NDT C.S.H.B. 2538 75(R)BILL ANALYSIS LICENSING & ADMINISTRATIVE PROCEDURES C.S.H.B. 2538 By: Oliveira 4-14-97 Committee Report (Substituted) BACKGROUND Other states are generating large revenues through a 3-percent fee paid by boxing and wrestling promoters who broadcast their sporting events on pay-per-view television. The same gains could be realized on pay-per-view fees paid by boxing and wrestling promoters who broadcast their events in Texas. Further, a 3-percent tax on boxing and wrestling events that are not broadcast would also put significant revenues into Texas' coffers. With the growing worldwide popularity of "ultimate fighting" and other types of sports in which bodily harm is the goal of the sport, Texas should take a stand against the sport and allowing it to be broadcast in the state. PURPOSE As proposed, C.S.H.B. 2538 amends the Texas Boxing and Wrestling Act to allow the state to collect 3 percent of pay-per-view boxing and wrestling telecasts from event promoters while outlawing any telecasts of ultimate fighting and moving the regulation of boxing from the Secretary of State's Office to the Department of Licensing and Regulation. This Act also allows the state to charge 3 percent on the gross revenues of a wrestling or boxing event which is not televised. RULEMAKING AUTHORITY It is the committee's opinion that additional rulemaking authority is granted in SECTION 8 of the bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 3, Texas Boxing and Wrestling Act (Article 8501-1, Vernon's Texas Civil Statutes) to change the definitions of the following: (9) "Boxing promoter" means a person licensed by the commissioner who arranges, advertises, or conducts a boxing contest, match, or exhibition, or shows or causes to be shown in Texas a closed circuit or pay-per-view telecast of any match involving any professional participant whether or not the telecast originates in Texas. (10) "Wrestling promoter" means a person to be licensed by the commissioner who arranges, advertises, or conducts a wrestling contest, match, or exhibition, or shows or causes to be shown in Texas a closed circuit or pay-per-view telecast of any match involving any professional participant whether or not the telecast originates in Texas. (17) "Telecast" means a visual transmission sent by any type of signal from one location to another. The term includes closed-circuit television, pay-per-view, and television broadcast via satellite, cable, or any other means. (18) "Closed-circuit telecast" means a telecast of an event exhibited in arenas, stadiums, or other locations where consumers pay admission to view the event. (19) "Pay-per-view" means a telecast of an event to be received by an individual telecast purchaser's television set for which telecast purchasers pay to view the event. (20) "Gross receipts" means the gross price charged, including the face value of all tickets sold and complimentary tickets redeemed, less sales tax for the sale or lease of telecasting, closedcircuit, or pay-per-view rights, without any deduction for commissions, brokerage fees, production fees, distribution fees, advertising fees, or other expenses or charges. (21) "Ultimate or extreme fighting" means any boxing, wrestling or similar match, contest, or exhibition between two or mor contestants who use their hands, feet, or both that is not recognized or sanction by an officially recognized state, regional, or national boxing or athletic authority or by a promoter licensed by the commissioner. The term includes a fighting contest in which any part of the contestant's body may be used as a weapon or any means of fighting may be used with the specific purpose to intentionally injure the other contestants in such a manner that they may not defend themselves, and in which there is no referee. (22) "System operator," "cable operator," or "facility operator" means a person who broadcasts or telecasts a closed-circuit telecast or pay-per-view telecast regardless of the technology used to transmit or receive the broadcast or telecast. (23) "Event" means an occurrence in which a professional boxer or professional wrestler displays or exhibits boxing or wrestling skills or performs or fights as a boxer or wrestler. (24) "Professional wrestler" means a person to be licensed by the department who competes for a money prize, purse, or compensation in a boxing or wrestling contest, exhibition, or match held within the State of Texas. (25) " Professional boxing manager" means a person to be licensed by the commissioner who contracts or otherwise enters into an agreement with a boxer to directly or indirectly control or administer the boxing affairs of the boxer for compensation. (26) "Professional wrestling manager" means a person to licensed by the commissioner who contracts or otherwise enters into an agreement with a wrestler to directly or indirectly control or administer the wrestling affairs of the wrestler for compensation. SECTION 2. Section 4(c), Texas Boxing and Wrestling Act (Article 8501-1 Vernon's Texas Civil Statutes). (c) The commissioner is authorized to hold administrative hearings in accordance with the Administrative Procedure Act. The commissioner will have the authority to declare violations on any professional kickboxing contests or exhibitions which are not fought on the basis of the best efforts of the contestants. The commissioner shall also have the power to and authority to revoke or suspend the license of any judge, boxer, wrestler, wrestling promoter, manager, referee, timekeeper, second, or boxing promoter for violations of this Act. The commissioner may also deny an application for license when the applicant does not possess the requisite qualifications. SECTION 3. Amends Section 5 of the Texas Boxing Act to the following: Decisions of the commissioner may secure judicial review as prescribed by the Administrative Procedure Act. Judicial review shall be by the substantial evidence rule. SECTION 4. Section 6 of the Texas Boxing Act is amended to the following: (a) A person who violates this provision of the Act or any rule or regulation of the department or the commissioner commits a Class B misdemeanor. (b) Any person violating the Act or the rules and regulations of the department or commissioner may be assessed a penalty to paid the State of Texas in an amount not to exceed $10,000 for each violation. (c) When it appears that the provisions of the Act or commissioner have been violated or a person is threatening to violate them, the attorney general or the department may bring about a civil for injunctive relief to restrain such person from continuing the violation or threat of violation or for the assessment and recovery of the civil penalty or for both. Venue for such suit will be in the Travis County district courts. SECTION 5. Amends Section 8 of the Texas Boxing Act as follows: (a) A person may not act as a boxing or wrestling promoter unless the person has been licensed by the commission under this Act. (b) The commissioner shall furnish a form for a promoter's license application. An application for a license shall be accompanied by a surety bond subject to the commissioner's approval and condition on the payment of the tax imposed under Section 11 of this Act. The commissioner shall set the sum of the surety bond, but the sum may not be less than $300. (c) The commissioner shall furnish a form for a wrestling promoter's license. A license fee shall be assessed to reasonably cover the administrative costs of licensing. The licensing application shall be accompanied by a $5,000 surety bond to filed with the commissioner. (j) A boxing or wrestling promoter may not knowingly or intentionally make a false or fraudulent report required under this Act. SECTION 6. Amends Section 9 of the Texas Boxing Act as follows: (d) It is a violation of the Act to furnish false information on a license application. SECTION 7. Amends Section 10 (A) of the Texas Boxing and Wrestling Act as follows: (a) The commissioner may establish rules and regulations setting reasonable qualifications for applicants seeking licenses as boxers, wrestlers, boxing or wrestling promoters, wrestling and boxing managers, matchmakers, judges, seconds, timekeepers or referees. SECTION 8. Amends Section 11 of the Texas Boxing Act by adding Sections 11 A, 11B, 11C, 12 and 13 as follows: Sec. 11(a) LIVE EVENT TAX; A tax of three percent of the total gross receipts will be charged to any person who conducts an event, including and elimination tournament, wherein an admission fee is charged. (b) Any person who conducts a boxing or wresting match, event, tournament etc.. where admission is charged has 21 days (including weekends) after the event to furnish the department with a duly verified report showing the number of tickets sold, prices charged and amount of gross receipts obtained from the event. A cashier's check or money order made payable to the State of Texas in the amount of three percent of the total gross receipts of the event shall be attached to the verified report. Sec. 11A. CLOSED CIRCUIT TELECAST PERMIT AND TAX: (a)Any person who charges an admission fee for exhibiting a simultaneous telecast of any event regulated by this Act on a closed circuit telecast must possess a promoter's license and must obtain a permit for each closed circuit telecast shown in Texas. (b) A three percent tax of the gross receipts obtained from the exhibition of the telecast in Texas is imposed on a person who charges an admission fee for exhibiting a simultaneous telecast of an event on a closed-circuit telecast shown in Texas. (c) The promoter has 21 days(including weekends) to provide a duly verified report on a form furnished by the department showing the number of tickets sold, prices charged and amount of gross receipts obtained from the event. A cashier's check in the amount of 3 percent of the gross receipts shall be attached to the verified report. (d) The promoter shall notify the commissioner of the names and addresses of all facilities to or through which the closed circuit telecast will be shown fourteen (14) days prior to the date of the closed circuit event, and shall provide daily updates to the commissioner of any additions and deletions of facilities. (e) This section applies to telecasts shown in Texas regardless of the location of the event. Sec. 11B. TELEVISION RIGHTS TAX: (a) Anyone who sells television broadcast rights of a boxing or wrestling match, contest, or exhibition must possess a boxing or wrestling promoters license. (b) A tax is imposed on a person who sells television broadcast rights of an event held in Texas. The tax imposed is an amount equal to the lesser of: (1) three percent of the gross receipts obtained by the person from the sale of the television broadcast rights; or (2) $50,000. (c) The person has 21 days after a televised event to pay state tax and provide the commissioner with a duly verified report which shows gross revenue to the promoter for television rights of the events. This section applies only to an event held in Texas. 11C. PAY-PER-VIEW EVENTS: Any person sells an event seen on a pay per view telecast that is shown in this state must possess a boxing or wrestling promoter's license issued under this Act and must obtain a permit for each pay-per-view telecast shown in Texas. (b) A tax is imposed on a person who sells pay-per-view telecast rights for an event that is shown in Texas. The tax imposed is an amount equal to the lesser of: (1) three percent of the gross receipts obtained by the person from the sale of the pay-perview telecast rights; or (2) $50,000. (c) The person must furnish the department within 21 days after the day of the fight a report which shows the gross receipts of the person from the sale of the pay-per-view telecast rights of the event, including the number of pay-per-view orders sold in Texas and the price of each order. (d) The tax imposed by this section is applicable to the gross receipts from the sale of the telecast rights derived from Texas subscribers, regardless of the location of the event. Sec. 12. CLOSED-CIRCUIT AND PAY PER VIEW TELECAST REPORTS BY SYSTEM, CABLE AND FACILITY OPERATORS. (a) Each system operator, cable operator, or facility operator whose facilities are utilized to telecast an event under this Act shall within 15 days, file a report with the commissioner stating the number of orders sold in Texas and the price per order. (b) If the event is sold by the number of rounds fought, each system operator, cable operator or facility operator shall report to the commissioner the price per round, the number of orders sold in Texas and the number of rounds fought. (c) A facility operator, cable operator, or system operator may not intentionally make a false or fraudulent report required under this Act. (d) A system operator, cable operator, or facility operator is not responsible for payment of taxes under this Act.. Sec. 13. TAX ADMINISTRATION. (a) The commissioner shall provide forms for reporting under Sections 11, 11A, 11B, 11C, and 12 of this Act. (b) The department may audit reports filed under Sections 11, 11A, 11B, 11C, and 12 of this Act. (c) The commissioner by rule shall determine a specified percentage of the total revenue obtained from the taxes imposed by Sections 11, 11A, 11B, 11C, and 12 of this Act not to exceed the lesser of 20 percent of the total annual revenues or $50,000 annually to be deposited into a separate account in the general revenue fund to be known as the Texas Boxing and Wrestling Sports Fund. The remainder of the revenue obtained from the taxes imposed by this Act shall be deposited to the credit of the General Revenue Fund. SECTION 9. The Texas Boxing Act is amended by adding Article 3 as follows: ARTICLE 3: ULTIMATE FIGHTING PROHIBITED (a) Ultimate or extreme fighting is prohibited in the State of Texas. (b) Anyone who promotes or participates in ultimate fighting, or serves as an agent, principal partner, publicist, vendor, producer, referee, or contractor of or for ultimate fighting is guilty of a class A misdemeanor. (c) Medical personnel who administer to, treats or assists any participant of ultimate or extreme fighting are exempt from this section. (d) No licenses or permits will be issued for ultimate fighting or similar contests. No person, partnership, organization, corporation, limited liability company or association shall conduct or participate in any ultimate fighting or similar contests. SECTION 10. Section 4(e), Texas Boxing and Wrestling Act is repealed. SECTION 11. This Act takes effect September 1, 1997 except as provided by subsections (c) and (d). (b) The commissioner shall adopt rules for licensing wrestlers, promoters and managers and under the Texas Boxing and Wrestling Act no later than Dec. 1, 1997. (c) A person who is required to be licensed as a professional wrestlers, managers and promoters and boxing promoters are not required to obtain a license until March 1, 1998. (d) The taxes imposed on the sale of television and pay-per-view rights by Sections 11B and 11C, Texas Boxing and Wrestling Act, apply only to boxing and wrestling events held on or after Jan. 1, 1998. SECTION 12. EMERGENCY CLAUSE. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute bill adds that a boxing or wrestling promoter may not knowingly or intentionally make a false or fraudulent report required under this Act. In CSHB 2538 Section 6 adds subsection (d) to Article 8501-1, Vernon's Texas Civil Statutes to state that it is a violation of the Act to furnish false information on a license application. CSHB 2538 sets down rules for payment of 3 percent gross receipts tax and the time table in which it must be paid. Also requires that the lesser of $50,000 or 20 percent of annual revenues generated by the new promoter and licensing fees will be deposited into a separate account in the general revenue fund to be known as the Texas Boxing and Wrestling Sports Fund. The remainder of the revenue will be deposited to the credit of the General Revenue Fund. CSHB 2538 adds a new section 11. The substitute takes effect on Sept. 1, 1997 with three exceptions: rules for licensing must be adopted by the commissioner no later than Dec. 1, 1997; anyone who is required to licensed under the Act is not required to do so until March 1, 1998; and, the taxes imposed on the sale of television and payper-view rights apply only to boxing and wrestling events held on or after Jan. 1, 1998. The substitute decreases the penalties for violation of the Act from a Class A misdemeanor to a Class B misdemeanor. The civil penalties for violation of the Act are not to exceed $10,000 in the substitute as compared with $1,000 in the original bill. The definitions of professional wrestler, professional wrestling manager, professional boxing manager are added. Section 8 of the original is now Section 9 and Section 12 is the Emergency Clause. In the CSHB Section 8 (13), Tax Administration, has been added. Section 4(d) and Section 6(c) have been deleted.