US Introduces Gambling Tax Bill

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History is repeating itself in the United States. Congressmen John Campbell and Barney Frank introduced their online gambling regulation bill in March 2011. This week Congressman Jim McDermott introduced HR 2230, the Internet Gambling Regulation and Tax Enforcement Act, in the House Financial Services Committee. The same steps were taken in the previous session of the Congress by the same triumvirate, but the then Internet gambling regulation bill HR 2267 could not move fast enough due to more pressing economic matters and had to lapse. As expected, Campbell and Frank are supporting HR 2230.

The objective remains the same as with the previous attempt. McDermott's HR 2230 does not in itself seek to legalize and regulate online gambling. But, if the bill of Frank and Campbell is passed then it will require a supporting tax bill. HR 2230 will be the supporting bill, or the companion bill as it is often called, and will require online gambling casinos and other operators to withhold taxes from net online winnings. In the bill the proposed rate of the withholding tax on online gambling winnings is 28%, which is the same as the current withholding taxes for other gambling winnings. The online gambling operators would have to declare the amount of tax withheld and how much has been deposited and withdrawn during the calendar year.

HR 2230 calls upon online gambling operators to provide other detailed information about gamblers to the government to ensure the collection of the appropriate taxes.
The information would include the names, addresses and tax identification numbers of all players to the government. Information on gross winnings, gross wagers and gross losses on each person for every calendar year would also have to be provided. The bill also seeks to impose a 2% federal tax on online gambling providers. Individual American states would be given the option of taxing online gambling operators at a rate of 6%. The operators would also have to pay a tax equal to 2% of the deposits they receive each month. The bill stresses that this tax cannot be deducted from the amounts that players deposit in their account, and must be paid for by the operator. McDermott's bill would also require online gambling operators to obtain a license. These details were provided by the Washington DC newspaper The Hill.

As laid out in his previous tax proposals, McDermott's bill specifies how the collected federal taxes on online gambling are to be deployed. 25% of the taxes collected are to be used to fund programs that care for foster or disadvantaged children, and most of the remaining taxes would go to the general treasury.

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