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Wednesday, June 27, 2012

North Carolina Gambling regulation bill faces uncertain future

North Carolina Gambling regulation bill faces uncertain future

RALEIGH - A proposal to regulate and heavily tax North Carolina's proliferating gambling industry is scheduled to be considered by state legislators again today, but its prospects are uncertain.
Until late Tuesday, it appeared that legislative leaders were going to allow the idea to die, but now it's scheduled to be heard in the state House Finance Committee this morning.
The bill would impose steep taxes on North Carolina's so-called sweepstakes parlors. These are gambling houses where people play computer games in hopes of winning money.
These businesses have expanded largely unregulated over the past several years amid a legal cat-and-mouse game between new gambling laws drafted to outlaw them, lawyers skilled at overturning the laws in court and software designers skilled at making the new games to comply with the letter of the law if not its spirit.
Gov. Bev Perdue has called for taxing the businesses to raise hundreds of millions of dollars for education.
Rep. Bill Owens of Pasquotank County, a Democrat who has been helping the Republican-controlled legislature overturn Perdue's vetoes, unveiled the latest iteration of a plan to tax and regulate the industry on Tuesday morning at a meeting of the House Finance Committee. The committee discussed the idea without voting on it.
The legislative staff estimated that the games would generate between $98 million and $329 million of state taxes per year.
The amounts widely vary because the staff had only rough guesses about how many sweepstakes cafes operate in North Carolina and how much they money they take in.
Owens' proposal calls for 9 percent of the revenue to pay go to law enforcement agencies, including local police and sheriff's departments. Six percent would be for administration expenses.
The remaining 85 percent of the money would be for public education, with up to $189 million sent to local school districts statewide to make up for statewide to make up for recent cuts to their budgets, and the rest for other education spending.
City and county governments could levy additional taxes on the outlets. Cities already do this through their privilege license taxes, but counties have been prohibited by law from imposing similar taxes on any business.
The bill would also impose new restrictions, such as prohibiting the sale of alcohol, on businesses that operate sweepstakes cafes. That would force some convenience store owners to choose between selling alcohol or keeping the machines.
People under age 18 would be banned from entering the businesses. The businesses would have to be licensed by the state, cap their maximum prizes at $10,000 and be subject to other restrictions, as well.
Litigation over whether the sweepstakes cafes can stay in business is pending before the N.C. Supreme Court. With that in mind, the bill would expire on April 1. If the Supreme Court rules the machines are legal, the lawmakers could extend the law, Owens said, and if they are ruled illegal, the lawmakers could let the law expire.
In discussions of the idea, lawmakers who think gambling should be illegal have expressed hesitation at giving the sweepstakes parlors the legitimacy of a law to tax them; others with an anti-tax bent don't like the idea of creating a new tax.
Staff writer Paul Woolverton can be reached at or 486-3512.

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