80R5410 BEF-F

By: Ellis, Carona S.B. No. 1359

A BILL TO BE ENTITLED

AN ACT

relating to the authorization and regulation of casino gambling and to the creation, powers, and duties of the Texas Gaming Commission; authorizing taxes; providing civil and criminal penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle A, Title 13, Occupations Code, is amended by adding Chapter 2004 to read as follows: CHAPTER 2004. CASINO GAMBLING SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2004.001. SHORT TITLE. This chapter may be cited as the Texas Economic Development and Gaming Control Act.

Sec. 2004.002. PUBLIC POLICY. (a) All casino gaming that is conducted in this state and that is authorized by law shall be regulated and licensed under this chapter, unless the legislature or federal law specifically provides otherwise.

(b) The legislature hereby finds, and declares it to be the public policy of this state, that:

(1) the development of regulated limited casino gaming in the state will benefit the general welfare of the people of this state by enhancing investment, development, and tourism in this state, resulting in new jobs and additional revenues to the state;

(2) the conduct of regulated casino gaming in a limited number of casinos will not harm the people of this state;

(3) the regulation of gaming in this state is important to ensure that gaming is:

(A) conducted honestly and competitively; and

(B) free from criminal and corruptive elements;

(4) public confidence and trust can be maintained only by strict regulation of all persons, locations, practices, associations, and activities related to the conduct of gaming and the casino service industry;

(5) persons owning any direct or indirect material interest in a casino should be licensed and controlled to protect the public health, safety, morals, good order, and general welfare of the people of this state;

(6) certain operators and employees of casinos should be regulated, licensed, and controlled to accomplish and promote these public policies while protecting the public health, safety, morals, good order, and general welfare of the people of this state;

(7) certain persons engaging in the casino service industry should be regulated, licensed, and controlled to accomplish and promote these public policies while protecting the public health, safety, morals, good order, and general welfare of the people of this state; and

(8) it is the intent of this chapter, where possible, to use the resources, goods, labor, and services of the people of this state in the operation and construction of casinos and casino-related amenities to the extent allowable by law.

Sec. 2004.003. DEFINITIONS. In this chapter:

(1) "Affiliate" means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with another person. A person is considered to control a company if the person beneficially owns more than a five percent equity interest in the company under the beneficial ownership rules adopted by the commission.

(2) "Applicant" means a person who has applied for an owner's license, an operator's license, an occupational license, a manufacturer's license, a casino service license, or a qualification to hold an equity interest or creditor interest in an owner license holder or who has applied for the approval of any act or transaction for which approval is required or allowed under this chapter.

(3) "Associated equipment" means any equipment, including a mechanical, electromechanical, or electronic contrivance, component, or machine, used in connection with gaming or with any game that would not otherwise be classified as a gaming device. The term includes dice, playing cards, links connecting progressive slot machines, equipment affecting the proper reporting of gross gaming revenue, computerized systems or software for monitoring slot machines, and devices for weighing or counting money.

(4) "Casino" means a facility at which gambling games are conducted for profit that are not authorized by a law other than this chapter.

(5) "Casino operator" means a person, other than the owner license holder who contractually agrees to provide operational and managerial services for the operation of a casino on behalf of the owner license holder in return for receiving a payment based wholly or partly on profits or receipts from the casino.

(6) "Casino service" means the provision of goods or services, including security service and gaming schools, to a person holding an owner's or operator's license under this chapter, other than a service requiring a manufacturer's license.

(7) "Casino service license" means a license issued under Section 2004.252.

(8) "Casino service license holder" means a person who holds a casino service license.

(9) "Commission" means the Texas Gaming Commission.

(10) "Commission member" means a member of the commission.

(11) "Company" means a corporation, partnership, limited partnership, trust, association, joint stock company, joint venture, limited liability company, or other form of business organization. The term does not include a sole proprietorship or natural person.

(12) "Creditor interest" means a right or claim of any character against a person for the payment of money borrowed, whether secured or unsecured, matured or unmatured, liquidated or absolute, or fixed or contingent. The term includes an obligation based on the person's profits or receipts.

(13) "Director" means a member of the board of directors of a corporation and a person performing similar functions with respect to a company other than a corporation.

(14) "Equity interest" means a proprietary interest, right, or claim allowing the holder either to vote with respect to matters of organizational governance or to participate in the profits and residual assets of a company, including common and preferred stock in a corporation, a general or limited partnership interest in a partnership, a similar interest in any other form of business organization, and a warrant, right, or similar interest convertible into, or to subscribe for, a proprietary right or claim, with or without the payment of additional consideration.

(15) "Executive director" means the executive director of the commission.

(16) "Family" means, with respect to a natural person, any other natural person related to the person within the second degree by affinity or the third degree by consanguinity, as determined under Subchapter B, Chapter 573, Government Code.

(17) "Game" or "gambling game":

(A) means any game or similar activity that involves the making of a bet, as defined by Section 47.01, Penal Code, for consideration, and includes:

(i) a banking or percentage game played with cards, dice, or a mechanical, electromechanical, or electronic device or machine for money, property, checks, credit, or a representative of value, including roulette, keno, twenty-one, blackjack, craps, poker, chuck-a-luck (dai shu), wheel of fortune, chemin de fer, baccarat, pai gow, slot machine, any other electronic game of chance, and any other game or device approved by the commission;

(ii) simulcast wagering on pari-mutuel greyhound or horse racing;

(iii) the maintenance of a race book; and

(iv) any other method of effecting a wager approved by the commission; and

(B) does not include:

(i) bingo authorized by Chapter 2001;

(ii) charitable raffles authorized by Chapter 2002; or

(iii) the state lottery conducted under Chapter 466, Government Code.

(18) "Gaming" or "gambling" means to deal, operate, carry on, conduct, maintain, or expose for play a game in a casino.

(19) "Gaming device" means a mechanical, electromechanical, or electronic contrivance, component, or machine used in connection with gaming or a game that affects the result of a wager by determining win or loss. The term includes a system for processing information that can alter the normal criteria of random selection, affect the operation of a game, or determine the outcome of a game.

(20) "Gaming employee":

(A) means an individual directly involved in the operation or conduct of gaming in a casino performing a service in a capacity that the commission finds appropriate for occupational licensing under Section 2004.202 and includes:

(i) a boxman, a cashier, change personnel, counting room personnel, a dealer, a floor person, a host empowered to extend credit or complimentary services, a keno runner, a keno writer, a machine mechanic, or security personnel;

(ii) a shift or pit boss or a supervisor or manager involved in gaming activities;

(iii) accounting or internal auditing personnel directly involved in recordkeeping or the examination of records generated from gaming activities; and

(iv) a junketeer or other independent agent whose compensation is based on how much a patron wagers or loses or who is paid per patron more than the price of admission; and

(B) does not include bartenders, cocktail waitresses, or other individuals engaged exclusively in preparing or serving food or beverages or individuals providing nominal, complimentary, or maintenance services.

(21) "Gross gaming revenue":

(A) means the total of the following, less the total of all cash paid out as losses to patrons and those amounts paid to purchase annuities to fund losses paid to patrons by independent financial institutions and items made deductible as losses under Section 2004.452:

(i) cash received by an owner license holder as winnings;

(ii) cash received by an owner license holder in payment for credit extended by the owner license holder to a patron for the purposes of gaming; and

(iii) compensation received by an owner license holder for conducting any game in which the owner license holder is not a party to a wager; and

(B) does not include:

(i) counterfeit money or tokens;

(ii) coins of other countries that are received in slot machines or gaming devices;

(iii) cash taken in fraudulent acts perpetrated against an owner license holder for which the holder is not reimbursed; or

(iv) cash received as entry fees for contests or tournaments in which the patrons compete for prizes.

(22) "Hearing examiner" means a person authorized by the commission to conduct hearings.

(23) "Institutional investor" means a person, other than a state or federal pension plan, that meets the requirements of a "qualified institutional buyer" as defined in 17 C.F.R. Section 230.144A, as amended, and is:

(A) a bank as defined in Section 3(a)(6), Securities Exchange Act of 1934 (15 U.S.C. Section 78c), as amended;

(B) an insurance company as defined in Section 2(a)(17), Investment Company Act of 1940 (15 U.S.C. Section 80a-2), as amended;

(C) an investment company registered under Section 8, Investment Company Act of 1940 (15 U.S.C. Section 80a-8), as amended;

(D) an investment adviser registered under Section 203, Investment Advisers Act of 1940 (15 U.S.C. Section 80b-3), as amended;

(E) a collective trust fund as defined by Section 3(c)(11), Investment Company Act of 1940 (15 U.S.C. Section 80a-3), as amended;

(F) an employee benefit plan or pension fund that is subject to the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.), as amended, excluding an employee benefit plan or pension fund sponsored by a publicly traded corporation registered with the commission;

(G) a state or federal government pension plan;

(H) a group composed entirely of persons specified in Paragraphs (A)-(F); or

(I) such other persons as the commission may determine for reasons consistent with the policies expressed in Section 2004.002.

(24) "Key executive" means a corporation's directors and executive officers, a partnership's general partners, a trust's trustee, a joint venture's managing venturers, and each person possessing similar responsibilities and authorities in any other form of business organization.

(25) "License" means an owner's license, an operator's license, an occupational license, a casino service license, a manufacturer's license, or a qualification to hold an equity interest or creditor interest in an owner's license holder.

(26) "License holder" means a person holding a license issued under this chapter.

(27) "Manufacturer license holder" means the holder of a manufacturer's license.

(28) "Manufacturer's license" means a license issued under Section 2004.251.

(29) "Negotiable instrument" means a writing that evidences a transaction between an individual and an owner license holder at the time of the transaction whose gaming chips, tokens, or currency are exchanged for the instrument and includes a writing taken in consolidation, redemption, or payment of a prior instrument.

(30) "Occupational license" means a license issued under Section 2004.202.

(31) "Occupational license holder" means the holder of an occupational license.

(32) "Operator's license" means a license issued under Section 2004.201.

(33) "Operator license holder" means the holder of an operator's license.

(34) "Owner's license" means a license issued under Section 2004.152.

(35) "Owner license holder" means a person holding an owner's license.

(36) "Principal manager" means a person who, as determined under the rules of the commission, holds or exercises managerial, supervisory, or policy-making authority over the management or operation of a gaming activity or casino service that in the judgment of the commission warrants the occupational licensing as a principal manager for the protection of the public interest. The term includes a key executive of a license holder that is a company and each person controlling a license holder that is a company.

(37) "Project commitment" means, with respect to an application for an owner's license for a proposed casino, the total land and development costs for the casino and any related hotel and entertainment, retail, and parking facilities, including the cost of acquiring and preparing the underlying real estate, the cost of obtaining requisite permits and approvals, the cost of acquiring and installing slot machines, gaming devices, and associated equipment, and fees for professional services and financing.

(38) "Publicly traded company":

(A) means a company that:

(i) has one or more classes of securities registered under Section 12, Securities Exchange Act of 1934 (15 U.S.C. Section 78l), as amended; or

(ii) is an issuer subject to Section 15(d), Securities Exchange Act of 1934 (15 U.S.C. Section 78o), as amended; and

(B) does not include a company or other legal entity that has securities registered or is considered to be an issuer solely because it guaranteed a security issued by an affiliate under a public offering or is considered to be a co-issuer of a public offering of securities under 17 C.F.R. Section 230.140.

(39) "Race book" means wagers accepted on the outcome of an event held at a greyhound or horse racetrack that uses the pari-mutuel system of wagering.

(40) "Slot machine" means a mechanical, electrical, or other device or machine that, on insertion of a coin, token, or similar object or on payment of consideration, is available to play or operate, the play or operation of which, wholly or partly by the element of chance, may deliver or entitle the person playing or operating the machine to receive cash, premiums, merchandise, tokens, or any other thing of value, whether the payoff is made automatically from the machine or is made in another manner.

Sec. 2004.004. EXEMPTION FROM FEDERAL STATUTES. (a) Under Section 2, 64 Stat. 1134 (15 U.S.C. Section 1172), as amended, this state declares that this state is exempt from that section.

(b) All shipments of gaming devices into this state, including slot machines, conducted in compliance with the applicable provisions of 15 U.S.C. Sections 1173 and 1174 are legal shipments of the devices into this state.

Sec. 2004.005. APPLICATION OF SUNSET ACT. The Texas Gaming Commission is subject to Chapter 325, Government Code (Texas Sunset Act). Unless continued in existence as provided by that chapter, the commission is abolished and this chapter expires September 1, 2019. [Sections 2004.006-2004.050 reserved for expansion] SUBCHAPTER B. TEXAS GAMING COMMISSION

Sec. 2004.051. TEXAS GAMING COMMISSION. (a) The Texas Gaming Commission is composed of five members appointed as provided by Section 47a, Article III, Texas Constitution.

(b) In making appointments to the commission, the appointing authorities shall attempt to achieve representation of all the population groups of this state.

Sec. 2004.052. QUALIFICATIONS OF COMMISSION MEMBERS. (a) To be eligible for appointment to the commission, an individual:

(1) must be a citizen of the United States;

(2) must have resided in this state for the two years preceding the date of the person's appointment;

(3) must submit to the Texas Ethics Commission a financial statement that contains the information required by Subchapter B, Chapter 572, Government Code;

(4) may not own a financial or other interest in a person engaged in the conduct of gaming or the provision of casino services, or in a security issued by that person, or be related within the second degree by affinity or the third degree by consanguinity, as determined under Chapter 573, Government Code, to an individual who owns a financial or other interest or security;

(5) may not be an applicant for or holder of a license under this chapter or hold an equity interest or creditor interest in an owner license holder requiring qualification under Section 2004.161; and

(6) may not be a member of the governing body of a political subdivision of this state.

(b) A person holding an elective office or an officer or official of a political party is not eligible for appointment to the commission.

Sec. 2004.053. TERM. Members of the commission serve staggered terms of six years, with the terms of one or two members, as applicable, expiring January 1 of each even-numbered year.

Sec. 2004.054. PRESIDING OFFICER. The governor shall designate one member to serve as presiding officer of the commission for a term of two years.

Sec. 2004.055. BOND. (a) Before assuming the duties of office, a member of the commission must execute a bond in the amount of $25,000 payable to the state and conditioned on the member's faithful performance of the member's duties of office.

(b) The bond must be approved by the governor.

(c) The cost of the bond shall be paid by the commission.

Sec. 2004.056. PROHIBITION OF CERTAIN ACTIVITIES. (a) A member of the commission may not:

(1) use the member's official authority to affect the result of an election or nomination for public office; or

(2) directly or indirectly coerce, attempt to coerce, command, or advise a person to pay, lend, or contribute anything of value to another person for political purposes.

(b) A commission member or the spouse of a commission member may not solicit or accept employment from a license holder or an applicant for a license before the second anniversary of the date the commission member's service on the commission ends.

Sec. 2004.057. REMOVAL. (a) It is a ground for removal from the commission if a member:

(1) does not have at the time of appointment the qualifications required for appointment to the commission;

(2) does not maintain during service on the commission the qualifications required for the appointment to the commission;

(3) violates a prohibition established by Section 2004.056;

(4) cannot discharge the member's duties for a substantial part of the term for which the member is appointed because of illness or disability; or

(5) is absent from more than one-half of the regularly scheduled commission meetings that the member is eligible to attend during a calendar year, unless the absence is excused by majority vote of the commission.

(b) The validity of an action of the commission is not affected by the fact that it is taken when a ground for removal of a commission member exists.

(c) If the presiding officer has knowledge that a potential ground for removal exists, the presiding officer shall notify the governor and the attorney general.

Sec. 2004.0571. APPLICATION OF FINANCIAL DISCLOSURE LAW. For purposes of Chapter 572, Government Code, a member of the commission, the executive director, and the division directors are appointed officers of a major state agency.

Sec. 2004.058. PER DIEM; EXPENSES. (a) Each member of the commission is entitled to:

(1) a per diem in an amount prescribed by appropriation for each day spent in performing the duties of the member; and

(2) reimbursement for actual and necessary expenses incurred in performing those duties.

(b) Reimbursement for expenses under this section is subject to any applicable limitation in the General Appropriations Act.

Sec. 2004.059. EXECUTIVE DIRECTOR. (a) The commission shall appoint an executive director, who serves at the pleasure of the commission.

(b) A person holding an elective office or an officer or official of a political party is not eligible for appointment as executive director.

(c) The executive director must have five or more years of responsible administrative experience in public or business administration or possess broad management skills.

(d) The executive director may not pursue any other business or occupation or hold any other office for profit.

(e) The executive director must meet all eligibility requirements relating to members of the commission, except the requirement for prior residency in this state.

(f) The executive director is entitled to an annual salary and other compensation specified by the commission.

(g) The executive director may not, before the second anniversary of the date the director's employment by the commission ends, acquire a direct or indirect interest in or be employed by a person licensed in the conduct of gaming or the provision of casino services in this state.

Sec. 2004.060. OFFICES. The commission shall maintain its primary office in Travis County and may maintain other offices determined to be necessary by the commission.

Sec. 2004.061. MEETINGS. (a) The commission shall meet not less than six times in each calendar year.

(b) The commission shall meet at the call of the presiding officer or as provided by commission rule.

Sec. 2004.062. AUTHORITY TO SUE OR BE SUED. (a) The commission may sue and be sued.

(b) Service of process in a suit against the commission may be secured by serving the executive director.

(c) A suit against the commission must be brought in Travis County.

Sec. 2004.063. AUDIT. The transactions of the commission are subject to audit by the state auditor under Chapter 321, Government Code. [Sections 2004.064-2004.100 reserved for expansion] SUBCHAPTER C. POWERS AND DUTIES OF COMMISSION

Sec. 2004.101. GENERAL POWERS. (a) All aspects of this chapter, including those relating to licensing, qualification, execution, and enforcement, shall be administered by the executive director and the commission for the protection of the public and in the public interest.

(b) The commission and the executive director have full power and authority to hold hearings on matters before the commission, and in connection to the hearings, to issue subpoenas, to compel the attendance of witnesses at any place in this state, to administer oaths, and to require testimony under oath. Any process or notice relating to a hearing may be served in the manner provided for service of process and notices in civil actions. The commission and the executive director may pay transportation and other expenses of witnesses as they consider reasonable.

(c) The executive director and the executive director's authorized employees may:

(1) inspect and examine a premises where gaming is conducted or equipment or supplies, including a slot machine or other gaming device, or associated equipment is manufactured, assembled, produced, programmed, sold, leased, marketed, distributed, repaired, or modified for use in gaming;

(2) for good cause, seize and remove from a premises and impound equipment or supplies for the purpose of examination and inspection; and

(3) demand access to, inspect, examine, photocopy, or audit papers, books, and records of applicants and license holders, on their premises or elsewhere as practicable, in the presence of the license holder or the license holder's agent, reporting the gross income produced by a gaming business, verification of the gross income, and other matters affecting the enforcement of this chapter.

(d) For the purpose of conducting audits after the cessation of gaming by a license holder, a former license holder shall furnish, on demand of the executive director or the executive director's authorized employees, books, papers, and records as necessary to conduct the audits. The former license holder shall maintain all books, papers, and records necessary for audits for three years after the date of the surrender or revocation of the license. If the former license holder seeks judicial review of a deficiency determination or files a petition for a redetermination, the former license holder must maintain all books, papers, and records until a final order is entered on the determination.

Sec. 2004.102. RULEMAKING AUTHORITY. (a) The commission shall adopt the rules the commission considers necessary or desirable in the public interest in carrying out the policy and provisions of this chapter.

(b) The rules shall set out:

(1) the method and form of application that an applicant for a license must follow and complete before consideration of an application by the commission;

(2) the information to be furnished by an applicant or license holder concerning antecedents, habits, character, associates, criminal record, business activities, and financial affairs;

(3) the criteria to be used in the award, revocation, and suspension of licenses;

(4) the information to be furnished by a license holder relating to the license holder's employees;

(5) the manner and procedure of hearings conducted by the commission or a hearing examiner of the commission;

(6) the payment of fees or costs an applicant or license holder must pay;

(7) the procedures for the issuance of temporary licenses and temporary qualification to hold equity interests and creditor interests in owner license holders;

(8) the manner and method of collection and payment of fees and the issuance of licenses;

(9) the definition of "unsuitable method of operation";

(10) the conditions under which the nonpayment of a gambling debt by a license holder shall be deemed grounds for disciplinary action;

(11) the manner of approval of new games, slot machines, and gaming devices;

(12) access to confidential information obtained under this chapter and means to ensure that the confidentiality of the information is maintained and protected;

(13) financial reporting and internal control requirements for license holders;

(14) the manner in which winnings, compensation from games and gaming devices, and gross gaming revenue must be computed and reported by an owner license holder;

(15) requirements for the annual audit of the financial statements of a license holder;

(16) requirements for periodic financial reports from each license holder consistent with standards and intervals prescribed by the commission;

(17) the procedures to be followed by a license holder for excluding a person from a casino; and

(18) the procedures for exempting or waiving institutional investors from the licensing requirements for shareholders of publicly traded corporations.

Sec. 2004.103. AUTHORITY OF EXECUTIVE DIRECTOR. (a) With commission approval, the executive director may create executive positions as the director considers necessary to implement this chapter.

(b) The executive director shall employ division directors in the areas of audit, investigation, and enforcement. The director of the audit division must:

(1) be a certified public accountant;

(2) have five or more years of progressively responsible experience in general accounting; and

(3) have a comprehensive knowledge of the principles and practices of corporate finance or must possess qualifications of an expert in the field of corporate finance and auditing, general finance, gaming, and economics.

(b-1) Other division directors must possess five or more years of training and experience in the fields of investigation, law enforcement, law, or gaming.

(c) The executive director may investigate, for the purpose of prosecution, a suspected criminal violation of this chapter. For the purpose of the administration and enforcement of this chapter, the executive director and employees designated by the executive director may be commissioned as peace officers.

(d) The executive director, to further the objectives and purposes of this chapter, may:

(1) direct and supervise all administrative actions of the commission;

(2) bring legal action in the name and on behalf of the commission;

(3) make, execute, and effect an agreement or contract authorized by the commission;

(4) employ the services of persons considered necessary for consultation or investigation and set the salaries of or contract for the services of legal, professional, technical, and operational personnel and consultants, except that outside legal assistance may be retained only with the approval of the attorney general;

(5) acquire furnishings, equipment, supplies, stationery, books, and all other things the executive director considers necessary to carry out the executive director's functions; and

(6) perform other duties the executive director may consider necessary to effect the purposes of this chapter.

Sec. 2004.104. OFFICE OF HEARING EXAMINERS. (a) The commission shall create an office of hearing examiners to assist the commission in carrying out its powers and duties.

(b) The office of hearing examiners shall:

(1) hold hearings under the authority of the commission on matters relating to the commission's administration of this chapter as the commission orders; and

(2) report after hearing in the manner prescribed by the commission.

(c) The commission shall refer any contested case arising under this chapter to the office of hearing examiners.

(d) The office of hearing examiners is independent of the executive director and is under the exclusive control of the commission.

(e) The office of hearing examiners is under the direction of a chief hearing examiner appointed by the commission.

(f) The commission may authorize the chief hearing examiner to delegate to one or more hearing examiners the authority to hold any hearing called by the chief hearing examiner.

(g) The chief hearing examiner and all assistant hearing examiners employed by the office of hearing examiners must be attorneys licensed to practice law in this state.

(h) The chief hearing examiner and all assistant hearing examiners may administer oaths, receive evidence, and issue subpoenas to compel the attendance of witnesses and the production of papers and documents in all matters delegated by the commission.

(i) The chief hearing examiner and all assistant hearing examiners are entitled to an annual salary and other compensation specified by the commission.

(j) The office of hearing examiners may contract for additional services it considers necessary to carry out its powers.

Sec. 2004.105. JUDICIAL REVIEW IN CONTESTED CASES. A final ruling of the commission in a contested case is subject to judicial review under Chapter 2001, Government Code. Judicial review is under the substantial evidence rule.

Sec. 2004.106. RECORDS. (a) The executive director shall maintain a file of all applications for licenses under this chapter, together with a record of all action taken with respect to the applications.

(b) The commission and the executive director may maintain other records they consider desirable.

(c) The information made confidential by this subsection may be revealed, wholly or partly, only in the course of the necessary administration of this chapter, under Section 2004.553, or on the order of a court of competent jurisdiction, except that the executive director or the commission may disclose the information to an authorized agent of an agency of the United States, another state, or a political subdivision of this state authorized under commission rules. Notice of the content of any information furnished or released under this subsection may be given to an affected applicant or license holder as prescribed by commission rule. The following information is confidential and not subject to disclosure under Chapter 552, Government Code:

(1) information requested by the commission or the executive director to be furnished under this chapter or that may otherwise be obtained relating to the finances, earnings, or revenue of an applicant or license holder;

(2) information pertaining to an applicant's criminal record, antecedents, and background that has been furnished to or obtained by the commission or the executive director from any source;

(3) information provided to the commission or the executive director or a commission employee by a governmental agency or an informer or on the assurance that the information will be held in confidence and treated as confidential; and

(4) information obtained by the executive director or the commission from a casino service license holder relating to the manufacturing, modification, or repair of slot machines or other gaming devices.

Sec. 2004.107. REPRESENTATION BY ATTORNEY GENERAL. (a) The attorney general shall represent the commission and the executive director in any proceeding to which the commission or the executive director is a party under this chapter or in any suit filed against the commission or executive director.

(b) The office of the attorney general on request shall advise the commission and the executive director in all other matters, including representing the commission when the commission acts in its official capacity. [Sections 2004.108-2004.150 reserved for expansion] SUBCHAPTER D. OWNER'S LICENSE

Sec. 2004.151. OWNER'S LICENSE. (a) Gaming may lawfully be conducted in a casino operating under an owner's license.

(b) It is unlawful for a person to own an equity interest in a casino that conducts gaming in this state for which an owner's license is not in effect.

(c) A separate owner's license must be obtained for each casino conducting gaming.

Sec. 2004.152. ALLOCATION OF OWNER'S LICENSES. (a) The commission shall award 12 owner's licenses to applicants for casino-anchored destination attraction development projects as follows:

(1) seven owner's licenses in urban areas, allocated by population;

(2) two owner's licenses on islands in the Gulf of Mexico that are tourist destinations with at least 1,000 guest rooms available for visitors in hotels, motels, or condominiums existing on January 1, 2007; and

(3) three additional owner's licenses, at locations:

(A) determined by the commission to achieve targeted economic development or permanent new job creation; or

(B) selected for other considerations determined appropriate by the commission.

(b) Notwithstanding Subsection (a):

(1) a license may not be issued in a county unless the voters of the county have adopted a proposition legalizing casino gaming at a local option election held under this chapter;

(2) not more than four owner's licenses may be issued in one county; and

(3) a license may not be issued in a county or municipality in which gaming is being conducted under the Indian Gaming Regulatory Act (25 U.S.C. Section 2701 et seq.) as of the effective date of this chapter.

(c) In allocating all licenses under this section, the commission shall consider, in addition to the other suitability criteria described in this chapter, the ability of the proposed casino facility to attract interstate or international tourism and to develop jobs in political subdivisions in which there has been a history of unemployment in excess of six percent for a period of three consecutive years out of the preceding five years as determined by the commission.

(d) For purposes of determining the location of a casino, a casino is considered to be located in the county in which the main public entrance to the casino is located.

(e) A person may not beneficially own, directly or indirectly, an equity interest of more than five percent of the total equity interest in more than three owner license holders.

(f) A person may not operate, either under an owner's license or under an operator's license, more than three casinos.

(g) The commission may not award an owner's license to a person unless the owner of the proposed project meets the residency requirement under Section 47a(i), Article III, Texas Constitution.

Sec. 2004.153. APPLICATION. (a) Application for an owner's license shall be made according to the rules of the commission and shall contain information the commission finds necessary to determine the suitability and eligibility of the applicant, the eligibility of the proposed location, and the economic impact of the overall casino project.

(b) In addition to any other information the commission may require, an application must include the following information concerning the feasibility of the overall casino project:

(1) proof that gaming has been approved through a local option election by the county where the casino is to be located;

(2) evidence that the applicant possesses, or has the right to acquire, sufficient real property on which the proposed casino will be located in order to allow the applicant's construction and operation of the casino project substantially as proposed;

(3) evidence that the applicant possesses, or reasonably expects to obtain, all state, county, and municipal permits and approvals necessary for the construction and operation of the proposed casino within the time periods prescribed in this chapter;

(4) evidence that the applicant possesses, or reasonably expects to obtain, all funds or financing necessary to construct and operate the applicant's proposed casino within the time periods prescribed in this chapter; and

(5) evidence that the applicant is prepared to begin construction of its proposed casino promptly on receiving an owner's license and to proceed with the construction of the casino without unnecessary delay.

(c) An applicant may apply for more than one owner's license relating to more than one casino, but must submit a separate application for each casino for which an owner's license is sought.

(d) An application for an owner's license must be accompanied by the nonrefundable application fee set out in Section 2004.351.

Sec. 2004.154. MANDATORY REQUIREMENTS. (a) During the first two years an individual holds an owner's license, the individual must be a resident of this state and comply with the residency requirements established by the commission.

(b) A company is eligible to apply for and hold an owner's license only if:

(1) the company is incorporated or organized and in good standing in this state or organized under the laws of another state of the United States and qualified to do business in this state; and

(2) the company complies with all the laws of this state.

(c) To be eligible to receive an owner's license to own a casino, an applicant must submit an application to the commission not less than 60 days after the later of:

(1) the date the commissioners court of the county gives written notice to the commission under Section 2004.656 that gaming as authorized under this chapter has been legalized through a local option election; or

(2) the date the commission establishes procedures for application.

(d) An application may not be considered filed for purposes of this chapter that does not include the information prescribed by Section 2004.153(b) or that is not accompanied by the prescribed application fee.

Sec. 2004.155. LICENSE AWARD CONSIDERATIONS. (a) The commission shall determine the initial and continuing suitability of each applicant for or holder of an owner's license based on suitability criteria the commission adopts to ensure that all owner license holders are of good character, honesty, integrity, and financial stability, that an owner license holder has sufficient business probity, competence, and experience in gaming, and that an owner license holder is otherwise qualified to be licensed.

(b) The commission shall give due consideration to the protection of the public health, safety, morals, and general welfare of the people of this state and for the reputation of the state's gaming industry.

(c) The burden of proving suitability to receive or hold an owner's license is on the applicant or license holder.

(d) In considering the initial and continuing suitability of an applicant for or holder of an owner's license, the commission may consider the suitability of:

(1) each person holding an equity interest or creditor interest in the applicant or holder;

(2) each person holding, or proposed to receive, an operator's license, occupational license, or manufacturer's license employed by or doing business with the applicant or holder; and

(3) each affiliate of the applicant or holder.

(e) An applicant for or holder of an owner's license may not receive or hold an owner's license if the person:

(1) has been convicted of a felony in the past 20 years under the laws of this state, any other state, or the United States;

(2) has ever been convicted of a gambling or gaming violation under the laws of this state or any other state;

(3) has ever knowingly or intentionally submitted an application for a license under this chapter that contained false information;

(4) served as a principal manager for a person described by Subdivision (1), (2), or (3);

(5) retains or employs another person described by Subdivision (1), (2), or (3);

(6) beneficially owns any material equity interest or creditor interest in the applicant or holder and is a person described by Subdivision (1), (2), or (3);

(7) holds a manufacturer's license or casino service license;

(8) is a member of the commission; or

(9) is a member of the judiciary or an elected official of this state.

(f) The commission may adopt rules providing for a person's reciprocal determination of suitability to hold an owner's license based on:

(1) a determination of suitability to own and operate a casino in any other jurisdiction the commission considers reasonable in light of the purpose of this chapter; or

(2) the person's ownership of a greyhound or horse racing facility under the Texas Racing Act (Article 179e, Vernon's Texas Civil Statutes).

Sec. 2004.156. ECONOMIC IMPACT ANALYSIS. (a) In determining whether or, in the case of multiple applicants competing for a limited number of owner's licenses within a county, to whom to grant an owner's license, the commission shall consider the following factors:

(1) the relative prospective revenues to be collected by the state from the conduct of gaming at the casino and the overall economic impact of each competing applicant's proposed casino and associated facilities;

(2) the relative number of residents of this state who would be employed in an applicant's proposed casino and any proposed associated hotel and nongaming businesses and the relative extent of the applicant's good faith plan to recruit, train, and promote a workforce that reflects the diverse populations of this state in all employment classifications;

(3) the relative extent to which an applicant's proposed casino and any proposed associated hotel and nongaming businesses could be reasonably expected to encourage interstate tourism to this state;

(4) the relative extent to which the scope, design, location, and construction of the applicant's casino and any associated hotel and nongaming businesses could be reasonably expected to contribute to developing a first-class gaming industry in this state; and

(5) the applicant's experience in conducting licensed gaming operations and the applicant's financial ability to promptly construct and adequately maintain the casino sought to be licensed, including the experience of partners of the applicant, of affiliated companies of the applicant or its partners, of key personnel of the applicant or its partners, and of operating companies under contract with the applicant.

(b) To ensure that a requisite level of economic development benefiting the people of this state accompanies each casino for which an owner's license is granted, the commission shall require an applicant, as a condition to receiving and holding an owner's license, to commit to building a casino project that meets the requirements for a casino-anchored destination attraction development project established under Section 47a(g), Article III, Texas Constitution.

Sec. 2004.157. PROOF OF LOCAL OPTION ELECTION. The commission may not accept an application for an owner's license relating to a casino proposed to be located in a county before receiving certification from the commissioners court of the county that gaming has been legalized through a local option election.

Sec. 2004.158. REVIEW OF APPLICATION. (a) The commission shall issue an order approving or denying an application for an owner's license not more than six months after the date of the filing of the application.

(b) The commission may adopt rules for awarding temporary or interim licensing the commission finds necessary to administer this chapter.

Sec. 2004.159. TRANSFERABILITY. An owner's license is not transferable and applies only to the specific site identified in the license.

Sec. 2004.160. DENIAL AND REVOCATION. (a) The commission may deny an application or revoke an owner's license for a reasonable cause.

(b) If the commission determines it has reasonable grounds to believe that an owner license holder may be unsuitable to continue to hold an owner's license, the commission shall conduct an investigation and hearing under Section 2004.551 and may, based on its determination, suspend, limit, or revoke the license. On suspension or revocation of an owner's license, the license holder must immediately cease all gaming.

(c) If the holder of an owner's license fails to begin construction of a casino within one year after the receipt of the owner's license, or fails to begin gaming operations within three years after the receipt of the license, the license is forfeited, unless the commission, for good cause, has previously granted an appropriate extension of time.

(d) The right to receive and hold an owner's license is a revocable privilege, and not a right or property under the United States Constitution or the Texas Constitution. An applicant for or holder of an owner's license does not have a vested interest or right in a license granted under this chapter.

Sec. 2004.161. REGISTRATION OF INTEREST IN LICENSE. (a) Except as provided by Subsection (b), a person who directly or indirectly owns an equity or creditor interest in an applicant for or holder of an owner's license shall register and qualify with the commission under commission rules and shall provide information the commission finds necessary to determine the suitability and eligibility of the person to retain the interest.

(b) The following persons are not required to register or qualify under this section:

(1) a key employee of the owner license holder that is required to apply for an occupational license under Section 2004.202;

(2) an institutional investor;

(3) a person that beneficially owns five percent or less of the total equity or creditor interest of the owner license holder; and

(4) any other group or class of persons that the commission by rule exempts from registration or qualification.

(c) A registration filed under this section must be accompanied by the application fee set out in Section 2004.351.

Sec. 2004.162. TRANSFERABILITY OF INTEREST. (a) Except as provided by this subsection, an owner license holder may not issue an equity or creditor interest to a person without the commission's determination of the qualification of the proposed subscriber or purchaser to hold the interest. An owner license holder that is a publicly held company may issue equity or creditor interests of five percent or less of its equity or creditor interest to any person without the consent of the commission.

(b) A person beneficially owning more than five percent of the equity or creditor interest of an owner license holder may not transfer any portion of the interest in the license holder to any person without the commission's determination of the qualification of the proposed transferee to hold the interest.

(c) A subscriber or proposed transferee of an interest by an owner license holder shall provide the commission with information the commission considers necessary to determine the qualification of the person. The commission, not later than 60 days after the date of the application, shall determine the qualification of a subscriber or proposed transferee and approve or deny the issuance or transfer.

Sec. 2004.163. DETERMINATION OF QUALIFICATION. (a) The commission shall determine the qualification of a person to acquire or continue to hold an equity or creditor interest in an applicant for or holder of an owner's license based on the qualification requirements the commission adopts for the protection of the public interest to ensure that the persons holding securities issued by license holders are of good character, honesty, integrity, and financial stability, and are otherwise qualified to hold the interest.

(b) The burden of proving qualification to acquire or hold an equity or creditor interest in a license holder is on the person acquiring or holding the interest.

(c) A person is unsuitable to acquire or retain an equity or creditor interest in an applicant for or holder of an owner's license if the person would be unsuitable to receive an owner's license under Section 2004.155(e).

(d) If the commission has reasonable grounds to believe that a person holding an equity or creditor interest in an applicant for or holder of an owner's license may be unqualified to retain the person's interest, the commission shall conduct an investigation and hearing under Section 2004.551 and may, based on its determination, issue an unsuitability finding and divestiture order to the holder of the interest and the issuer of the interest. On receipt of a divestiture order, the person holding the interest shall tender its entire interest for purchase to the issuer or a third party on terms the commission approves.

(e) If the commission issues an unsuitability finding and divestiture order to a holder of an equity interest or creditor interest, the person subject to the order may not:

(1) receive, directly or indirectly, a dividend, interest, payment, or distribution of any kind relating to the security that is the subject of the order; or

(2) exercise, directly or indirectly, any voting power or other right with respect to the security to which the order relates.

(f) A person subject to an order may receive payment for the sale of the person's interest on terms the commission approves. [Sections 2004.164-2004.200 reserved for expansion] SUBCHAPTER E. OPERATOR'S AND OCCUPATIONAL LICENSES

Sec. 2004.201. OPERATOR'S LICENSE. (a) A person may not provide services as a casino operator without holding an operator's license.

(b) A casino operator must hold a separate license for each casino that the casino operator operates unless the operator is also the owner of the premises and holds an owner's license for the premises.

Sec. 2004.202. OCCUPATIONAL LICENSE. (a) A person may not be employed as a gaming employee without holding an occupational license.

(b) A holder of an owner's or operator's license is not required to obtain an occupational license to provide services as a gaming employee in the casino to which the license relates.

(c) An owner must at all times have not less than one occupational license holder designated as a key employee having responsibility over all gaming activities who shall be available at the casino at all times when gaming is conducted on the owner license holder's premises.

(d) A gaming employee designated or determined to be a key employee by the commission shall be issued an occupational license designated as a key employee occupational license. In determining whether an employee is a key employee, the commission is not restricted by the title of the job performed by the employee but may consider the functions and responsibilities of the employee in making decisions.

(e) A person employed in the field of gaming as a gaming employee shall obtain an occupational license designated as a support occupational license. A person required to hold a support occupational license may not be a gaming employee of or assist the owner or operator license holder until the employee obtains a support occupational license. A person licensed as a key employee is not required to obtain a support occupational license.

Sec. 2004.203. APPLICATION. (a) Application for an operator's license or an occupational license shall be made in compliance with commission rules and must contain information the commission finds necessary to determine the suitability and eligibility of the applicant to function as a casino operator or to be employed or retained as a gaming employee.

(b) An application for an operator's license or an occupational license must be accompanied by the required application fee.

(c) The commission may issue a temporary operator's license and a temporary occupational license.

Sec. 2004.204. RESIDENCY. A person is eligible to apply for and hold an operator's license or occupational license without regard to the residency of the applicant.

Sec. 2004.205. DETERMINATION OF SUITABILITY. (a) The commission shall determine the suitability of an applicant for or holder of an operator's license or occupational license based on suitability criteria the commission adopts in order to ensure that a license holder:

(1) is of good character, honesty, and integrity;

(2) has sufficient business probity, competence, and training or experience in the gaming industry to perform the function contemplated; and

(3) is otherwise qualified to be licensed.

(b) The burden of proving suitability to receive and hold an operator's license or occupational license is on the applicant or license holder.

(c) In considering the suitability of a company applying for or holding an operator's license or occupational license to receive and continue to hold the license, the commission shall consider the suitability of each principal manager and each holder of an equity interest and creditor interest of the company to individually receive and hold an occupational license based on the suitability standards that apply to the applicants for the license generally.

(d) A person may not be found suitable to receive or hold an operator's license or occupational license if that person would be found unsuitable to hold an owner's license under Section 2004.155(e), except that an applicant for an operator's license or occupational license who has been convicted of a felony may be found suitable if the person is found to be adequately rehabilitated under the rehabilitation requirements adopted by the commission, and the applicant or license holder is otherwise suitable for licensing.

Sec. 2004.206. DENIAL OR REVOCATION OF LICENSE. (a) The commission may deny an application for or revoke an operator's license or occupational license for any reasonable cause.

(b) If the commission determines that it has reasonable grounds to believe that a license holder may be unsuitable to continue to hold the license, giving due consideration to the protection of the health, safety, morals, and general welfare of this state and to the reputation of the state's gaming industry, the commission shall conduct an investigation and hearing provided in Section 2004.551 and may, based on its determination, suspend, limit, or revoke any license.

(c) On the suspension or revocation of a license, the license holder shall cease the provision of all services in any capacity requiring a license under Section 2004.201 or 2004.202.

(d) A holder of an occupational license that has been revoked or suspended may not:

(1) receive, directly or indirectly, any compensation, consideration, or payment of any kind relating to the conduct of gaming in any capacity requiring a license under Section 2004.201 or 2004.202, other than the payment for services rendered before the suspension or revocation; or

(2) serve or function in a capacity that would require a license under Section 2004.201 or 2004.202.

(e) The receipt and holding of a license is a privilege and is not a right or property under the United States Constitution or the Texas Constitution. An applicant for or holder of an operator's license or occupational license does not have a vested interest or right in a license granted under this chapter. [Sections 2004.207-2004.250 reserved for expansion] SUBCHAPTER F. MANUFACTURER'S AND OTHER SERVICE PROVIDERS' LICENSES

Sec. 2004.251. MANUFACTURER'S LICENSE. (a) A person may not engage in any segment of the slot machine manufacturing industry in this state for which a manufacturer's license is required under this section without obtaining a manufacturer's license covering that segment of the industry.

(b) The commission shall adopt rules identifying segments of the manufacturing industry directly involved in the design, manufacture, assembly, production, programming, sale, lease, marketing, distribution, repair, or modification of slot machines or component parts of slot machines that the commission finds appropriate for licensing under this section.

(c) A manufacturer's license is personal to the license holder and allows the license holder to conduct business with any casino.

Sec. 2004.252. CASINO SERVICE LICENSE. (a) A person may not engage in any segment of the casino service industry that requires a license without obtaining a casino service license.

(b) The commission shall adopt rules identifying segments of the casino service industry directly involved with providing gaming-related services, equipment, and supplies that the commission finds appropriate for licensing.

(c) A person is required to obtain a casino service license if the person:

(1) operates, conducts, or maintains a gaming-related business in a casino; or

(2) furnishes goods, property, or services to a casino in exchange for:

(A) a payment based on a percentage of the earnings, profits, or receipts from the casino; or

(B) a payment the commission finds to be grossly disproportionate to the value of the goods, property, or service provided.

(d) A utility company, a municipality, or another political subdivision is not required to obtain a casino service license under this section.

(e) A casino service license is personal to the license holder and allows the license holder to conduct business with any casino.

Sec. 2004.253. APPLICATION. (a) Application for a manufacturer's license or casino service license shall be made in compliance with commission rules and shall contain information the commission finds necessary to determine the suitability and eligibility of the applicant.

(b) An application for a manufacturer's license or casino service license must be accompanied by the required application fee.

Sec. 2004.254. DETERMINATION OF SUITABILITY. (a) In considering the suitability of a company applying for or holding a manufacturer's license or casino service license to receive and continue to hold the license, the commission shall consider the suitability of each principal manager and each holder of an equity interest and creditor interest in the company applicant to individually receive and hold a manufacturer's license or casino service license based on the suitability standards that apply to the company applicant. A person may not be found suitable to receive or hold a manufacturer's license or casino service license if that person would be found unsuitable to hold an owner's license under Section 2004.155(e).

(b) If the commission determines that it has reasonable grounds to believe that a license holder is unsuitable to hold a manufacturer's license or casino service license, the commission shall conduct an investigation and hearing under Section 2004.551 and may, based on its determination, suspend, limit, or revoke a license.

(c) On suspension or revocation of a license, the license holder must cease the performance of manufacturing activity or casino service requiring a license under this chapter. After the revocation or suspension of the license, the affected license holder may not receive, directly or indirectly, compensation, consideration, or payment of any kind relating to manufacturing activity or provision of casino services in any capacity requiring a license under this chapter, other than the payment for goods or services provided before the suspension or revocation.

(d) An owner or casino operator who has entered into a lease with a manufacturer license holder or casino services license holder whose license has been revoked or suspended may continue to make payments on the lease based upon its original terms and conditions without modification or may accelerate the lease and pay it off, at the sole option of the owner or operator.

(e) The burden of proving suitability to receive and hold a manufacturer's license or casino service license is on the license holder. [Sections 2004.255-2004.300 reserved for expansion] SUBCHAPTER G. LICENSE RENEWAL

Sec. 2004.301. TERMS; RENEWAL; TEMPORARY LICENSE. (a) Before the issuance of a license, the commission may issue a temporary license for six months or less and may renew the temporary license as many times as the commission finds appropriate on the payment of the fee and execution of the bond, if required.

(b) The commission may issue a temporary license only to a person it believes will be determined to be qualified based on:

(1) the commission's review of the background investigations conducted by other state agencies or other United States jurisdictions with gaming activities; and

(2) the commission's determination that there is nothing in those background investigations of the applicant that would cause the applicant not to qualify for a license in this state.

(c) An original or renewal license expires on the first anniversary of the date it is issued.

(d) The fee for an owner's, operator's, occupational, manufacturer's, or casino service license is in the amount established by Section 2004.352 and must be paid annually. A license holder may renew an unexpired license annually by meeting the licensing requirements of the commission and by paying the annual fee. [Sections 2004.302-2004.350 reserved for expansion] SUBCHAPTER H. APPLICATION AND LICENSE FEES

Sec. 2004.351. APPLICATION FEES. (a) An applicant for an owner's license submitted before January 1, 2010, must pay a $250,000 application fee for each application. The fees shall be:

(1) deposited in the Texas casino gaming fund; and

(2) used for the timely mobilization of the commission.

(b) An application fee tendered before January 1, 2008, is not required to be accompanied by an application. An application submitted before January 1, 2010, must be filed on a date determined by commission rule.

(c) An application fee for an owner's license paid before January 1, 2008, must be accompanied by a document indicating the name of the applicant or an affiliate or partner of the applicant and the name of the county in which the casino is proposed to be located.

(d) An applicant submitting an application before January 1, 2010, may not apply for an owner's license for a site in a county unless the application fee for a license in that county was paid during the period set out in this section. If the applicant seeks more than one license in a county, the applicant or its affiliates or partners submitting an application before January 1, 2010, must file the number of application fees designating that county that is equal to the number of license holders in that county that the applicant is seeking.

(e) Notwithstanding Subsections (a), (b), (c), and (d), if no applicant pays an application fee for a site in a specific county, and the county passes a local option election approving casino gaming, or if applicants pay application fees for sites within a county and the county fails to approve a local option election approving casino gaming, the commission may accept applications for a site in the county that passed the local option election from persons who filed applications for other sites in the county where the local option election failed and apply the applicant's initial application fee to the new site.

(f) An applicant for an owner's license who submits an application on or after January 1, 2010, must pay an application fee of $100,000.

(g) An applicant for a manufacturer's license must pay an application fee of $200,000.

(h) An applicant for an operator's license must pay an application fee of $50,000.

(i) An applicant for a casino service license must pay an application fee of $100.

(j) A person registering and applying to qualify to hold an equity interest or creditor interest in a license holder must pay an application fee of $100.

(k) An individual applying for an occupational license must pay an application fee of $100.

(l) All application fees must be in the form of a money order or cashier's check and be payable to the Texas Gaming Commission. Application fees are nonrefundable.

(m) Application fees shall be applied toward the cost of investigating applicants' suitability for licensing or qualification under this chapter. Any costs of investigation incurred in excess of the application fee shall be paid by the applicant.

Sec. 2004.352. LICENSE FEES. (a) A holder of an owner's license must pay an annual license fee of $100,000.

(b) A holder of a manufacturer's license must pay an annual license fee of $100,000.

(c) A holder of an operator's license must pay an annual license fee of $50,000.

(d) A holder of a casino service license must pay an annual license fee of $100.

(e) A holder of an equity interest or creditor interest in any license holder that is required to qualify with the commission must pay an annual fee of $100.

(f) A holder of an occupational license must pay an annual license fee of $100. [Sections 2004.353-2004.400 reserved for expansion] SUBCHAPTER I. CASINO GAMING FUND

Sec. 2004.401. TEXAS CASINO GAMING FUND. (a) The Texas casino gaming fund is a special fund in the state treasury.

(b) All application fees, investigation fees, and license fees collected by the commission or on the commission's behalf shall be deposited to the credit of the Texas casino gaming fund.

(c) The Texas casino gaming fund may be used only for the operation of the commission and the administration of this chapter. However, if the money in the fund exceeds the amount necessary for the operation of the commission and the administration of this chapter, the legislature may transfer any excess amount to the general revenue fund.

(d) The operation of the commission and the administration of this chapter shall be supported by fees generated under this chapter and by a portion of the gaming taxes imposed by Section 2004.451. The operation of the commission may never be a charge against the general revenues of this state except to the extent those revenues are raised by taxes or fees imposed on gaming activities. [Sections 2004.402-2004.450 reserved for expansion] SUBCHAPTER J. TAX ON GROSS GAMING REVENUE

Sec. 2004.451. GAMING TAX; ALLOCATION OF TAX. (a) There is imposed on each holder of an owner's license a gaming tax in an amount equal to 15 percent of the gross gaming revenue of the casino operated under the license. The tax shall be computed and paid on a monthly basis as required by commission rule.

(b) Five-sixths of the revenue from the tax imposed by this section, with the exception provided by Subsection (d), is allocated to the general revenue fund.

(c) Two-thirds and one-third of the remaining one-sixth of the revenue from the tax imposed by this section are allocated to the municipality and county, respectively, in which the casino to which the license relates is located, or, if the casino is located in an unincorporated area, the remaining one-sixth of the tax imposed by this section is allocated to the county in which the casino to which the license relates is located.

(d) Of the revenue allocated to the general revenue fund under Subsection (b):

(1) one-tenth of one percent of that amount may be appropriated only to the Department of State Health Services for the department's compulsive gambling program under Section 461.018, Health and Safety Code;

(2) an amount determined by the commission in consultation with the Texas Racing Commission necessary to supplement the purses at licensed Texas horse racetracks so that the purse for each race is greater than the average purse for similar races in any other state shall be deposited to the credit of the purse fund under Section 6.095, Texas Racing Act (Article 179e, Vernon's Texas Civil Statutes); and

(3) $200,000 may be appropriated each state fiscal biennium only to the Department of Public Safety to be used to provide grants to prosecuting attorneys for the investigation and prosecution of offenses related to the possession of gambling devices.

(e) An initial mobilization payment in the amount of $200,000 shall be transferred from the taxes imposed by this section to the Department of State Health Services to be appropriated for the purpose of mobilizing a program dedicated to compulsive gambling resolution.

(f) The taxes imposed by this section are due and payable on or before the 20th day of the month following the month in which the taxes are imposed.

(g) If the amount of gaming taxes required to be reported and paid under this section is later determined to be greater or less than the amount actually reported and paid by the license holder, the commission shall:

(1) assess and collect the additional gaming taxes determined to be due with interest until paid; or

(2) refund any overpayment, with interest, to the license holder.

(h) Interest must be computed, until paid, at the rate of one percent per month from the first day of the first month following either the due date of the additional gaming taxes or the date of overpayment.

Sec. 2004.452. DETERMINATION OF GROSS GAMING REVENUE. (a) In calculating gross gaming revenue, a prize, premium, drawing, benefit, or ticket that is redeemable for money, merchandise, or other promotional allowance, except money or tokens paid at face value directly to a patron as the result of a specific wager and the amount of cash paid to purchase an annuity to fund winnings, may not be deducted from gross gaming revenue as a loss at any game except a slot machine.

(b) In calculating gross gaming revenue from slot machines, the actual cost to the license holder of any personal property distributed to a patron as the result of a legitimate wager may be deducted as a loss, but travel expenses, food, refreshments, lodging, or services at the license holder's facility may not be deducted. For the purposes of this subsection, "as the result of a legitimate wager" means that the patron must make a wager before receiving the personal property, regardless of whether the receipt of the personal property is dependent on the outcome of the wager.

(c) Cash or the value of noncash prizes awarded to patrons in a contest or tournament are not losses for purposes of determining gross gaming revenue.

Sec. 2004.453. REFUND OF OVERPAYMENT. (a) Gaming taxes that are erroneously collected may be refunded, on approval of the commission, as other claims against the state are paid.

(b) Not later than the 90th day after the date of the mailing of the notice of the commission's action on a claim for refund filed under this chapter, the claimant may bring an action against the commission on the grounds stated in the claim in any court of competent jurisdiction for the recovery of any part of the amount of the claim that has been disallowed.

(c) Failure to bring an action within the time specified by Subsection (b) constitutes a waiver of any demand against the state on account of alleged overpayments.

(d) If the commission fails to mail its notice of action on a claim within six months after the date the claim is filed, the claimant may consider the claim disallowed and bring an action against the commission on the grounds set forth in the claim for the recovery of any part of the amount claimed as an overpayment.

(e) In a case where a refund is granted, interest is allowed at the rates provided in Section 111.064, Tax Code.

(f) A claim for refund of gaming taxes paid in excess of the amount required to be reported and paid must be filed not later than two years after the date of overpayment.

Sec. 2004.454. DETERMINATION OF DEFICIENCY. (a) If an owner license holder fails to make a report of the gaming taxes as required by this chapter, or if the executive director is not satisfied with the report of the gaming taxes required to be paid to the state under this chapter by an owner license holder, the executive director may compute and determine the amount required to be paid on the basis of:

(1) the facts contained in the report, if any;

(2) an audit conducted by the executive director;

(3) an estimate of the amount of taxes due under this chapter;

(4) any information in the commission's possession or that may come in the executive director's possession; or

(5) any combination of the methods described by Subdivisions (1)-(4).

(b) In making a determination, the commission may offset overpayments and interest due against underpayments and interest or penalties due for the period of the audit.

(c) The executive director shall give prompt written notice of a determination of a deficiency under this section to the owner license holder. Except in the case of fraud or intent to evade the payment of the gaming tax fee imposed by this chapter, a notice of a determination of a deficiency must be mailed not later than two years after the last day of the calendar month following the applicable reporting period in which the deficiency occurred or not later than two years after the report is filed by the owner license holder, whichever is later.

(d) If the reasons for the deficiency are not apparent, the executive director shall include an explanation of those reasons in the notice of a determination of a deficiency.

(e) If overpayments and interest exceed underpayments, penalties, and interest, the excess payment shall be refunded to the owner license holder.

Sec. 2004.455. PETITION FOR REVIEW. (a) An owner license holder against whom a determination is made under Section 2004.454 may petition the commission for a redetermination not later than the 30th day after the date of the service of notice of the determination. If a petition for redetermination satisfying the requirements of Subsection (c) is not filed within the 30-day period, the determination becomes final.

(b) If a petition for redetermination satisfying the requirements of Subsection (c) is filed within the 30-day period, the commission shall reconsider the determination and, if the petitioner requests, shall grant a hearing.

(c) A petition for redetermination must:

(1) specify the contested portions of the determination of deficiency;

(2) specify the grounds for redetermination;

(3) state whether a hearing is requested; and

(4) be accompanied by payment in full of the uncontested portion of the determination, including any interest and penalties.

(d) An order or decision of the commission on a petition for redetermination is final 10 days after the date of service on the petitioner.

(e) A petitioner against whom an order or decision of the commission becomes final may, not later than the 60th day after the date the decision is final, petition for judicial review in the manner provided by Chapter 2001, Government Code. The executive director may not petition for judicial review.

Sec. 2004.456. CERTAIN POLITICAL SUBDIVISION TAXES PROHIBITED. A county, municipality, or other political subdivision of this state may not impose a license fee or tax on a person licensed to conduct gaming under this chapter. This section does not prohibit the imposition of generally applicable taxes or of fees for standard municipal services.

Sec. 2004.457. TAX ADMINISTRATION. (a) The commission shall perform all functions incident to the administration, collection, enforcement, and operation of a fee or tax imposed under this chapter. The commission may adopt rules and prescribe forms for the administration, collection, and enforcement of a fee or tax and for the reporting of a fee or tax.

(b) Except as modified by this chapter, Subtitle B, Title 2, Tax Code, applies to the administration, collection, and enforcement of a tax imposed under this chapter. For purposes of the application of Subtitle B, Title 2, Tax Code, to a tax imposed under this chapter, the powers and duties assigned to the comptroller under that subtitle are assigned to the commission. [Sections 2004.458-2004.500 reserved for expansion] SUBCHAPTER K. REGULATION OF CASINO OPERATIONS

Sec. 2004.501. REGULATION OF CASINO OPERATIONS. (a) The commission shall adopt rules applicable to the operation of casinos as the commission finds necessary for the protection of the health, safety, morals, and general welfare of this state and for the reputation of the state's gaming industry.

(b) Casinos are entitled to operate 24 hours a day, seven days a week. A license holder may elect other hours of operation.

(c) The commission may not authorize a casino to conduct wagering on the outcome of a sports event or sports activity other than greyhound or horse racing.

Sec. 2004.502. USE OF CHIPS OR TOKENS. All gaming must be conducted with chips or tokens approved by the commission or with the legal tender of the United States.

Sec. 2004.503. REPORTING REQUIREMENTS. (a) An owner license holder shall keep the license holder's books and records in a manner that clearly shows the total amount of gross gaming revenue and other revenues received.

(b) The books and records kept by an owner license holder relating to gaming operations are not public records and the publication and dissemination of the materials by the commission is prohibited. The commission may publish and disseminate gaming revenues of each owner license holder at a frequency and in the level of detail as it considers appropriate.

(c) An owner license holder shall file a report of each change of the corporate officers and directors with the commission. The commission shall, not later than the 90th day after the date of the change, approve or disapprove the change. During the 90-day period, the officer or director is entitled to exercise the powers of the office to which the officer or director was elected or appointed.

(d) An owner license holder shall report to the executive director in writing a change in company employees who have been designated as key employees.

(e) The commission may require that a company furnish the commission with a copy of its federal income tax return not later than the 30th day after the date the return is filed with the federal government.

Sec. 2004.504. EXCLUSION OF PERSONS. (a) The commission by rule shall provide for the establishment of a list of persons who are to be excluded or ejected from a casino. The list may include a person whose presence in the establishment is determined by the commission to pose a threat to the interests of this state, to licensed gaming, or to both interests.

(b) In making a determination under this section, the commission may consider any:

(1) prior conviction of a crime that is a felony in this state or under the laws of the United States or a crime involving moral turpitude or a violation of the gaming laws of a state; or

(2) violation of or conspiracy to violate the provisions of this chapter relating to:

(A) the failure to disclose an interest in a gaming establishment for which the person must obtain a license;

(B) wilful evasion of a fee or a tax;

(C) notorious or unsavory reputation that would adversely affect public confidence and trust that the gaming industry is free from criminal or corruptive elements; or

(D) a written order of a governmental agency that authorizes the exclusion or ejection of the person from an establishment where gaming or pari-mutuel wagering is conducted.

Sec. 2004.505. INTERNAL AUDIT AND CONTROL SYSTEMS. (a) An owner license holder shall adopt an internal control system that provides for:

(1) the safeguarding of its assets and revenues, especially the recording of cash and evidences of indebtedness; and

(2) the provision of reliable records, accounts, and reports of transactions, operations, and events, including reports to the executive director and the commission.

(b) The internal control system must be designed to reasonably ensure that:

(1) assets are safeguarded;

(2) financial records are accurate and reliable;

(3) transactions are performed only in accordance with management's general or specific authorization;

(4) transactions are recorded adequately to allow proper reporting of gaming revenue and of fees and taxes and to maintain accountability for assets;

(5) access to assets is allowed only in accordance with management's specific authorization;

(6) recorded accountability for assets is compared with actual assets at reasonable intervals and appropriate action is taken with respect to any discrepancies; and

(7) functions, duties, and responsibilities are appropriately segregated and performed in accordance with sound practices by competent, qualified personnel.

(c) An owner license holder and an applicant for an owner's license shall describe, in a manner approved or required by the executive director, the license holder's or applicant's administrative and accounting procedures in detail in a written system of internal control. An owner license holder and applicant for an owner's license shall submit a copy of the license holder's or applicant's written system to the executive director. A written system must include:

(1) an organizational chart depicting appropriate segregation of functions and responsibilities;

(2) a description of the duties and responsibilities of each position shown on the organizational chart;

(3) a detailed, narrative description of the administrative and accounting procedures designed to satisfy the requirements of Section 2004.503(a);

(4) a written statement signed by the license holder's chief financial officer and either the license holder's chief executive officer or an owner license holder attesting that the system satisfies the requirements of this section;

(5) if the written system is submitted by an applicant, a letter from an independent certified public accountant stating that the applicant's written system has been reviewed by the certified public accountant and complies with the requirements of this section; and

(6) other items the executive director may require.

(d) The commission shall adopt minimum standards for internal control procedures.

Sec. 2004.506. AGE REQUIREMENTS. A person under the age of 21 years may not:

(1) play, be allowed to play, place wagers, or collect winnings, personally or through an agent, from any gaming authorized under this chapter; or

(2) be employed as a gaming employee.

Sec. 2004.507. ACCEPTANCE OF NEGOTIABLE INSTRUMENTS. (a) A negotiable instrument evidencing a gaming transaction may be enforced by legal process.

(b) A license holder may accept an incomplete negotiable instrument that is signed by a patron and states the amount of the debt. The license holder may complete the instrument as is necessary for the instrument to be presented for payment.

(c) A license holder:

(1) may not accept a negotiable instrument that is incomplete, except as authorized by Subsection (b); and

(2) may accept a negotiable instrument that is payable to an affiliate or may complete a negotiable instrument in the name of an affiliate as payee if the negotiable instrument otherwise complies with this section and the records of the affiliate pertaining to the negotiable instrument are made available to the executive director on request.

(d) This section does not prohibit the establishment of an account by a deposit of cash, recognized traveler's check, or any other instrument that is equivalent to cash.

(e) Any person, license holder, or the agents or employees of the person or license holder who violate this section are subject only to the penalties provided in this chapter relating to disciplinary actions. The failure of a person to comply with this section or commission rules does not invalidate a negotiable instrument or affect the ability to enforce the negotiable instrument or the transaction that the negotiable instrument represents.

Sec. 2004.508. GAMING DEBTS. (a) Except as otherwise provided by this chapter, gaming debts not evidenced by a negotiable instrument are void and unenforceable and do not give rise to any administrative or civil cause of action.

(b) A claim by a patron of a license holder for payment of a gaming debt not evidenced by a negotiable instrument may be resolved by the executive director under commission rules.

(c) The executive director shall send a copy of the director's ruling by first class mail to the attorneys of record and shall keep an appropriate copy of the mailing. If a party is not represented by an attorney of record, the executive director shall send a copy of the ruling by first class mail to the party and shall keep an appropriate record of the mailing.

(d) A party or attorney of record notified by mail under this section is presumed to have been notified on the date on which the notice is mailed.

(e) A party aggrieved by the executive director's ruling is entitled to have the claim resolved by the commission in a contested case if the party files a written complaint with the commission challenging the executive director's decision not later than the 20th day after the date on which the party or the party's attorney of record is notified by mail.

Sec. 2004.509. QUESTIONING AND DETENTION OF PERSONS. (a) An owner license holder or the license holder's officer, employee, or agent may question any person on the license holder's premises suspected of violating this chapter. The owner license holder or the license holder's officer, employee, or agent is not criminally or civilly liable:

(1) as a result of the questioning; or

(2) for reporting the person suspected of the violation to the executive director or law enforcement authorities.

(b) An owner license holder or the license holder's officer, employee, or agent who has reasonable cause to believe that there has been a violation of this chapter in the establishment by a person may take that person into custody and detain the person in the establishment in a reasonable manner and for a reasonable length of time. The taking into custody and detention does not render the license holder or the license holder's officer, employee, or agent criminally or civilly liable unless it is established by clear and convincing evidence that the taking into custody and detention are unreasonable under all the circumstances.

(c) An owner license holder or the license holder's officer, employee, or agent is not entitled to the immunity from liability provided by Subsection (a) or (b) unless there is displayed in a conspicuous place in the license holder's establishment a notice in bold-faced type, clearly legible, and in substantially this form:

AN OWNER LICENSE HOLDER OR AN OWNER LICENSE HOLDER'S OFFICER, EMPLOYEE, OR AGENT WHO HAS A REASONABLE CAUSE TO BELIEVE THAT A PERSON HAS VIOLATED A PROVISION OF THE TEXAS ECONOMIC DEVELOPMENT AND GAMING CONTROL ACT MAY QUESTION OR DETAIN THAT PERSON IN THE ESTABLISHMENT. [Sections 2004.510-2004.550 reserved for expansion] SUBCHAPTER L. ENFORCEMENT

Sec. 2004.551. ENFORCEMENT. (a) The executive director shall conduct an appropriate investigation to:

(1) determine whether there has been a violation of this chapter or of a commission rule;

(2) determine facts, conditions, practices, or matters that the director considers necessary or proper to aid in the enforcement of a law or rule;

(3) aid in adopting rules;

(4) secure information as a basis for recommending legislation relating to this chapter; and

(5) determine whether a license holder is able to meet the license holder's financial obligations, including all financial obligations imposed by this chapter, as they become due.

(b) If after an investigation the executive director is satisfied that a license should be limited, conditioned, suspended, or revoked, or that a fine should be levied, the executive director shall initiate a hearing by filing a complaint with the commission and transmit a summary of evidence that bears on the matter and the transcript of testimony at an investigative hearing conducted by or on behalf of the executive director regarding the license holder. The complaint must be a written statement of charges that must set forth in ordinary and concise language the acts or omission with which the respondent is charged. The complaint must specify the statute or rule that the respondent is alleged to have violated. A complaint must contain a factual allegation and shall not consist merely of charges raised on the language of the statute or rule. On the filing of the complaint, the executive director shall serve a copy of the complaint on the respondent either personally or by registered or certified mail at the respondent's address on file with the executive director.

(c) Except as provided by Section 2004.455, the respondent must answer not later than the 30th day after the date of the service of the complaint.

(d) On receipt of the complaint of the executive director, the commission shall review all matter presented in support and shall appoint a hearing examiner to conduct further proceedings.

(e) The hearing examiner shall conduct proceedings under Chapter 2001, Government Code. After the proceedings, the hearing examiner may recommend that the commission take any appropriate action, including revocation, suspension, limitation or conditioning of a license, or imposition of a fine not to exceed $5,000 for each violation.

(f) The commission shall review the recommendation. The commission may remand the case to the hearing examiner for the presentation of additional evidence on a showing of good cause as to why the evidence could not have been presented at the previous hearing.

(g) The commission shall accept, reject, or modify the recommendation.

(h) If the commission limits, conditions, suspends, or revokes a license or imposes a fine, the commission shall issue its written order.

(i) A limitation, condition, revocation, suspension, or fine imposed is effective until reversed following judicial review, except that the commission may stay its order pending a rehearing or judicial review on terms and conditions as it considers proper.

(j) Judicial review of an order or decision of the commission may be had under Chapter 2001, Government Code. Judicial review is under the substantial evidence rule.

Sec. 2004.552. PRIVILEGED DOCUMENTS. (a) A communication or document of an applicant or license holder that is required by law or commission rule or by a subpoena issued by the commission and that is to be made or transmitted to the commission or the executive director is privileged and does not impose liability for defamation or constitute a ground for recovery in a civil action by a person other than the commission.

(b) If a document or communication contains information that is privileged, the privilege is not waived or lost because the document or communication is disclosed to the commission or the executive director.

(c) Notwithstanding the powers granted to the commission and the executive director by this chapter:

(1) the commission and the executive director may not release or disclose privileged information, documents, or communications provided by an applicant and required by a lawful court order after timely notice of the proceedings has been given to the applicant or license holder without the prior written consent of the applicant or license holder;

(2) the commission and the executive director shall maintain all privileged information, documents, and communications in a secure place accessible only to members of the commission and the executive director; and

(3) the commission shall adopt procedures to protect the privileged nature of information, documents, and communications provided by an applicant or license holder.

Sec. 2004.553. RELEASE OF CONFIDENTIAL INFORMATION. An application to a court for an order requiring the commission or the executive director to release any information declared by law to be confidential shall be made only on a motion in writing delivered not later than the 10th day before the date of application to the commission, the attorney general, and all persons who may be affected by the entry of the order. Copies of the motion and all papers filed in support of it shall be served with the notice by delivering a copy in person or by certified mail to the last known address of the person to be served.

Sec. 2004.554. EMERGENCY ORDERS. (a) The commission may issue an emergency order for suspension, limitation, or conditioning of a license or work permit or may issue an emergency order requiring a casino to keep an individual license holder from the premises of the licensed gaming establishment or to not pay the license holder any remuneration for services or any profits, income, or accruals on the license holder's investment in the casino.

(b) An emergency order may be issued only if the commission determines that:

(1) a license holder has wilfully failed to report, pay, or truthfully account for a fee imposed under this chapter or wilfully attempted in any manner to evade or defeat a fee or payment;

(2) a license holder or gaming employee has cheated at a gambling game; or

(3) the action is necessary for the immediate preservation of the public peace, health, safety, morals, good order, or general welfare.

(c) The emergency order must state the grounds on which it is issued, including a statement of facts constituting the alleged emergency necessitating the action.

(d) An emergency order may be issued only with the approval of and under the signature of four or more members of the commission.

(e) An emergency order is effective immediately on issuance and service on the license holder or resident agent of the license holder, gaming employee, or, in cases involving registration or findings of suitability, on issuance and service on the person or entity involved or resident agent of the entity involved. An emergency order may suspend, limit, condition, or take other action in relation to the license of one or more persons in an operation without affecting other individual license holders or the casino. An emergency order remains effective until further order of the commission or final disposition of the case.

(f) Not later than the fifth day after the date of issuance of an emergency order, the executive director shall file a complaint and serve it on the person or entity involved. The person or entity against whom the emergency order has been issued and served is entitled to a hearing before the commission and to judicial review of the decision and order of the commission under Chapter 2001, Government Code. Judicial review is under the substantial evidence rule. [Sections 2004.555-2004.600 reserved for expansion] SUBCHAPTER M. PENALTIES AND OFFENSES

Sec. 2004.601. FAILURE TO PAY FEES. (a) License fees and other fees required by this chapter must be paid to the commission on or before the dates provided by law for each fee.

(b) A person failing to timely pay a fee or tax when due shall pay in addition a penalty of not less than $50 or 25 percent of the amount due, whichever is the greater. The penalty may not exceed $1,000 if the fee or tax is less than 10 days late and may not exceed $5,000 under any circumstances. The penalty shall be collected as are other charges, license fees, and penalties under this chapter.

Sec. 2004.602. FAILURE TO REPORT, PAY, OR ACCOUNT FOR FEE OR TAX. (a) A person commits an offense if the person wilfully fails to report, pay, or truthfully account for a fee or tax imposed under this chapter or wilfully attempts in any manner to evade or defeat a fee or tax.

(b) An offense under this section is a Class A misdemeanor.

Sec. 2004.603. GAMING FRAUD. (a) A person commits an offense if the person knowingly:

(1) alters or misrepresents the outcome of a game or other event on which wagers have been made after the outcome is made sure but before it is revealed to the players;

(2) places, increases, or decreases a bet or determines the course of play after acquiring knowledge, not available to all players, of the outcome of the game or an event that affects the outcome of the game or that is the subject of the bet or aids anyone in acquiring such knowledge for the purpose of placing, increasing, or decreasing a bet or determining the course of play contingent on that event or outcome;

(3) claims, collects, or takes, or attempts to claim, collect, or take, money or anything of value in or from a gambling game, with intent to defraud, without having made a wager contingent on the game, or claims, collects, or takes an amount greater than the amount won;

(4) entices or induces another to go to a place where a gambling game is being conducted or operated in violation of this chapter, with the intent that the other person play or participate in that gambling game;

(5) places or increases a bet after acquiring knowledge of the outcome of the game or other event that is the subject of the bet, including past posting and pressing bets;

(6) reduces the amount wagered or cancels the bet after acquiring knowledge of the outcome of the game or other event that is the subject of the bet, including pinching bets; or

(7) manipulates, with the intent to cheat, a component of a gaming device in a manner contrary to the designed and normal operational purpose for the component, including varying the pull of the handle of a slot machine, with knowledge that the manipulation affects the outcome of the game or with knowledge of an event that affects the outcome of the game.

(b) An offense under this section is a felony of the third degree.

Sec. 2004.604. USE OF PROHIBITED DEVICES. (a) A person commits an offense if the person, at a casino, uses or possesses with the intent to use a device, other than those customarily used in the conduct of gaming to assist in:

(1) projecting the outcome of the game;

(2) keeping track of the cards played;

(3) analyzing the probability of the occurrence of an event relating to the game; or

(4) analyzing the strategy for playing or betting to be used in the game.

(b) An offense under this section is a felony of the third degree.

Sec. 2004.605. USE OF COUNTERFEIT OR UNAUTHORIZED TOKEN, CHIP, OR COIN. (a) A person commits an offense if the person knowingly uses counterfeit chips or tokens in a gambling game.

(b) A person commits an offense if the person, in playing any gambling game designed to receive, be played with, or be operated by chips or tokens approved by the executive director or by lawful coin of the United States of America:

(1) knowingly uses a chip, token, or coin other than chips or tokens approved by the commission or lawful coin of the United States of America, or uses a coin not of the same denomination as the coin intended to be used in that gambling game; or

(2) uses any device or means to violate the provisions of this chapter.

(c) A person, other than an authorized employee of an owner license holder acting in furtherance of the person's employment within an establishment, commits an offense if the person knowingly has on the person's body or in the person's possession on or off the premises of a casino a device intended to be used to violate the provisions of this chapter.

(d) A person, other than an authorized employee of an owner license holder acting in furtherance of the person's employment within an establishment, commits an offense if the person knowingly has on the person's body or in the person's possession on or off the premises of a casino a key or device known to have been designed for the purpose of and suitable for opening, entering, or affecting the operation of a gambling game, a drop box, or an electronic or mechanical device connected to the game or box or for removing money or other contents from the game or box.

(e) A person commits an offense if the person, with the intent to manufacture slugs for unauthorized use in gaming devices located at a casino, knowingly has on the person's body or in the person's possession paraphernalia for manufacturing slugs. In this subsection, "paraphernalia for manufacturing slugs" means the equipment, products, and materials that are intended for use or designed for use in manufacturing, producing, fabricating, preparing, testing, analyzing, packaging, storing, or concealing a counterfeit facsimile of the chips or tokens approved by the executive director or a lawful coin of the United States, the use of which is an offense under Subsection (b). The term includes:

(1) lead or lead alloys;

(2) molds, forms, or similar equipment capable of producing a likeness of a gaming token or United States coin;

(3) melting pots or other receptacles;

(4) torches; and

(5) tongs, trimming tools, or other similar equipment.

(f) Possession of more than one of the devices, equipment, products, or materials described in this section permits a rebuttable inference that the possessor intended to use them for cheating.

(g) An offense under this section is a felony of the third degree.

Sec. 2004.606. CHEATING. (a) A person commits an offense if the person knowingly cheats at any gambling game.

(b) An offense under this section is a state jail felony.

Sec. 2004.607. POSSESSION OF UNLAWFUL DEVICES. (a) A person commits an offense if the person knowingly possesses any slot machine or other gaming device that has been manufactured, sold, or distributed in violation of this chapter.

(b) An offense under this section is a Class A misdemeanor.

Sec. 2004.608. UNLAWFUL MANUFACTURE, SALE, OR DISTRIBUTION OF GAMING EQUIPMENT. (a) A person commits an offense if the person manufactures, sells, or distributes cards, chips, dice, a game, or a device intended to be used to violate this chapter.

(b) A person commits an offense if the person marks, alters, or otherwise modifies any associated equipment or gaming device in a manner that:

(1) affects the result of a wager by determining win or loss; or

(2) alters the normal criteria of random selection that affect the operation of a game or determine the outcome of a game.

(c) A person commits an offense if the person instructs another person in cheating or in the use of a device for cheating at any game authorized to be conducted at a casino, with the knowledge or intent that the information or use may be employed to violate this chapter.

(d) An offense under this section is a felony of the third degree.

Sec. 2004.609. REPORTING PENALTIES. (a) A person commits an offense if the person, in a license application, in a book or record required to be maintained by this chapter or a rule adopted under this chapter, or in a report required to be submitted by this chapter or a rule adopted under this chapter:

(1) makes a statement or entry that the person knows to be false or misleading; or

(2) knowingly fails to maintain or make an entry the person knows is required to be maintained or made.

(b) A person commits an offense if the person knowingly refuses to produce for inspection by the executive director a book, record, or document required to be maintained or made by this chapter or a rule adopted under this chapter.

(c) An offense under this section is a Class A misdemeanor.

Sec. 2004.610. GAMING BY MINORS. (a) A person commits an offense if the person knowingly permits an individual that the person knows is younger than 21 years of age to participate in gaming at a casino.

(b) An individual younger than 21 years of age commits an offense if the individual participates in gaming at a casino.

(c) An offense under this section is a Class C misdemeanor.

Sec. 2004.611. GENERAL PENALTY. (a) A person commits an offense if the person knowingly or wilfully violates, attempts to violate, or conspires to violate a provision of this chapter specifying a prohibited act.

(b) Unless another penalty is specified for the offense, an offense under this section is a Class A misdemeanor. [Sections 2004.612-2004.650 reserved for expansion] SUBCHAPTER N. LOCAL OPTION ELECTIONS

Sec. 2004.651. ORDERING LOCAL OPTION ELECTION. The commissioners court of a county may at any time order an election to authorize casino gaming under this chapter in that county. However, an election may not be held before the date of the election at which the constitutional amendment authorizing the legislature to authorize limited casino gaming proposed by the 80th Legislature, Regular Session, 2007, is submitted to the voters. The local option election authorized by this section may be held on the same date as the election at which the constitutional amendment proposed by the 80th Legislature, Regular Session, 2007, is presented to the voters. The commissioners court shall order and hold an election to legalize gaming under this chapter in the county if the commissioners court is presented with a petition that meets the requirements of Section 2004.652 and is certified as valid under Section 2004.653.

Sec. 2004.652. PETITION REQUIREMENTS. (a) A petition for a legalization election must include a statement substantially as follows before the space reserved for signatures on each page: "This petition is to require that an election be held in (name of county) to legalize casino gaming in (name of county)."

(b) A petition is valid only if it is signed by registered voters of the county in a number equal to or greater than the lesser of three percent of the total number of votes cast for governor by qualified voters of the county in the most recent gubernatorial general election.

(c) Each voter must enter beside the voter's signature the date the voter signs the petition. A signature may not be counted as valid if the date of signing is earlier than the 90th day before the date the petition is submitted to the commissioners court. A signature may be affixed to a petition before November 6, 2007. A petition may not be presented to the governing body of a county before November 6, 2007.

(d) Each voter must provide on the petition the voter's current voter registration number, printed name, and residence address, including zip code.

Sec. 2004.653. VERIFICATION. (a) Not later than the fifth day after the date a petition for an election under this chapter is received in the office of the commissioners court, the commissioners court shall submit the petition for verification to the county clerk.

(b) The county clerk shall determine whether the petition is signed by the required number of registered voters of the county. Not later than the 30th day after the date the petition is submitted to the clerk for verification, the clerk shall certify in writing to the commissioners court whether the petition is valid or invalid. If the clerk determines that the petition is invalid, the clerk shall state the reasons for that determination.

Sec. 2004.654. ORDERING ELECTION. If the county clerk certifies that a petition is valid, not later than the 30th day after the date of certification, the commissioners court shall order that an election be held in the county on the next uniform election date under Section 41.001, Election Code, that allows sufficient time to comply with applicable provisions of law, including Section 3.005, Election Code. The commissioners court shall state in the order the issue to be voted on. The county clerk shall notify the commission by certified mail, return receipt requested, that an election has been ordered.

Sec. 2004.655. BALLOT PROPOSITION. The ballot in a legalization election shall be printed to provide for voting for or against the proposition: "Legalizing casino gaming within (name of county)."

Sec. 2004.656. ELECTION RESULTS. (a) If the majority of the votes cast in a legalization election favor the legalization of casino gaming, casino gaming authorized under this chapter is permitted within the county holding the election effective on the 10th day after the date of the election.

(b) The commissioners court of a county in which a legalization election has been held shall give written notice of the results of the election to the commission not later than the third day after the date the election is canvassed.

(c) If less than a majority of the votes cast in a legalization election in any county are cast in favor of the legalization of casino gaming, casino gaming is not permitted in the county, and a subsequent election on the issue may not be held in the county before the corresponding uniform election date one year after the date of the election.

(d) If less than a majority of the votes cast in two consecutive legalization elections within any county are cast in favor of the legalization of casino gaming, casino gaming is not permitted in the county, and a subsequent election on the issue may not be held in the county before the corresponding uniform election date five years after the date of the election.

SECTION 2. Section 47.02(c), Penal Code, is amended to read as follows:

(c) It is a defense to prosecution under this section that the actor reasonably believed that the conduct:

(1) was permitted under Chapter 2001, Occupations Code;

(2) was permitted under Chapter 2002, Occupations Code;

(3) consisted entirely of participation in the state lottery authorized by the State Lottery Act (Chapter 466, Government Code);

(4) was permitted under the Texas Racing Act (Article 179e, Vernon's Texas Civil Statutes); [or]

(5) consisted entirely of participation in a drawing for the opportunity to participate in a hunting, fishing, or other recreational event conducted by the Parks and Wildlife Department; or

(6) consisted entirely of participation in authorized games in a casino licensed under Chapter 2004, Occupations Code.

SECTION 3. Section 47.06(f), Penal Code, is amended to read as follows:

(f) It is a defense to prosecution under Subsection (a) or (c) that the person owned, manufactured, transferred, or possessed the gambling device, equipment, or paraphernalia for the sole purpose of shipping it:

(1) to a casino licensed under Chapter 2004, Occupations Code, for casino gaming; or

(2) to another jurisdiction where the possession or use of the device, equipment, or paraphernalia was legal.

SECTION 4. Section 47.09(a), Penal Code, is amended to read as follows:

(a) It is a defense to prosecution under this chapter that the conduct:

(1) was authorized under:

(A) Chapter 2001, Occupations Code;

(B) Chapter 2002, Occupations Code; [or]

(C) the Texas Racing Act (Article 179e, Vernon's Texas Civil Statutes); or

(D) Chapter 2004, Occupations Code;

(2) consisted entirely of participation in the state lottery authorized by Chapter 466, Government Code; or

(3) was a necessary incident to the operation of the state lottery and was directly or indirectly authorized by:

(A) Chapter 466, Government Code;

(B) the lottery division of the Texas Lottery Commission;

(C) the Texas Lottery Commission; or

(D) the director of the lottery division of the Texas Lottery Commission.

SECTION 5. Subchapter H, Chapter 151, Tax Code, is amended by adding Section 151.356 to read as follows:

Sec. 151.356. ELECTRONIC AND ELECTROMECHANICAL GAMING DEVICES. An electronic or electromechanical gaming device permitted under Chapter 2004, Occupations Code, is exempt from the tax imposed by this chapter and from the other provisions of this chapter.

SECTION 6. Article 6, Texas Racing Act (Article 179e, Vernon's Texas Civil Statutes), is amended by adding Section 6.095 to read as follows:

Sec. 6.095. SPECIAL ALLOCATION TO PURSES. (a) The commission shall administer a purse fund consisting of money transferred to the fund from the gaming tax under Section 2004.451(d)(2), Occupations Code.

(b) The commission shall determine the average purse in each state that permits pari-mutuel wagering on horse races for each type of horse race conducted at a licensed racetrack in this state.

(c) The commission shall distribute money from the purse fund to licensed horse racetracks in this state as necessary to supplement the purse for each race so that the resulting purse is greater than the average purse for similar races in any other state.

SECTION 7. All funds in the Texas casino gaming fund are appropriated to the Texas Gaming Commission for the operation of the commission and the administration of Chapter 2004, Occupations Code, as added by this Act, for the biennium ending August 31, 2009.

SECTION 8. Not later than January 1, 2008, the initial members of the Texas Gaming Commission shall be appointed as provided by Section 47a, Article III, Texas Constitution, to terms as follows:

(1) the initial term of the member appointed under Section 47a(c)(1) expires January 1, 2010;

(2) the initial terms of the members appointed under Sections 47a(c)(2) and (4) expire January 1, 2012; and

(3) the initial terms of the members appointed under Sections 47a(c)(3) and (5) expire January 1, 2014.

SECTION 9. (a) Subchapter N, Chapter 2004, Occupations Code, as added by this Act, takes effect September 1, 2007.

(b) The remainder of this Act takes effect on the date on which the constitutional amendment proposed by the 80th Legislature, Regular Session, 2007, authorizing the legislature to authorize the operation of limited casino gaming, creating the Texas Gaming Commission, and authorizing the operation of video lottery games takes effect. If that amendment is not approved by the voters, this Act has no effect.