Fiscal Summary
(CORRECTED)
Increase State Expenditures - $49,700/One-Time/Division of Regulatory Boards
$220,300/Recurring/Division of Regulatory Boards
Other Fiscal Impact - Due to various unknown factors, the extent and timing of receipt for any additional state tax revenue cannot be reasonably estimated. Any such amounts received are not anticipated to cover expenses in the short term; but is assumed to cover expenses incurred in the long term.
As of June 30, 2017, the Division of Regulatory Boards had a cumulative reserve balance of $26,350,035.
To the extent that horse racing becomes established in this state, the Department of Revenue could eventually require additional positions in its Taxpayer Services Division and Audit Division; however, due to unknown factors, any determination with regards to such additional positions cannot be made at this time with any reasonable certainty.
Bill Summary
This bill establishes the Tennessee horse racing commission to regulate horse racing and pari-mutuel wagering, imposes taxes, and establishes criminal offenses, as discussed below.
THE COMMISSION
This bill creates the horse racing commission, which will initially consist of the current members of the state horse racing advisory committee. The advisory committee consists of seven members, appointed by the governor, as follows: five public members; one member who has a background in law enforcement and is selected from a list of three persons submitted by the director of the TBI; and one member who has a background in accounting and is selected from a list of three persons submitted by the state board of accountancy. The racing commission will be attached to the department of commerce and insurance for administrative purposes only.
This bill establishes eligibility requirements for commission members, which include that the person must not directly, indirectly, or in any capacity own or have any financial interest in a horse racing track; must not have been convicted of any gambling or gaming offense under federal law or the laws of any state, or of an offense punishable as a felony under federal law or the laws of any state; and must not have a financial interest, or engage in any private employment, in a business that does business with any horse racing association or any other entity involved in horse racing.
This bill sets out in detail the responsibilities of the racing commission, which include:
(1) Developing and implementing programs designed to ensure the safety and well-being of horses, jockeys, and drivers; and
(2) Recommending tax incentives and implementing incentive programs to ensure the strength and growth of the equine industry.
This bill also sets out in detail the powers of the racing commission, which include:
(1) Jurisdiction and supervision over all horse race meetings in this state and over all associations and persons on association grounds;
(2) Jurisdiction over any person or entity that offers advance deposit account wagering to residents of this state. Any such person or entity must be licensed by the racing commission, and the racing commission may impose a license fee not to exceed $10,000 annually;
(3) Jurisdiction over any totalisator company that provides totalisator services to a racing association located in this state. A totalisator company under the jurisdiction of the racing commission must be licensed by the racing commission, regardless of whether a totalisator company will be located in this state or operates from a location or locations outside of this state. The racing commission may impose a license fee on a totalisator company;
(4) Jurisdiction over any manufacturer, wholesaler, distributor, or vendor of any equine drug, medication, therapeutic substance, or metabolic derivative purchased by or delivered to a licensee or other person participating in horse racing in this state by means of the internet, mail delivery, in-person delivery, or other means;
(5) Jurisdiction over any horse training center or facility in this state that records official timed workouts for publication;
(6) Authorization to require any applicant for a license under (2) or (3) to submit to a background check of the applicant, or of any individual or organization associated with
the applicant;
(7) Authorization to visit, investigate, and have free access to the office, track, facilities, or other places of business of any licensee, or any person owning a horse or performing services on a horse registered to participate in a breeders incentive fund under the jurisdiction of the racing commission;
(8) Authorization to promulgate rules under which horse racing at a horse race meeting will be conducted in this state, and to fixing and regulating the minimum amount of purses, stakes, or awards to be offered for the conduct of any horse race meeting; and
(9) Authorization to refuse to issue or renew a license, revoke or suspend a license, impose probationary conditions on a license, issue a written reprimand or admonishment, impose fines or penalties, deny purse money, require the forfeiture of purse money, or any combination thereof with regard to a licensee or other person participating in horse racing in this state for violation of any federal or state statute, regulation, or steward's or the racing commission's directive, ruling, or order to preserve the integrity of horse racing in this state or to protect the racing public.
Following the conclusion of each racing season, the racing commission must prepare an annual report of its meetings, business, actions taken, collections, disbursements, and recommendations, and publish the report on a website maintained by the racing commission that will be accessible by the public.
The requirements for applicants to obtain a license or renew a license are set out in detail in the bill. This bill also sets out in detail requirements for an agreement for the sale, purchase, or transfer of an equine.
This bill makes it an offense for a person to:
(1) Act as a dual agent in a transaction involving the sale, purchase, or transfer of an interest in an equine without the prior knowledge of both the purchaser and the seller and written consent of both the purchaser and the seller; or
(2) Act as an agent for either a purchaser or a seller or act as a dual agent in a transaction involving the sale, purchase, or transfer of an equine to receive compensation, fees, a gratuity, or other item of value in excess of $500 relating directly or indirectly to the transaction from an individual or entity, including any consigner involved in the transaction, other than an agent's principal, unless:
(A) The agent receiving and the person or entity making the payment disclose in writing the compensation, fees, gratuity, or other item of value to both the purchaser and seller; and
(B) Each principal for whom the agent is acting consents in writing to the compensation, fees, gratuity, or other item of value.
A person who is injured by a person found to be in violation of (1) or (2) above may recover treble damages from such person, and the prevailing party in any litigation will be entitled to recover court costs, reasonable litigation expenses, and attorney's fees.
This bill will not apply to the sale, purchase, or transfer of an equine used for showing if the sale, purchase, or transfer does not exceed $10,000.
PARI-MUTUEL WAGERING
This bill requires the racing commission to promulgate rules regulating mutual wagering on horse races under the pari-mutuel system of wagering. The wagering may be conducted only by a person licensed to conduct a horse race meeting and only upon the licensed premises. The pari-mutuel system of wagering may be operated only by a totaliser or other mechanical equipment approved by the racing commission. The racing commission may issue a license to conduct pari-mutuel wagering on steeple chases or other racing over jumps, if all proceeds from the wagering, after expenses are deducted, are used for charitable purposes.
This bill sets out the requirements for the commission that may be deducted from the gross amount wagered. Also, this bill requires that the minimum wager accepted by a licensed association be 10 cents, and the minimum pay-off on a one-dollar wager be $1.10; but, in the event of a minus pool, the minimum pay-off for a one-dollar wager must be $1.05.
Each association conducting Thoroughbred racing that averages $1.2 million or less in on-track pari-mutuel handle per day of live racing conducted by the association must pay to the racing commission all moneys allocated to the backside improvement fund, described below, in an amount equal to 0.5 percent of its on-track pari-mutuel wagers.
This bill sets out in detail other requirements for pari-mutuel wagering.
THE BACKSIDE IMPROVEMENT FUND
This bill establishes, under the jurisdiction of the racing commission, the backside improvement fund, which will consist of money allocated to the fund as described above, together with any other money that may be contributed from other sources. The purpose of the backside improvement fund will be to improve the backside of Thoroughbred racing associations averaging $1.2 million or less pari-mutuel handle per racing day on live racing. The racing commission must use the backside improvement fund only to promote, enhance, and improve the conditions of the backside of eligible racing associations.
The racing commission must review the status of the backside improvement fund investments quarterly and report its findings to the finance, ways and means committees of the senate and house.
TAXES
This bill imposes an excise tax as follows:
(1) The tax will be 0.5 percent of all money wagered on live races at the track during the fiscal year on all tracks conducting pari-mutuel wagering on live racing under the jurisdiction of the racing commission. The tax will not apply to pari mutual wagering on live harness racing at a county fair;
(2) The tax will be 0.5 percent of all money wagered on races during the fiscal year on all tracks conducting telephone account wagering, participating as receiving tracks in intertrack wagering under the jurisdiction of the racing commission, and participating as receiving tracks displaying simulcasts and conducting interstate wagering. The tax will not apply to harness racetracks licensed by the racing commission; and
(3) The tax will be imposed on all advance deposit account wagering licensees at a rate of 0.5 percent of all amounts wagered through the licensee by this state's residents.
This bill requires that all funds received by the department of revenue from the taxes imposed on (1)-(2) be paid into the state treasury and credited to the general fund. All revenue received from the tax imposed on (3) will be distributed as follows:
(1) 15 percent to the state treasury and credited to the general fund; and
(2)
(A) 85 percent of revenue received from a wager placed on a race conducted at a track in this state will be distributed to the association that conducted the race;
(B) 85 percent of revenue received from a wager placed on a race conducted at a track outside this state will be distributed to the track in this state recognized as the host track by the racing commission at the time the wager was placed. However, if a wager subject to the tax will be placed on a race conducted at a track outside this state, and the person placing the wager has registered an address with the advance deposit account wagering licensee that is within 25 miles of a Tennessee track, the association licensed by the racing commission to operate that track must receive the tax revenue derived from that wager; or
(C) If no track is recognized as host, nor an association licensed, at the time the wager is placed with an advance deposit wagering licensee, 85 percent of the revenue received from the wager shall be remitted to the state treasury and credited to the general fund.
Also under this bill, except for the conduct of harness racing at a county fair, each person entering the grounds or enclosure of a race track at which a live horse race meeting will be conducted under the jurisdiction of the racing commission must pay a tax of 15 cents to the state. If tickets good for more than one day are issued, the sum of 15 cents must be paid by each person using the ticket on each day that it will be used. This bill prohibits an admission tax from any of the employees of the race track, or the owners or trainers of horses, jockeys, or their employees.
CRIMINAL OFFENSES
This bill establishes the following criminal offenses:
(1) A person refusing to make a report or turn over sums of unclaimed pari-mutuel winning tickets presumed abandoned. A violation will be a Class A misdemeanor;
(2) A person knowingly entering or causing to be entered for competition, or competing, for a prize or stake, or driving any horse, under an assumed name, or out of its proper class, where the prize or stake will be decided by a contest of speed. A violation will be a Class D felony;
(3) A person knowingly misrepresenting or fraudulently concealing the public performance in any former contest, or trial of speed, of a horse that person proposes to enter in a contest, whether the horse will be entered in the contest or not. A violation will be a Class D felony;
(4) An official timer at a horse race knowingly and falsely announcing a slower or faster time than that actually accomplished by a horse. A violation will be a Class A misdemeanor;
(5) A person failing to appear before the racing commission at the time and place specified in a summons. A violation will be a Class B misdemeanor; and
(6) A person either in this state or outside this state, with the intent to influence the outcome of a horse race, using any device, material, or substance not approved by the racing commission on or in any participant involved in or eligible to compete in a horse race to be viewed by the public. A violation will be a Class C felony.
