Text: June 1, 2016Governor Dayton and Lt. Governor SmithOffice of the Governor and Lt. Governor116 Veterans Service Building20 W. 12th St.St. Paul, MN 55155Dear Governor Dayton and Lt. Governor Smith:We are writing to advise you of the impacts of HF848, the Omnibus Tax Bill passed by the legislature onMay 22, 2016, should it become law. The tax bill will have a greater impact on the general fund thanpreviously estimated, will negatively impact our stadium-related revenue stream, and will result in anew gross receipts tax on stadium suite rentals.Article 5, sections 17, 18, and 28, of HF 848 define "bingo hall" and change the tax rate on paper pulltabs sold at bingo halls. In particular, Section 17 reduces to 9% the tax paid on combined net receiptsfor paper pull tabs sold at a bingo hall. Section 18 changes the method by which the tax is calculated.Section 28 defines bingo hall as a premises where an organization "regularly conducts bingo" if: morethan 50% of the organization's gross receipts from lawful gambling for that organization are frombingo; or no other organization conducts lawful gambling on the premises.If the word "or" was "and", then "bingo hall" would include only locations where bingo is the primarylawful gambling activity. But by using "or" most locations that sell pull tabs are, or can become, a"bingo hall" simply by "regularly" conducting bingo, even if their bingo revenues are a small fraction oftheir overall lawful gambling revenues.The Department of Revenue (DOR) has an obligation to administer the law as written. Here, where thelaw is not ambiguous, the Department cannot substitute "and" in the place of "or" in Section 28.Doing so would withhold a tax benefit created by the plain reading of the law and have the effect ofimposing a higher a tax rate for some taxpayers. This is unlike situations where ambiguity in thestatute as written can be administered with the assistance of legislative intent or, under certaincircumstances, even where not ambiguous, legislative intent was to extend a benefit.Accordingly, starting on the effective date of July 1, 2016, DOR will administer the Article as written.The provision imposes a 9% flat tax rate on paper pull tabs sold at bingo halls instead of the graduatedrates in current law which range from 9% to 36%.The language, as adopted, has a much greater cost than the revenue estimate for HF296, as carried onthe spreadsheet adopted by the Conference Committee. The cost for this item on the ConferenceCommittee spreadsheet was $490,000 in fiscal year 2017 and $1.1 million in fiscal years 2018 and2019. The cost for the language as written is $30.8 million in fiscal year 2017 and $71.6 million in fiscalyears 2018 and 2019.As you recall, the stadium legislation that passed in 2012 identified new revenues to offset the stadiumcosts--the expansion of charitable gambling. In 2013, $20 million per year of corporate tax revenue wasadded. We are currently projecting $41 million of revenue from these two sources to offset $41million of stadium-related expenses in fiscal year 2017. The impact of the change in the 2016 tax billwill eliminate $21 million per year of the revenues intended to cover stadium-related costs.In fact, all of the revenue over the next three years from charitable gambling intended to offsetstadium expenses would be lost as a result of the tax law change. Because stadium revenues will fallbelow stadium expenses, the statute provides that the authority to replace the lost revenues. Currentlaw (M.S. 16A.727) authorizes MMB to 'blink on' a 10% gross receipts tax on stadium suite rentaleffective on July 1, 2016. In addition to the 10% gross receipts suite tax, MMB is authorized toimplement an additional sports-themed lottery game.MMB and DOR are working to determine the fiscal impact of these two additional backup revenues. Ifthis bill is signed into law, we will also work with the Minnesota Sports Facility Authority, the GamblingControl Board, and the Minnesota Lottery in the coming weeks to plan for and implement a newlottery game and new suite rental tax.Sincerely,Myron Frans, Commissioner Cynthia Bauerly, Commissioner