Senate clears 54 percent online slot tax
The Pennsylvania Senate passed a gaming expansion package that includes legalization of online gaming and daily fantasy sports. Senators easily passed HB 271, a measure originally formulated by the state House that senators had been using as a shell bill for gaming expansion.
In addition to legalizing and regulating iGaming and DFS, the bill would authorize gaming on iGaming kiosks and tablets at the state’s airports, and would authorize sales of state lottery tickets over the internet. Additionally, the bill would replace the local-community host fee stuck down last fall by the state Supreme Court.
Like measures passed by the state House, the Senate bill would restrict online gaming licenses to the current 12 operators of land-based casinos and racinos—a relief to many who had heard state senators push for online gaming run by the state lottery.
However, the tax rates in the Senate measure bear no resemblance to either of the iGaming bills passed by the state House. In fact, many observers say the taxes and fees in the Senate measure would doom any online gaming program before it began.
The bill, which now goes to the House, sets a 54 percent tax rate on revenues from online slot and table games, while taxing internet poker at 16 percent. Current operators have said they would not seek licenses to run online casinos at the 54 percent tax rate, which is the same revenue tax operators pay on land-based slot machines.
Both bills passed in the House set the online gaming revenue tax at 14 percent, regardless of the game.
A story in OnlinePokerReport.com says that the rate could be lowered. State Rep. George Dunbar says lawmakers understand the problems with the bill.
“The senators I’ve talked to don’t agree with the narrative being presented with the bill, but they wanted to get it through,” Dunbar told the website. “Plenty of people in the building know what is going on. I have a lot of faith that the leadership team grasps this issue very well and will talk to the right people before final decisions are made.”
The Senate bill also sets higher fees than the House measures. Operators seeking a full iGaming license would pay $10 million in fees—$5 million each for online poker and online casino games. A license to operate daily fantasy sports would cost the lesser of $50,000 or 7.5 percent of the applicant’s gross revenue, with a 12 percent revenue tax thereafter.
Under the measure, existing casinos would have 90 days after enactment to buy an iGaming license. After that, other companies would be allowed to purchase the licenses, for the same $5 million fee for each type. After licensing, renewal would cost $250,000 annually.
Airport gaming at kiosks and tablets would be licensed at fees from $250,000 to $5 million, depending on the size of the city or county in which the airport is located.
The bill would replace the host fee struck down last year—it was 2 percent of slot revenues or $10 million, whichever was greater—with a flat annual fee of $10 million to be paid to local municipalities hosting casinos. While senators say it passes constitutional muster because it is uniform for all casinos, Mount Airy Casino, which successfully challenged the former fee in court, has indicated it will challenge the new fee on the same constitutional grounds—that because $10 million represents a larger portion of overall revenues or smaller casinos, it would still violate the uniform taxation clause of the state constitution.
The state Supreme Court required lawmakers to pass a new host fee be last Friday, May 26. However, the next host-fee payment is not due until July, so lawmakers have privately set the budget deadline, the end of June, as the deadline for passing a new host fee.
Finally, the Senate bill would impose a 0.5 percent tax on revenues of all but the two resort-class casinos to set up a casino marketing and capital development account for use to promote the industry.
Of course, the Senate bill is not necessarily the one that would reach the desk of Governor Tom Wolf. The measure now goes back to the House, which will be free to amend the tax and fee structures, after which a joint conference would reconcile the differences.
House members may add other provisions that could derail any attempts to clear a final measure. Most prominent among them is a push to add video gaming terminals to bars, taverns and other liquor-licensed establishments. Add-ons such as this were what doomed last year’s House bill.
Meanwhile, the evolution of the gaming package was being watched closely by Las Vegas Sands, which recently failed in negotiations to sell its Sands Casino Resort Bethlehem property to MGM Resorts International. LVS officials have placed a planned $90 million expansion of the Bethlehem property on hold pending legislation to expand gaming in the state, particularly online gaming, which is famously opposed by LVS Chairman Sheldon Adelson.
LVS officials reiterated that opposition last week. “I’m not going to discuss any particular bill that has yet to reach the House, but I’ll reiterate our strong opposition to any gambling expansion in Pennsylvania,” said LVS spokesman Ron Reese in an interview with the Allentown Morning Call. “We believe it would be short-sighted and job-killing, and it would cause us to reconsider whether we want to reinvest in that property.”
