KRS 238.536: Amount and use of net receipts retained by charitable organization --

Penalties imposed upon charitable organization failing to retain certain

percentage of adjusted gross receipts -- Submission of financial plan.

(1) The net receip ts from charitable gaming retained by a charitable organization for

the previous calendar year, provided the charitable organization was licensed at the

start of the calendar year, shall be equal to or greater than forty percent (40%) of the

adjusted gross receipts of the charitable organization for the same period. A

licensed charitable organization shall expend net receipts exclusively for purposes

consistent with the charitable, religious, educational, literary, civic, fraternal, or

patriotic functions o r objectives for which the licensed charitable organization

received and maintains federal tax -exempt status, or consistent with its status as a

local school district, a common school, an institution of higher education, or a state

college or university. N o net receipts shall inure to the benefits or financial gain of

an individual. Any charitable organization which permits its license to expire or

otherwise lapse shall still be subject to the retention requirement. The following

fees and taxes shall be exc luded from the calculation of the percentage retained,

retroactive to calculations made for calendar year 1999:

(a) All fees paid to the office during the calendar year;

(b) Any sales or use taxes levied under KRS Chapter 139 on charitable gaming

supplies and equipment that are paid by a licensed charitable organization

during the calendar year; and

(c) Any federal excise taxes levied under 26 U.S.C. secs. 4401 and 4411 and paid

by a licensed charitable organization during the calendar year.

(2) The following actions shall be imposed on a licensed charitable organization that

fails to retain the requisite percentage of adjusted gross receipts required in

subsection (1) of this section. The calculation of percentages shall be rounded to the

nearest tenth of a percent:

(a) If the percentage retained is between thirty -five percent (35%) and thirty -nine

and nine-tenths percent (39.9%), the licensee shall be placed on probation for

a period of six (6) months and shall be required to submit to the office an

acceptable financial plan detailing corrective actions to be taken by the

licensee to achieve the forty percent (40%) threshold by the end of the

calendar year in which the probation is imposed;

(b) If the percentage retained is between thirty percent (30%) and t hirty-four and

nine-tenths percent (34.9%), the licensee shall be placed on probation for a

period of one (1) year and shall be required to submit to the office a financial

plan as described in paragraph (a) of this subsection. The office shall conduct

a six (6) month review of the charitable gaming activities of a licensee placed

on probation pursuant to this subsection to evaluate the licensee's compliance

with its financial plan;

(c) If the percentage retained falls between twenty -nine and nine -tenths pe rcent

(29.9%) and twenty -five percent (25%), the licensee shall be placed on

probation for a period of one (1) year, shall submit to the office an acceptable

financial plan as described in paragraph (a) of this subsection, and shall

participate in a mandatory training program designed by the office. The office

shall conduct a quarterly review of the licensee's activities to evaluate the

licensee's compliance with its financial plan and its progress toward

achievement of the forty percent (40%) threshold dur ing the probationary

period;

(d) If the percentage falls below twenty -five percent (25%) or if the licensee fails

to attain the forty percent (40%) threshold for a second consecutive calendar

year, the licensee shall have its license suspended for a period of one (1) year;

and

(e) For purposes of paragraphs (a), (b), (c), and (d) of this subsection, periods of

probation and suspension shall commence, unless appealed, from the date the

office notifies the licensee of its failure to satisfy the retention requirement for

the previous calendar year. If a probation or suspension is appealed, the action

shall commence on the date final adjudication of the matter is complete.

(3) Any licensee that has had its license suspended under the provisions of subsection

(2)(d) of this section shall be required to submit to the office an acceptable financial

plan as described in subsection (2)(a) of this section, upon applying for

reinstatement of its license. As a condition of reinstatement, the licensee shall be on

probation for a period of one (1) year and shall be subject to quarterly review by the

office in accordance with subsection (2)(c) of this section.