Freeman: IRS proposal “onerous”
Officials of the Internal Revenue Service got an earful from the industry last week in a public hearing on the agency’s proposal to drop the W2G reporting threshold on slot winnings from $1,200 to $600.
American Gaming Industry President and CEO Geoff Freeman led a group of casino executives and tribal representatives in advising an IRS panel that the change would be unworkable for the industry, and was created by officials with little knowledge of how casinos work, noting that the result of lowering the reporting threshold would be “far more complicated, onerous and unproductive” than IRS officials have realized.
David Bean, who serves on the tribal council for the Puyallup Tribe, took it one step further, saying, “It’s as if these regulations were drafted in a vacuum by someone who has no idea about the gaming industry and how it operates.”
Among the casino officials testifying was John Canham, vice president of casino operations at Penn National’s Hollywood Casino at Kansas Speedway. “The reduction in the reportable threshold could have a devastating effect on our business, and we strongly oppose the decrease,” he said.
Canham noted that slot operations would suffer by an estimated 300 percent to 500 percent increase in occasions where machines lock up while players wait for an attendant to bring a W2G form to sign for reporting slot wins beginning at $600 instead of $1,200. “The IRS would be flooded with these W2Gs,” he said. “If the idea was not to increase paperwork, this would not be the way to go.”
Freeman reacted to testimony by the speaker he followed, consultant Greg Mullally, who suggested that player tracking technology currently used in high-roller rooms to log reportable wins could be expanded to the entire floor, with player loyalty cards used to keep track of taxable income. Freeman said the consultant “fails to understand the casino marketplace in its current form.”
Players would simply stop using loyalty cards, Freeman said, eliminating an important marketing tool for the industry. “The customer could walk away,” he told the Las Vegas Review-Journal following the hearing. “This would have enormous implications not just for loyalty cards in the casino industry but in the broader hospitality industry—hotels, airlines and others.”
The IRS proposal included the potential use of player tracking systems, which prompted a letter from Freeman to the IRS specifically opposing that provision as having a potential “chilling effect” on gaming customers. ““The gaming industry is aware of no other industry in the country for which the IRS has issued regulations requiring the industry to deploy its customer loyalty program for federal tax collection purposes,” the letter said.
At last week’s hearing, Alex Waldrop, president of the National Thoroughbred Racing Association gave the racing industry’s view, testifying that the new reporting requirement was conceived with no understanding of how racing wagers relate to wins, with trifecta wagers and other multiple bets resulting in “wins” that are actually much less than the actual payout when all wagers are considered.
“It is the position of the entire horse breeding and racing industry that these Treasury regulations need to be modernized to ensure that both the withholding and reporting of winning parimutuel wagers accurately and fairly reflect the realities of wagering in the 21st century,” said Waldrop, who said the reporting requirement would be unfair and burdensome. “It is very likely that many of the individuals holding winning Derby superfecta tickets won little or no money when considering the full cost of their superfecta wager, only to find themselves standing in line at an IRS window due to the fact that the wager paid $634.10 on a single winning combination of $1.”
