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IRS seeks bigger take from slots jackpots
By ROBERT CONNELLY
AUSTINTOWN
The Internal Revenue Service is proposing lowering the casino tax-withholding threshold on winnings from $1,200 to $600.
When a patron of Hollywood Gaming at Mahoning Valley Race Course hits the threshold, the machine is locked until tax documents are filled out.
“It was a complete surprise,” said Eric Schippers, senior vice president of public affairs with Penn National Gaming Inc., parent company of Hollywood Gaming. “The withholding threshold of $1,200 is over a decade old and if anything, there should be some consideration of raising the threshold given inflation, not reducing it.”
Geoff Freeman, president and chief executive officer of the national trade group representing the casino industry, American Gaming Association, agreed with Schippers.
“Other than the search for new revenue and creative thinking in Washington [D.C.], we don’t [know where it came from]. And that’s a concern because you want to know where these ideas are coming from,” he said in a conference call last week. “This one came from a bit out of left field.”
He also agreed with Schippers on the inflation aspect, saying that the threshold should be raised “closer to $4,600 as opposed to $600.”
In a news release earlier this month, Freeman’s colleague at the AGA, Sara Rayme, senior vice president of public affairs, expressed “serious concerns” with the proposal.
“Not only would this potential policy change create additional burdensome and unnecessary reporting requirements for gaming companies, but it could also cost states millions of dollars in revenues that support vital public services,” she said.
The threshold would be lowered from $1,200 to $600 for winnings from slot machines and the video lottery terminals at racinos, as well as keno and bingo. Keno’s reporting threshold is now at $1,500 while bingo and slot machines are $1,200. The IRS adopted the winnings threshold in 1977 after states had varied on the limit based on a sliding scale, such as a requirement that wager odds had to be at least 300 to 1, information from the Federal Register detailed.
“There have been significant changes in gaming industry technology since” 1977, the Federal Register, the daily journal of the U.S. Government explains. It goes on to talk about electronic machines and player’s cards that allow tracking wagers and winnings as well as changes to taxes since the 1970s. It points to electronic filing as one of those changes.
“Accordingly, the Treasury Department and the IRS think the regulations for reporting winnings from bingo, keno and slot machine play need to be updated in light of these developments and that there are opportunities to reduce burden and simplify reporting,” the Federal Register explained.
The 90-day comment section on the proposal ends June 2.
“There’s going to be a little bit more process here than just the 90-day comment period,” Freeman said. The proposal has “come from people that clearly have some understanding of how the gaming business operates, but their awareness of the technologies currently available and how information is currently stored is probably a little bit inflated in terms of what’s possible.”
Ths point about the player experience was also emphasized by Schippers and other members of the gaming community since the IRS announcement this month. Would this mean more employees would have to be hired to deal with the paperwork when a machine locks up? Schippers said that was something that is being looked at.
Macquarie Securities gaming analyst Chad Beynon agreed. “Lowering this amount would disrupt the player experience,” Beynon wrote in an email.
“It’s not a good thing for casinos, but it’s hard to quantify it,” said Alex Bumazhny, Fitch Ratings Service gaming analyst. He noted $600 is more “everyday ups and downs of winnings, not necessarily jackpot numbers ... A player playing a decent amount of money could hit it quite a bit.”