amount:
General Fund. If gambling tax is eliminated on
Funding Source /Fiscal nonprofit corporations, approximately $3,300
Impact: annually will no longer be received for public safety
purposes.
Strategic Priority: Public Safety
Insurance Required? No
Mail to:
Phone:
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APPROVED FOR
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SUBMITTAL: & '
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(1) Staff will respond to direction by Council on whether the gambling tax should remain on
charitable organizations and nonprofit corporations with certain exemptions, or be eliminated
entirely. (2) Depending on what Council decides on number 1, staff recommends that to be
consistent with State law, YMC5.49.O2OB/1\ be amended oothat the first $1O.00Oofnet
receipts from charitable or nonprofit organization raffles is exempt from gambling tax.
Narne- Description.
L:1 Memorandum on Gambling Taxes for Nonprofit Corporations.pd Memorandum
If
UJI-00"t , 1011
May 22, 2013
TO: Honorable Mayor and Members of the City Council
Tony O'Rourke, City Manager
FROM: Helen A. Harvey, Senior Assistant City Attorney
SUBJ: Gambling Taxes for Nonprofit Corporations
We have been asked to research whether the City would be able legally to
completely exempt nonprofit corporations from paying gambling taxes.
1. Law on Gambling Taxes for Nonprofit Corporations
A. Yakima Municipal Code ("YMC") Provisions for Nonprofit
Corporations
Yakima Municipal Code 5.49,0208(1) already exempts nonprofit corporations
from paying gambling taxes if the organization has no paid operating or management
personnel and the gross income received does not exceed $5,000 a year, less the amount
paid for prizes. YMC 5.49.020B(1) provides:
"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
YMC 5.49.030."
B. ComRarison to State Law
Yakima Municipal Code 5,49.020 is similar to Washington State law in that it
permits taxing of gambling activities conducted by nonprofit corporations once receipt
amount thresholds are reached. However, it is not identical to the restriction amount
Memo to City Council and City Manager re Gambling Taxes
May 22, 2013
Page 2
on taxing raffles conducted by charitable organizations and nonprofits that is provided
for under State law. Under State law, charitable and nonprofit organizations are
exempt from bingo and amusement game taxes if the combined net receipts from these
games are no more than $5,000 per year and the organization does not pay personnel to
operate the games. RCW 9.46.110(3)(c). This State law provision is similar to the YMC.
However, the net receipt amount is different for raffles under State law, which provides
that the first $10,000 of net receipts from charitable or nonprofit organization raffles is
exempt from gambling tax. RCW 9.46.110(3)(d).
Because State law places a restriction on the ability of cities to tax raffles
conducted by charitable organizations and nonprofit corporation, YMC 5.49.0208(1)
should be amended to be the same as State law so that the first $10,000 of net receipts
from charitable or nonprofit organization raffles is exempt from the gambling tax.
C. Comparison to Other Cities
As described in Section B above, State law already contains some restrictions on
the ability to tax nonprofit corporations. Many cities impose taxes on nonprofit
corporations similar to State gambling tax law, often by restating the gambling tax
provisions contained in Chapter 9.46 RCW.
Municipal Research and Service Center ("-*WSC"*) has located ordinances of two
cities that exempt nonprofit corporations entirely from gambling taxes without any
limitations: Pullman and Spokane. City of Pullman Municipal Code 6.88.250 provides
that the "taxes required by this Chapter are not imposed on gambling activities
conducted by bona fide charitable or non-profit organizations." Spokane Municipal
Code 8,04.030 provides that the "tax is not imposed with respect to amusement or bingo
games or raffles, or a combination of these activities, conducted by a bona fide
charitable or nonprofit organization."
D. Gambling Taxes Must be Used for Public Safety
State law heavily regulates gambling and gambling taxes. A city which collects a
tax on gambling activities "must use the revenue from such tax primarily for the
purpose of public safety." RCW 9.46.113. Effective June 10, 2010, the legislature
expanded the permitted use of gambling revenues to include any public safety purpose.
Memo to City Council and City Manager re Gambling Taxes
May 22, 2013
Page 3
Exemption of nonprofit corporations from paying any gambling taxes, which
must be used for the purpose of public safety, would be legal. Staff respectfully will
respond to direction by the City Council on whether the Council does or does not wish
to amend the ordinance to exempt nonprofit corporations from paying any gambling
taxes.
However, if the Council decides to retain the gambling tax on profit
corporations, the Yakima Municipal Code gambling tax provision on nonprofit
corporations which conduct raffles should be amended to exempt the first $10,000 of net
receipts from raffles so the local provision is consistent with State law.
Enclosure: Yakima Municipal Code Chapter 5.49 on Gambling Taxes
cc: Jeff Cutter, City Attorney
Chapter 5.49
GAMBLING TAXES
Sections:
5.49.010
Authority for chapter.
5.49.020
Taxes imposed—Amounts-
Exemptions.
5.49.025
Prohibition of certain gambling
activities if gambling taxis
unconstitutional.
5.49.030
Filing of declaration of intent and
copy of gambling license required.
5.49.040
Sworn statement and remittance
required quarterly.
5,49.05 0
Late payment—Penalty.
5.49.060
Director of finance and budget
authorized to administer chapter.
5.49.070
Duty to make records available.
5.49.080
Unlawful acts—Penalty.
5.49.090
Effective date.
5.49.100
Severability.
5.49.010 Authority for chapter.
This chapter is enacted pursuant to and in accordance
with Chapter 9.46 of the Revised Code of Washington as
an exercise of the power of the city of Yakima to tax for
revenue, (Ord. 1731 § I (part), 1974).
5.49.020 Taxes imposed-- Amounts-
Exemptions.
A. Tax imposed. There is levied a tax upon all per-
sons, associations and organizations who conduct or oper-
ate gambling activities within the city of Yakima and who
have been duly licensed by the Washington State Gam-
bling Commission to conduct or operate such gambling
activities. Such tax shall be paid on the following gam-
bling 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 con-
duct of such activity;
2. Commencing January 1, 2000, any bingo or raf-
fle, at the rate of five percent of the gross receipts less the
amount awarded as cash or merchandise prizes in the con-
duct of such activity;
3. Any amusement game at the rate of two percent of
the gross receipts less the amount awarded as cash or mer-
chandise 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;
W Milli
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 per-
sonnel and has gross income from bingo, raffles or amuse-
ment 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
YMC 5,49.030.
(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 veter-
ans, and that limits membership in said organization to
veterans of the various branches of the United States mil-
itary, 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 YMC 5.49.030.
(3) Activities carried out by public or private schools
or by organizations sponsored by or related to public or
private schools, including parent organizations and stu-
dent body organizations, shall be exempt from the provi-
sions of this chapter upon compliance with YMC 5.49.030
when the proceeds of such activities are applied for the
benefit of any such school, or school-sponsored or school-
related organization.
(4) Any deviation from exemption restrictions enu-
merated 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 pay-
ment within ten days after written demand of the city
department of finance of any taxes formerly granted
exemption hereunder. (Ord. 2006-45 § 1, 2006: Ord. 99-
43 § 1, 1999: Ord. 97-72 § 1, 1997: Ord. 94-47 § 1, 1994;
Ord. 3102 § 1, 1988; Ord. 2506 § 1, 1981: Ord. 2070 § 1,
1977: Ord. 1763 § 1, 1975: Ord, 1731 § I (part), 1974).
5.49.025 Prohibition of certain gambling activities
if gambling tax is unconstitutional.
A. If it is detennined by a court of competent juris-
diction, in a judgment not subject to review, that all or any
part of the gambling taxes set forth in YMC 5,49.020, or
the application of those taxes, are unconstitutional, to the
end that a judgment invalidates some or all of the tax, pro-
spectively or retroactively or refunds are required; then,
beginning on the day the judgment becomes final, the fol-
207 (Yakima 1-07)
5.49.030
lowing gambling activities shall be prohibited within the
city of Yakima:
1. Punchboards, as defined in RCW 9.46-0273;
2. Pulltabs, as defined in RCW 9.46.0273;
3. Social card games, as defined in RCW 9.46.0281;
4. Public cardroorns, as defined by. WAC 230 -02-
410.
B. Nothing in this section shall affect the conduct of
any other gambling activities authorized by the state of
Washington. (Ord. 93-54 § 2,1993: Ord, 3032 § 1, 1987).
5.49.030 Filing of declaration of intent and copy of
gambling license required.
A. For the purpose of identifying who shall be sub-
ject to the tax imposed by this chapter, any person, associ-
ation or organization intending to commence the conduct
or operation within the city of Yakima of any gambling
activity authorized by Chapter 9.45 of the Revised Code
of Washington after January 1, 1975, shall, at least ten
days prior to the commencement of any such activity, file
with the city of Yakima a sworn declaration of intent to
conduct or operate such activity specifying the dates,
times and places on a form to be prescribed and provided
by the director of finance and budget for the city of
Yakima, together with a copy of the gambling license
issued pursuant to Chapter 9.46 of this code.
B. Any person, association or organization conduct-
ing or operating within the city of Yakima any gambling
activity authorized by Chapter 9.46 of the Revised Code
of Washington prior to January 1, 1975, and intending to
continue the conduct or operation of such gambling activ-
ity on or after January 1, 1975, shall, within fifteen days
after January 1, 1975, comply fully with the requirements
of subsection A of this section with respect to any autho-
rized gambling activity conducted on or after January 1,
1975. (Ord. 93-73 § 1, 1993: Ord, 93-54 § 1, 1993; Ord.
1731 § I (part), 1974).
5.49.040 Sworn statement and remittance
required quarterly.
A. Any person, association or organization issued a
state gambling license or renewal thereof for any part of a
quarterly period of a calendar year shall, on or before the
final day of the month following the end of such quarterly
period, file with the city of Yakima a sworn statement, on
a form to be prescribed and provided by the city, together
with a sworn copy of the quarterly activity report as
required by the regulations of the Washington State Gam-
bling Commission for the period during which the tax
imposed hereunder accrued, for the purpose of ascertain-
ing the tax, if any, due for the preceding quarterly period.
B. The tax imposed by this chapter shall be due and
payable in quarterly installments on or before the final `day
of the month following the end of the quarterly period in
which the tax accrued, and remittance therefor shall
(YaMma 1.07) 208
accompany the sworn statement required by subsection A
of this section. (Ord. 2506 § 2, 1981: Ord. 1816 § 1, 1975:
Ord. 1731 § I (part), 1974).
5.49.050 Late payment—Penalty.
For each payment due under the provisions of this
chapter, if such payment is not made by the due date
thereof, there shall be added a penalty as follows:
1. If paid on or before the fifteenth day of the second
month following the end of the quarterly period in which
the tax accrued, ten percent of the accrued tax or five dol-
lars, whichever is greater;
2. If paid on or before the final day of the second
month following the end of the quarterly period in which
the tax accrued, fifteen percent of the accrued tax or ten
dollars, whichever is greater;
3. If paid after the fifteenth of the third month fol-
lowing the end of the quarterly period in which the tax
accrued, twenty percent of the accrued tax or fifteen dol-
lars, whichever is greater. (Ord. 1816 § 2,1975: Ord. 1731
§ I (part), 1974).
5.49.060 Director of finance and budget
authorized to administer chapter.
The director of finance and budget shall have the power
and duty to administer this chapter. The director of finance
and budget shall have the power to adopt and publish such
rules and regulations not in conflict with rules and regula-
tions of the Washington State Gambling Commission as
may be reasonably necessary to enable the collection of
the tax imposed in this chapter, (Ord. 93-73 § 2, 1993:
Ord. 1731 § I (part), 1974).
5.49.070 Duty to make records available.
It shall be the responsibility of all officers, directors
and managers of any organization conducting any gam-
bling activities subject to taxation under this chapter to
make available at all reasonable times such financial
records as the chief of the Yakima police department or
his designee shall require in order to determine full com-
pliance with this chapter. (Ord. 1731 § I (part), 1974).
5.49.080 Unlawful acts—Penalty.
A. Any person who knowingly fails or refuses to
comply with any provisions of this chapter or with any
rule or regulation promulgated by the director of finance
and budget, or supplies false or fraudulent information in
required declarations or statements, or aids and abets any
violation of this chapter, is guilty of a misdemeanor and
upon conviction shall be punished in accordance with
YMC 5.01,010.
B. The failure to accurately remit amounts due and
payable within the time prescribed by subsection B of
YMC 5.49.040 shall be deemed both a criminal and civil
violation of this chapter. Any fine imposed under this sec-
tion shall be in addition to the taxes and penalties required
by this chapter.
C. Any officer, director or manager of any organiza-
tion conducting any gambling activity taxed by this chap-
ter shall be jointly and severally liable for the payment of
any tax, penalty or fine imposed hereunder.
D. The following statutes, codified in the Revised
Code of Washington, and their successors are adopted by
reference:
RCW 9,46,170 False or misleading entries or state-
ments, refusal to produce records, as violations—Penalty.
RCW 9.46.190 Violations relating to fraud or deceit—
Penalty.
RCW 9,46.195 Obstruction of public servant in admin-
istration or enforcement as violation—Penalty.
RCW 9.46.196 Defrauding or cheating other partici-
pant or operator as violation—Causing another to do so as
violation—Penalty,
RCW 9.46,198 Working in gambling activity without
license as violation—Penalty.
RCW 9.46.200 Action for money damages due to vio-
lations—Interest—Attomays' fees—Evidence for exon-
eration.
Subsections (1), (2), (3) and (5) only of RCW 9,46.230
Seizure and disposition of gambling devices—Owning,
buying, selling, etc., gambling devices or records—Penal-
ties.
RCW 9.46,240 Gambling information, transmitting or
receiving as violation—Penalty. (Ord, 93-73 § 3, 1993:
Ord. 2506 § 3, 1981; Ord. 1731 § 1 (pad), 1974),
5.49.090 Effective date.
The provisions of this chapter shall become effective
and remain in full force and effect on and after the first day
of January, 1975. (Ord. 93-73 § 3, 1993: Ord. 1131 § I
(part), 1974).
5,49.100 Severability.
If any provision or section of this chapter shall be held
void or unconstitutional, all other parts, provisions and
sections of this chapter not expressly so held to be void or
unconstitutional shall continue in full force and effect.
(Ord. 1731 § I (part), 1974).
M
(Yakima 1-07)
W6stuaw,
West's RCWA 9,46.113
a
Effective, June 10, 2010
West's Revised Code of Washington Annotated Currentness
Title 9. Crimes and Punishments (Refs & Annos)
r,W Chapter 9.46. Gambling--1973 Act (Refs & Annos)
-*.+ 9.46.113. Taxation of gambling activities—Disbursement
Page 2 of 2
Page I
Any county, city or town which collects a tax on gambling activities authorized pursuant to RCW 9,46.110 must
use the revenue from such tax primarily for the purpose of public Safety.
CREDIT(S)
[20 10 c 127 § 6, eff June 10, 2014; 1975 Ist ex.s. c 166 § 11.]
Current with 2013 Legislation effective through April 25, 2013
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