HomePublicationsNewsletter ArchiveVolume 19Issue 32Federal Online Gambling Tax Legislation Introduced

On Thursday, November 14, 2013, Representative Jim McDermott (D-Wash.) introduced the Internet Gambling Regulation and Tax Enforcement Act (“HB 3491”) legislation that, if passed, would establish a federal taxation schedule for Internet gambling. The legislation has been drafted to compliment a current bill, introduced by Rep. Peter King (R-NY) and Rep. Michael Capuano (D-Mass.), which seeks to authorize online gambling activity.

“The future is happening,” stated Rep. McDermott in the Congressional Record. “People in small towns and big cities across America are gambling online either legally under a patchwork of inconsistent state laws or illegally without any consumer protection. We have to deal with this issue. If we regulate online gambling, we can create jobs, generate revenue, and expand aid to children in foster care.”

Under the current draft of HB 3491, Internet gambling operators would be subject to a federal tax “in an amount equal to 4 percent of all funds deposited by customers making deposits while located within the United States.” In addition, state and tribal governments have the option to elect to receive funds pursuant to HB 3491. If so elected, each state or tribal government would receive 8 percent of all funds deposited by individuals located within their state or tribal jurisdiction. Finally, each Internet gaming operator would be subject to a 12 percent tax on funds deposited by players located in a foreign jurisdiction. This taxation scheme would be overseen by the Secretary of the Treasury, which is also empowered to promulgate regulations to assist in the enforcement of the legislation.

Portions of revenue generated pursuant to the bill would be allocated to two federal programs, the American Heritage Block Grant Fund and the Transitional Assistance Grant Program. The American Heritage Block Grant Fund would receive 0.5 percent of the tax revenue generated pursuant to the legislation and would make distributions to state-operated American Heritage Programs. As noted in the bill, these programs “develop projects, productions, workshops, or [are] programs that will encourage public knowledge, education, understanding, and appreciation of American heritage and the arts.” One quarter of the revenue received from the above taxes on Internet gambling activity would be allocated to the Transitional Assistance Grant Program. Under this program, grants would be provided to approved state plans that provide educational, job training, and other benefits to individuals who were or are in foster care.

On November 14, 2013, HB 3491 was referred to the House Ways and Means and the House Education and Workforce Committees. For more information on the legislation, including a copy of the current draft of the bill, please visit the US Congress’s website, located here.

The companion bill introduced by Rep. King and Rep. Capuano, the Internet Gambling Regulation, Enforcement, and Consumer Protection Act, was referred to the House Subcommittee on Crime, Terrorism, Homeland Security, and Investigations on July 15, 2013. More information on the bill can be obtained here.



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