History is repeating itself in the United States legislature from Congressmen John Campbell and Barney Frank’s introduction of the online gambling regulation bill in March 2011. Congressman Jim McDermott recently introduced HR 2230, the Internet Gambling Regulation and Tax Enforcement Act to the House Financial Services Committee.
The First Bill
The process is the same as the first bill, however, at that time, the Internet gambling regulation moved quickly through the legislature due to other more important economic matters. Campbell and Frank are in support of the new bill as expected.
The goal of HR 2230 is the same as the previous bill. However, the new bill does not seek to legalize and regulate online gambling. Instead, it is a supporting tax bill that will assist Campbell and Frank’s original legislation. Known as a companion bill, it will require online gambling operators to withhold a specific amount of taxes from the winnings of players.
Withholding Tax On Players
The proposed withholding tax is 28 percent which is consistent with current withholding taxes from land-based gambling winnings. Therefore, operators will be required to declare the amount of tax withheld and the exact amount that has been deposited and withdrawn for each player across an entire calendar year.
Information Collected By The Government
HR 2230 is requesting that online gambling operators provide detailed information about their players to the government to confirm the collection of associated taxes. This data includes names, tax identification numbers, and addresses. Further information on gross wagers, losses, and winnings would also be required every calendar year.
Individual And Operator Taxation
Furthermore, the bill is seeking a 2 percent federal tax of operators. Also, individual states would have the option of taxing online gambling providers at a rate of 6 percent. Additionally, operators would be required to pay a tax equal to 2 percent of deposits received each month. The bill further clarifies that this amount must be paid by the operator and cannot be taken from the amounts players deposit into their accounts.
Acquisition Of A License
The bill also requires online operators to acquire a license. Within the tax proposals, McDermott specifies exactly how the federal taxes are to be collected and gaming deployed. 25 percent of all taxes collected will be utilized to fund programs for foster and disadvantaged children. The remaining taxes will be sent to the general treasury.
The passage of this bill could be the first step toward the development of a legalized, regulated online gambling system in the United States. Many support groups have their fingers crossed that this bill will become a law.