GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1999

H	2 

HOUSE BILL 19
Committee Substitute Favorable 2/24/99

Short Title:  Casino Boats Regulated.	(Public)

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Sponsors:

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Referred to:  

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February 3, 1999

A BILL TO BE ENTITLED
AN ACT TO PROHIBIT CERTAIN CASINO BOATS FROM OPERATING IN NORTH CAROLINA AND TO REGULATE CERTAIN CASINO BOATS THAT OPERATE IN NORTH CAROLINA PURSUANT TO FEDERAL LAW AND TO LEVY A PRIVILEGE TAX ON GAMBLING BOATS OPERATING IN NORTH CAROLINA AND TO REQUIRE WITHHOLDING FROM CERTAIN GAMBLING BOAT WINNINGS.
Whereas, North Carolina has a long history of outlawing gambling within the State; with gambling being illegal since 1891, allowing gambling in houses of public entertainment being illegal since 1799, and the possession of gambling devices outlawed in this State since 1791; and
Whereas, casino boats have started "gambling cruise to nowhere"operations in several states along the Atlantic Ocean, in an attempt to avoid the application of similar laws prohibiting gambling and the possession of gambling devices, with passengers embarking at ports within the State, passing beyond the three-mile State criminal jurisdictional limit where the gambling and use of the gambling devices actually take place, and then returning to the same port within the State where the passengers disembark; and
Whereas, the federal government has preempted regulation of the possession of gambling devices on certain casino boats  that leave a port in one state, make at least one intervening stop in a second state, and then return to the same or another port in the first state as specified in 15 U.S.C. 1175(b)(2), commonly referred to as the Johnson Act Amendments of 1992; and
Whereas, it is the intent of the General Assembly to prohibit "gambling cruises to nowhere"in this State and to regulate, to the extent possible under federal law, all gambling cruises that originate and terminate in this State;  Now, therefore,
The General Assembly of North Carolina enacts:
Section 1.  Article 37 of Chapter 14 of the General Statutes is amended by adding a new Part to read:
"Part 3.  Casino Boats.
"§ 14-309.20.  Short title.
This Part may be referred to as the 'Gambling Cruise Prohibition and Regulation Act.'
"§ 14-309.21.  Casino boats and gambling devices; prohibited.
(a)	It shall be unlawful to manufacture, recondition, repair, sell, transport, possess, or use any slot machine, gaming table, illegal punchboard, or gambling device as defined in this Article or 15 U.S.C. 1171 on any vessel, boat, ship, watercraft, or barge that embarks from any point within this State and disembarks at the same or another point within this State without making an intervening stop within the boundaries of another state, possession of the United States, or a foreign country.
For purposes of this subsection, an 'intervening stop' shall be when a vessel, boat, ship, watercraft, or barge does all of the following:
(1)	Docks at a port.
(2)	Remains continuously at that port for at least six hours.
(3)	Allows passengers to disembark the vessel for sightseeing, shopping, or other similar tourism-related acts at that port.
(b)	It shall be unlawful to manage, supervise, control, operate, or own any vessel or craft during which time the person intentionally causes or knowingly permits a violation of subsection (a) of this section.
(c)	It shall be unlawful to solicit, entice, induce, persuade, or procure, or to aid in soliciting, enticing, inducing, persuading, or procuring any person to visit or embark on any vessel, boat, ship, watercraft, or barge for any purpose that constitutes a violation of this Article.
(d)	This section shall not apply to possession or transportation of slot machines, gaming tables, illegal punchboards, or gambling devices on United States-flagged or foreign-flagged vessels during travel from a foreign nation or another state or possession of the United States up to the first point of entry into North Carolina waters or during travel to a foreign nation or another state or possession of the United States from the point of departure from North Carolina waters, provided that nothing herein shall preclude prosecution for any other offense under this Article.
(e)	Nothing contained in this section shall preclude prosecution for any other offense under this Article or for the use of any slot machine, gaming table, illegal punchboard, or gambling device on any vessel while docked within the territorial waters of this State.
"§ 14-309.22.  Penalty for violation.
(a)	A person who violates G.S. 14-309.21 shall be guilty of a Class A1 misdemeanor.
(b)	Alcohol law enforcement officers and any law enforcement officer with subject matter and territorial jurisdiction, who have probable cause to believe any slot machine, gaming table, illegal punchboard, or gambling device is being manufactured, reconditioned, repaired, sold, transported, possessed, or used in violation of G.S. 14-309.21, may take any of the following actions:
(1)	Seize the slot machine, gaming table, illegal punchboard, or gambling device.
(2)	Seize any monies, other property, or thing of value used in conjunction with or derived from the unlawful use of such illegal device.
(3)	Seize  any vessel, boat, ship, watercraft, or barge upon which an illegal slot machine, gaming table, illegal punchboard, or other gambling device is found.
(c)	Upon conviction, a court of competent jurisdiction shall enter an order directing the seizure, forfeiture, and sale of any vessel, boat, ship, watercraft, or barge along with all of its gear, engines, tackle, and all other nautical, navigation, and safety equipment, furniture, and personal property of any description.  Any means of conveyance to and from an illegally used vessel, boat, ship, watercraft, or barge shall also be ordered seized, forfeited, and sold.  The proceeds of a sale pursuant to this subsection shall be applied, in order, to the costs of seizure, storage, and sale, with the balance paid to the school fund in the county in which the property is seized.
"§ 14-309.23.  Authority of alcohol law enforcement division and Alcoholic Beverage Control Commission.
(a)	Authority. – In the case of any tour boat or vessel, boat, ship, watercraft, or barge possessing an alcoholic beverage permit pursuant to Chapter 18B of the General Statutes, any alcohol law enforcement agent or employee of the Alcoholic Beverage Control Commission shall, at any time it reasonably appears that someone is on board, have authority to board and investigate the operation of the craft to ensure compliance with the provisions of the ABC law and this Article to include viewing the entire premises, and examining any books, logs, and records of the permittee.
(b)	Interference with inspection. – Refusal by a permittee or by any employee of a permittee to permit an alcohol law enforcement agent or employee of the Alcoholic Beverage Control Commission to board to make an inspection authorized by subsection (a) of this section  shall be cause for revocation, suspension, or other action against the permit of the permittee as provided in G.S. 18B-104.
(c)	It shall be a Class 2 misdemeanor for any person to resist or obstruct an authorized person attempting to make a lawful inspection under this section.
"§ 14-309.24.  Regulation of casino boats operating pursuant to federal law.
(a)	The operator of any vessel, boat, ship, watercraft, or barge, the operation of which would be illegal in this State except for the exclusions provided in 15 U.S.C. 1175(b)(2), shall comply with all of the following:
(1)	The operator shall comply with the applicable provisions of Chapter 105 of the General Statutes including paying a privilege tax in accordance with G.S. 105-40.1 and withholding and reporting gambling winnings in accordance with G.S. 105-163.3A.
(2)	If alcoholic beverages are to be sold to the passengers, the operator shall obtain a 'casino boat' permit as provided for in G.S. 18B-1006(n).
(3)	The operator shall, while operating the vessel within North Carolina waters, comply with the Safety of Life at Sea (SOLAS) standards and  requirements normally applicable in international waters."
Section 2.  G.S. 18B-1006 is amended by adding a new subsection:
"( n)	Casino boats. – The Commission may issue a 'casino boat' permit to a boat that is operated pursuant to G.S. 14-309.24 if the boat meets all of the following conditions:
(1)	The boat shall serve meals on each voyage and shall have a dining area with seating for at least 36 people.
(2)	The boat's gross receipts from food and nonalcoholic beverages shall be greater than its gross receipts from alcoholic beverages.
(3)	A boat holding a 'casino boat' permit may also hold the permits listed in G.S. 18B-1001(1), (3), (5), and (10), but no off-premises sales may be made pursuant to those permits.
(4)	A boat shall have a home port in an area where issuance of all of the permits listed in subdivision (3) of this subsection are legal, and all passengers shall enter the boat at the home port or at other ports listed on a preannounced itinerary.  The boat's permits are valid only during voyages that leave and return to the boat's home port, and apply only if the boat docks in areas within this State where sales are legal, except in an emergency.
(5)	Liquor purchased for resale in mixed beverages may be purchased only from the local board for the jurisdiction of the boat's home port.
(6)	The permit fees are paid for the applicable permits listed in subdivision (3) of this section and for a 'casino boat' permit.
(7)	The permittee shall comply with all Commission rules regarding record keeping and reporting for tour boats.
(8)	The requirements of all other applicable provisions of this Chapter are met."
Section 3.  G.S. 18B-902(d)	reads as rewritten:
"(d)	Fees. – An application for an ABC permit shall be accompanied by payment of the following application fee:
(1)	On-premises malt beverage permit – $400.00.
(2)	Off-premises malt beverage permit – $400.00.
(3)	On-premises unfortified wine permit – $400.00.
(4)	Off-premises unfortified wine permit – $400.00.
(5)	On-premises fortified wine permit – $400.00.
(6)	Off-premises fortified wine permit – $400.00.
(7)	Brown-bagging permit – $400.00, unless the application is for a restaurant seating less than 50, in which case the fee shall be $200.00.
(8)	Special occasion permit – $400.00.
(9)	Limited special occasion permit – $50.00.
(10)	Mixed beverages permit – $1,000.
(11)	Culinary permit – $200.00.
(12)	Unfortified winery permit – $300.00.
(13)	Fortified winery permit – $300.00.
(14)	Limited winery permit – $300.00.
(15)	Brewery permit – $300.00.
(16)	Distillery permit – $300.00.
(17)	Fuel alcohol permit – $100.00.
(18)	Wine importer permit – $300.00.
(19)	Wine wholesaler permit – $300.00.
(20)	Malt beverage importer permit – $300.00.
(21)	Malt beverage wholesaler permit – $300.00.
(22)	Bottler permit – $300.00.
(23)	Salesman permit – $100.00.
(24)	Vendor representative permit – $50.00.
(25)	Nonresident malt beverage vendor permit – $100.00.
(26)	Nonresident wine vendor permit – $100.00.
(27)	Any special one-time permit under G.S. 18B-1002 – $50.00.
(28)	Winery special event permit – $200.00.
(29)	Mixed beverages catering permit – $200.00.
(30)	Guest room cabinet permit – $1,000.
(31)	Liquor importer/bottler permit – $500.00.
(32)	Cider and vinegar manufacturer permit – $200.00.
(33)	Brew on premises permit – $400.00.
(34)	Casino boat permit – $10,000."
Section 4.  G.S. 105-228.90(b) is amended by adding a new subdivision to read:
"(4)	Gambling boat voyage. – A voyage of a commercial vessel transporting passengers engaged in gambling aboard the vessel, during which passengers embark in this State and disembark only in this State or a contiguous state."
Section 5.  Article 2 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-40.1. Gambling boat voyages.
A person engaged in the business of operating gambling boat voyages must pay a tax on the business at the rate of six dollars ($6.00) for each passenger who embarks on a gambling boat voyage in this State.  Within the first 10 days of each month, the taxpayer must report to the Secretary the number of passengers who embarked on the taxpayer's gambling boat voyages during the previous month and must pay the tax at the time the report is due."
Section 6.  G.S. 105-163.1 is amended by adding a new subdivision to read:
"(5a)	Gambling boat operator. – A person engaged in the business of operating gambling boat voyages."
Section 7.  G.S. 105-163.1(14) reads as rewritten:
"(14)	Withholding agent. – An employer, a gambling boat operator, or a payer."
Section 8.  Article 4A of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-163.3A. Gambling boat operators must withhold taxes.
(a)	Requirement. – Every gambling boat operator who pays a resident of this State more than six hundred dollars ($600.00) in gambling winnings during a gambling boat voyage must deduct and withhold from the winnings paid to the resident the State income taxes due on the winnings as provided in this section.  The amount of taxes to be withheld is seven percent (7%) of the winnings paid to the resident.  The taxes a gambling boat operator withholds are held in trust for the Secretary.
(b)	Returns; due date. – A gambling boat operator must file a return with the Secretary on a form prepared by the Secretary and must provide any information required by the Secretary.  The return is due and the withheld taxes are payable by the last day of the first month after the end of each calendar quarter during which the gambling boat operator pays gambling winnings to a resident of this State.  The Secretary may extend the time for filing the return or paying the tax as provided in G.S. 105-263.
(c)	Annual statement. – A gambling boat operator required to deduct and withhold from a resident's gambling winnings under this section must furnish to the resident duplicate copies of a written information statement.  The statement is due by January 31 following the calendar year and must show the following:
(1)	The gambling boat operator's name, address, and taxpayer identification number.
(2)	The resident's name, address, and taxpayer identification number.
(3)	The total amount of gambling winnings paid during the calendar year.
(4)	The total amount deducted and withheld under this section during the calendar year.
(5)	Any other information required by the Secretary.
(d)	Report to Secretary. – Each gambling boat operator must file with the Secretary an annual report that compiles the information contained in each of the operator's statements to residents and any other information required by the Secretary.  This report is due on the date prescribed by the Secretary and is in lieu of the information report required by G.S. 105-154.
(e)	Records. – If a gambling boat operator does not withhold from any gambling winnings paid to an individual, the operator must obtain from the individual documentation proving that he or she is not a resident of this State.  The operator must retain this information with its records."
Section 9.  G.S. 105-163.9 reads as rewritten:
"§ 105-163.9.  Refund of overpayment to withholding agent.
A withholding agent who pays the Secretary more under this Article than the Article requires the agent to pay may obtain a refund of the overpayment by filing an application for a refund with the Secretary.  No refund is allowed, however, if the withholding agent withheld the amount of the overpayment from the wages, winnings, or compensation of the agent's employees, passengers, or contractors.  A withholding agent must file an application for a refund within the time period set in G.S. 105-266. Interest accrues on a refund as provided in G.S. 105-266."
Section 10.  G.S. 105-163.10 reads as rewritten:
"§ 105-163.10.  Withheld amounts credited to taxpayer for calendar year.
The amount deducted and withheld under this Article during any calendar year from the wages, winnings, or compensation of an individual is allowed as a credit to that individual against the tax imposed by Article 4 of this Chapter for taxable years beginning in that calendar year.  The amount deducted and withheld under this Article during any calendar year from the compensation of a nonresident entity is allowed as a credit to that entity against the tax imposed by Article 4 of this Chapter for taxable years beginning in that calendar year.  If the nonresident entity is a pass-through entity, the entity shall pass through and allocate to each owner the owner's share of the credit.
If more than one taxable year begins in the calendar year during which the withholding occurred, the amount is allowed as a credit against the tax for the last taxable year so beginning.  To obtain the credit allowed in this section, the individual or nonresident entity must file with the Secretary one copy of the withholding statement required by G.S. 105-163.3, 105-163.3A, or 105-163.7 and any other information the Secretary requires."
Section 11.  This act is effective when it becomes law. Sections 4 through 10 of this act become effective on the first day of the third calendar month after this act becomes law.