16 Tex. Admin. Code § 402.505

Current through Register Vol. 49, No. 48, November 29, 2024

Section 402.505 - Permissible Expense

(a) Definitions. The following terms, when used in this section shall have the following meanings:

(1) Reasonable expense--An amount of expense appropriate as it relates to the conduct of bingo; an expense that is moderate or fair in the amount, not extreme or excessive; an amount paid that does not substantially exceed the current rate or average retail cost of items or services purchased.

(2) Necessary expense--A type of expense essential for the conduct of a bingo.

(b) The Commission will consider the following in determining the reasonableness of an expense:

(1) Whether the amount of the expense incurred exceeds that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs;

(2) Whether the individuals authorizing the amount of the expense acted with prudence in the circumstances, considering their responsibilities to the organization;

(3) Whether there was significant deviation from the established practices of the organization which unjustifiably increased the amount of the expense incurred; and

(4) Whether the licensed authorized organization engaged in arms-length transactions and generally accepted sound business practices.

(c) The Commission will consider the following in determining the necessity of an expense:

(1) Whether the goods or services provided were justifiably required to support the conduct of bingo;

(2) Whether the expense was of a type generally recognized as an expense for the conduct of bingo; and

(3) Whether the expense might contribute to an increase in the proceeds available for charitable distribution.

(d) Allocation of expense--The licensed authorized organization may pay only its proportional share of any shared expenses.

(1) Expenses incurred that are shared with an activity not related to the conduct of bingo must be allocated to the extent in which the bingo operation benefited from the product or service.

(2) Expenses must be allocated on a reasonable basis among the activities that benefited.

(3) The licensed authorized organization must maintain documentation to support its portion of the shared expense, including the basis upon which the expense was allocated among the benefiting activities.

(e) The licensed authorized organization is responsible for maintaining documentation to substantiate the permissibility of expenses incurred for the conduct; administration and operation of bingo. Detailed records, including receipts or copies of invoices that fully document and substantiate the bingo expenses must be complete, true, and accurate, and be maintained for 4 years.

(f) Expenses must conform to any limitations or exclusions set forth in the Bingo Enabling Act or Charitable Bingo Enabling Rules as to types or amount of expense items.

16 Tex. Admin. Code § 402.505

The provisions of this §402.505 adopted to be effective May 10, 2007, 32 TexReg 2466