Testimony to the Senate State Government Finance and Policy and Elections Committee on Wednesday, March 3.
Madam Chair, committee members, thank you for your time today.
My name is Allen Lund. I am the executive director of Allied Charities of Minnesota (ACM). We are a 501c6 that represents licensed gambling organizations in Minnesota.
ACM opposes SF746, a bill being sponsored by the Gambling Control Board that would change the current star rating system for charities. If enacted SF746 would no longer take into account our largest single expense, the taxes and fees that we are required to pay, when computing our rating. The current system takes all Lawful Purpose Expenditures (donations, taxes and fees) as a percentage of Net Receipts (sales minus prizes) to determine your rating. The proposed system takes donations only as a percentage of Allowable Expenses to determine your rating. The GCB has stated that this bill is tied to tax relief, but tax relief is nowhere to be found in the bill.
ACM understands those that think that licensed charitable gambling organizations need to get more dollars to the bottom line for mission and community. Charities want that too. We welcome charities being evaluated, but we believe that the entire expense structure needs to be considered when looking at the ability of a charity to serve.
ACM has offered alternatives that prior to organizations being rated would remove mandates that charities must pay in order to conduct charitable gambling in Minnesota. We must pay our taxes and fees. We must store our played games for a minimum of 3 ½ years. We must pay for our games, rent, bar ops and electronic revenue share. If a charity has sales of more than $750,000 in a fiscal year they must have an annual outside audit conducted by a CPA and the audit must be paid for. All of these things lessen our ability to get money to our bottom line for mission and community.
The Osseo Lions (of which I am a member) does not own a building and has one site, a local bar. Monthly the Osseo Lions must pay rent to the bar, a bar electronics operation fee and an electronics revenue share fee that totals $10,000. That’s $120,000 annually that the Osseo Lions do not have available for donations, through no fault of their own. The Osseo/Maple Grove American Legion (of which I am also a member) has one site and pays none of those costs. Using the proposed rating system a person not familiar with either organization could come to a conclusion that the Legion (5 stars under the current system and 5 stars under the proposed system) is a better steward of funds than the Lions (4 stars under the current rating system and 1 star under the proposed rating system) when in reality both are well run organizations dealing with very different circumstances. That is not a fair and equitable comparison.
If enacted the average organization would go from 4 stars under the current system (1 to 5 possible stars) to 1 star under the proposed system (0 to 5 possible stars).
We also question the timing of this bill. These are unsettling times for all of us. Charities do not know what the future holds and many have been holding additional funds in reserve in order to survive the pandemic with the goal of serving far into the future. We all hope that a rating system that is fair and equitable to all charities can be developed and ACM stands ready to help with that. If the bill is to be progressed, we would ask that an effective date no earlier than July 1, 2023 be given in order for charities to have the time to react and attempt to comply with the change.
There is currently a charitable gambling tax relief bill being offered in the Senate (SF1322) that reduces taxes on charities and also changes the star rating system to help ensure that relief goes where we all want it to go, into mission and community. SF746 does not do that.
Thank you for your time today.