Bill Summary for H 512 (2023-2024)

Printer-friendly: Click to view

Summary date: 

Mar 29 2023

Bill Information:

View NCGA Bill Details2023-2024 Session
House Bill 512 (Public) Filed Tuesday, March 28, 2023
Intro. by Warren.

View: All Summaries for BillTracking:

Bill summary

Enacts new Article 9, Video Gaming Terminals in GS Chapter 18C, providing as follows.

Part 1, General Provisions

Sets out and defines terms as they are used in Article 9. Defines video gaming terminal as a device operated under the authority of the North Carolina State Lottery Commission (Commission) that is exempt under GS 14-306.1A (setting out the types of machines and devices prohibited by law) and is any electronic computerized video game machine that, upon the insertion of cash or a lottery share, is available to play a video gaming game authorized by the Commission and which uses a video display and microprocessors in which, by chance, the player may receive free games or credits that can be redeemed for cash; excludes a device that directly dispenses coins, cash, or tokens. Defines video gaming games as electronically simulated games of chance that are displayed and played on permitted video gaming terminals and approved by the Commission. Defines operator as a person licensed by the Commission who owns, leases, or otherwise controls a video gaming terminal for which a video gaming terminal permit has been issued by the Commission and places those video gaming terminals or associated equipment for public use in the State. Defines video gaming merchant as a person licensed by the Commission and with whom an operator has contracted to allow placement of video gaming terminals for public play and redemption of shares of video gaming games in accordance with this Article.

Requires the Commission to determine that video gaming games are a type of lottery game in this State and requires contracting with operations and video gaming merchants to operate video gaming games for play by the public. Deems the playing of video gaming games a share (any method of participation in a lottery game, other than by a ticket purchased on an equivalent basis with a ticket) for the purposes of GS Chapter 18C, exempt from GS 18C-131(c), which sets the minimum retail price of each ticket or share in any lottery game at 50¢. Requires playing to be only on video gaming terminals that have a valid video gaming terminal permit. Requires the Commission to adopt rules to determine play of video gaming games that address procedures for monitoring, collection, and remittance of net machine revenue from the games, in conformity with the following: (1) transfers no less than 32% of the total net machine revenues to the new North Carolina Video Gaming Fund, with the requirement that the Commission adopt rules on specified issues and allowing the Commission to adopt rules to set a minimum percentage of annual revenue to be returned to the public in the form of prizes; (2) requires any monies unused by the Commission after covering administrative expenses to be transferred to the North Carolina Video Gaming Fund and prohibits allocating more than 8% of the total for the Commission’s annual administrative expenses; (3) allocates 35% of the net machine revenues to operators and 25% to video gaming merchants; (4) requires connecting video gaming terminals and associated equipment to a central monitoring system at all times during play and as otherwise determined by the Commission; (5) requires all video gaming terminals to be placed with a video gaming merchant who holds an active off-site ABC permit or an active on-site ABC permit and prohibits a video gaming merchant from being engaged primarily in the business of placing video gaming terminals for play by the public in this State; (6) allows each video gaming merchant to operate up to six video gaming terminals per location and allows the Commission to  allow up to an additional four terminals per location; (7) requires, in contracting with operators, that no video gaming terminals be placed within 500 feet of a church, public school, or any nonpublic school; (8) requires prizes to be issued by a share that is redeemable in accordance with GS 18C-132 (setting out procedures for lottery drawings and claiming prizes; payment of prizes; protection of information concerning certain prize winners) or may be inserted into video gaming terminals to generate credits for the play of video gaming games; (9) allows the Commission to contract only with manufacturers and operators licensed under this Article; and (10) allows operators placing video gaming terminals for play in this State to only (a) purchase, lease, or otherwise obtain video gaming terminals and associated equipment from manufacturers licensed under this Article, and (b) contract with licensed video gaming merchants for placement of video gaming terminals for play by the public. Gives the Department of Public Safety, Alcohol Law Enforcement Division, enforcement authority under this Article.

Establishes the North Carolina Video Gaming Fund (Fund) in the State treasury that consists of the transfer of net machine revenues as described above, any money remaining from the Commission’s administrative expenses, and any interest earned on those funds. Requires the NCGA to appropriate money in the Fund annually in the Appropriations Act based on estimates of net machine revenue from video gaming terminals to the Fund. Requires the annual appropriation to include: (1) $2 million each fiscal year to the following to improve graduation rates and student success or the sustainability of the institution—Elizabeth City State University, Fayetteville State University, North Carolina Agricultural and Technical State University, North Carolina Central University, Winston-Salem State University, and UNC-Pembroke; (2) $10 million each fiscal year to independent historically black colleges and universities in NC for grants of up to $2 million per institution for improving graduation rates and student success; (3) an amount to the State Education Assistance Authority each fiscal year that is sufficient to fund scholarship forgivable loans for eligible students under the new Community College Scholarship Loan Program (expires June 30, 2027); and (4) $1 million each fiscal year to the Department of Public Safety for grants to counties for sheriffs to combat illegal gaming, awarded upon recommendation of the Governor’s Crime Commission. Requires constituent institutions receiving appropriations or a grant to report annually to the specified NCGA committed on how the funds were used.

Part 2. Licenses and Permits

Requires a video gaming terminal permit to be affixed to every video gaming terminal, representing that the machine has been registered, inspected, and approved for operation. Requires the Commission to issue video gaming terminal permits annually based on the number of approved terminals registered with the Commission per licensed operator. Requires the Commission to adopt rules for the schedule for issuing and affixation of the permit; allows the option for a licensed operator or licensed video gaming merchant to ask to add video gaming terminals during the license year. Makes it illegal for anyone other than authorized Commission personnel to affix or remove a permit. Requires the terminal and associated equipment’s software and hardware to be compatible with the Commission's central monitoring system and requires the games installed on the video gaming terminal to be approved by the Commission before a permit may be issued. Terminals that do not display the permit are illegal and subject to confiscation.

Requires a license to manufacture, operate or serve, or place for play by the public any video gaming terminal. Sets out qualifications for licensure as well as disqualifications for licensure. Requires a background check of the applicant, including each partner, director, officer, and all stockholders of 5% or more of any business entity, except for institutional investors. Prohibits a licensee or applicant to be a licensee from paying, giving, or making any economic opportunity, gift, loan, gratuity, special discount, favor, hospitality, or service, to the Director of the North Carolina State Lottery (Director), to any Commission member or employee, or to any member of the immediate family residing in the same household as one of these individuals. Prohibits an operator from giving anything of value, including a loan or a financing arrangement, to any video gaming merchant as an incentive or inducement to locate video gaming terminals in a specific location. Requires the Commission to adopt additional rules governing the exchange of gifts, loans and other financing arrangements, gratuities, special discounts, favors, hospitality, or service between licensees. Allows licenses to be revoked for cause.

Caps the fee that may be charged for a license application for renewal at $250 and allows charging the cost of the criminal and financial record check. Allows license to be transferred or assigned.

Allows a manufacturer to be licensed as an operator and an operator as a manufacturer. Prohibits a video gaming merchant from being licensed as a manufacturer or operator and prohibits a manufacturer or operator from being licensed as a video gaming merchant. Sets out requirements to be met when contracting for a central monitoring system. Requires the Commission to strive to have no less than five manufacturers licensed and no less than 12 operators licensed in the State at all times.

Sets out duties of video gaming license holders including reporting and recording keeping requirements.

Part 3. Video Gaming Terminals

Requires video gaming terminals to have a terminal permit and be placed with a video gaming merchant for play. Requires Operators to provide the Commission with the location of each terminal and information on the merchants where the terminals are located. Requires game software to be certified by an independent testing lab. Prohibits the Commission from limiting licensure or connection to the central monitoring system to one type of gaming terminal, one manufacturer, or one operator.

Requires the Commission to contract for a central monitoring system from a supplier of central monitoring systems. Sets out requirements for the central monitoring system.

Makes it a Class 1 misdemeanor to sell a share for play of a video gaming terminal to a person under the age 21 or for a person under age 21 to purchase a share for play of a video gaming terminal or otherwise play a video gaming terminal. Prohibits video gaming terminals from allowing more than the amount set by the Commission to be played in a single wager. Requires the odds of winning to be posted on or near each terminal.

Requires a person transporting a video gaming terminal from one gaming merchant’s establishment to another location, to give written notice to the Commission before transporting the terminal.

Part 4. Enforcement

Gives the Commission sole administrative authority of this Article.

Provides that to procure evidence of violations of this Article, alcohol law enforcement agents, Commission employees, and officers of local law enforcement agencies that have contracted to provide ABC enforcement have authority to investigate the establishment of a video gaming merchant, operator, or a manufacturer to make inspections. Makes refusal by a licensee, or their employee, to permit officers to enter the premises to make an inspection a cause for action against the licensee, including license revocation or suspension. Makes it a Class 2 misdemeanor for any person to resist or obstruct an officer attempting to make a lawful inspection. Requires reporting on inspections to the Commission.

Makes it a Class 1 misdemeanor to tamper with a video gaming terminal with the intent to interfere with the terminal’s proper operation, with penalty increased to a Class H felony for a second offense, and a Class G felony for a third or subsequent offense. Makes it Class G felony to, with the intent to manipulate the outcome, payoff, or operation of a video gaming terminal, manipulate the outcome, payoff, or operation of a video gaming terminal by physical tampering or any other means, with subsequent offenses a Class F felony. Makes it a Class G felony for a video gaming merchant or operator to falsely report or fail to report the amount due required by the Commission, also subject to license revocation. Makes it a Class G felony for a video gaming merchant who pays a prize to any person in the amount less than the specified prize won, also subject to license revocation.

Makes conforming changes to GS 18C-103, GS 18C-161, GS 14-306.1A, GS 14-306.4, and GS 105-259.

Amends GS 18C-120 to give the Director the power to engage an independent firm experienced in security procedures to conduct a study and evaluation of all aspects of security in the operation of the video gaming terminals; sets out what is to be included in the security assessment.

Amends GS 18C-122 to allow the Commission to hear any report on lottery network vulnerability or application vulnerability that could be used to provide an unfair advantage to a player or jeopardize the integrity of any lottery game; exempts those reports from public records under GS Chapter 132.

The above provisions are effective January 1, 2024.

Enacts new GS 105-102.7 imposing the following privilege taxes: (1) $50,000 for manufacturers; (2) $25,000 plus $150 per video gaming terminal for operators; and (3) $1,000 per retail location plus $150 per video gaming terminal in each location for video gaming merchants. Effective for taxes imposed for taxable years beginning on or after July 1, 2024.

Amends GS 14-298, concerning the seizure of illegal gaming items, as follows. Requires the owner to pay the costs of storage and disposal when the court enters an order releasing a seized item to the law enforcement agency for destruction or training purposes. Adds that if the item was seized as evidence in a criminal action or proceeding against the owner of the item, upon any plea of guilty or nolo contendere in that action or proceeding by the item’s owner, the court must order the owner to pay the reasonable costs of storage and disposal incurred by the seizing law enforcement agency. Amends GS 14-299 to make any vehicle used to transport any video game machine prohibited by GS 14-306 (slot machine or device) or GS 14-306.1A (specified types of machines prohibited), or any electronic machine or device prohibited by GS 14-306.4 (prohibiting electronic machines and devices for sweepstakes), liable to be seized. Amends GS 14-306.4, which prohibits electronic machines and devices for sweepstakes, by specifying that each game console, play station, or other access point allowing a person to operate a slot machine is a separate machine or device. Applies to offenses committed on or after December 1, 2023.

Adds new Part 7, Community College Scholarship Loan Program, to Article 23 of GS Chapter 116. Establishes the Community College Scholarship Loan Program (Program) to provide scholarship forgivable loans to NC residents to attend community colleges in pursuit of an associate degree, diploma, or certificate and for those students to be eligible for forgiveness of the scholarship forgivable loans if the degree, diploma or certificate is awarded within six years. Requires using the funds from the Community College Scholarship Loan Trust Fund (Loan Fund) to award scholarship forgivable loans to eligible students for up to six academic years, to be used for tuition and fees. Requires the amount of a student’s scholarship forgivable loan to be reduced by the amount of grants or scholarships received from other State or federal sources. Allows the use of a lottery process to award the loans if there are insufficient funds to provide one to every eligible applicant. Sets out student eligibility requirements.

Establishes the Fund consisting of: (1) net revenues transferred from the North Carolina Gaming Fund, (2) funds received as repayment of scholarship forgivable loans, and (3) interest earned on those amounts. Requires funds from the Loan Fund to be used only for scholarship forgivable loans under the Program.

Caps interest on the loans at 10%. Sets out conditions under which the loans are forgiven as well as conditions under which the loan must be repaid. Sets out the time period for repayment of the loan.

Requires the State Education Assistance Authority to report annually, beginning in 2024, to the specified NCGA committee on the implementation of the Program, including the specified information.

Makes Part 7 effective January 1, 2024, applicable beginning with scholarship forgivable loans awarded for the 2024-25 academic year.

Amends GS 105-153.5 to allow a taxpayer to deduct from their adjusted gross income the amount forgiven under the Program. Effective for taxable years beginning on or after January 1, 2024.

Requires the North Carolina State Lottery Commission to use sufficient funds from the North Carolina State Lottery Fund to cover initial operating expenses of the Commission to implement new Article 9, but caps the total amount borrowed by the Commission at $14 million. Requires $4 million of those funds to be transferred to the Department of Public Safety, Alcohol Law Enforcement Division, for enforcement of this act, with the remainder available for expenditure for the purposes set forth in this act without further action by the NCGA. Requires that funds be repaid within 24 months after the act’s effective date.

Allows the Commission to begin rulemaking to implement Article 9 before January 1, 2024, but no temporary or permanent rule can become effective before January 1, 2024. Allows the Commission to initiate requests for proposals for the central monitoring system before January 1, 2024, but prohibits awarding a contract before that date. Allows the Commission to accept and issue applications for licensure under Article 9, but prohibits a license from becoming prior to January 1, 2024, or on the date the Commission deems the central monitoring system active, whichever occurs later. 35 G.S. 18C-204(b)(3), as enacted by this act, expires June 30, 2027.