HomePublicationsNewsletter ArchiveNewslettersVolume 21Issue 21AGA President & CEO Testifies at IRS Hearing on Gaming Proposal

On Wednesday, June 17, 2015, American Gaming Association’s (“AGA”) president and CEO Geoff Freeman testified at the Internal Revenue Service (“IRS”) hearing on the proposed rules regarding electronic player tracking regulations using player loyalty cards for tax reporting purposes.

The industry’s greatest concern, Mr. Freeman said, is that the proposal mandates electronic player tracking. This would pose significant challenges, since marketing tools are not equipped to serve this purpose and customers are uncomfortable with the proposed approach. Further, the mandate is inflexible and inconsistent with existing state requirements.

“While we recognize the IRS’ concerns and objectives, we question the need to impose mandatory, across-the-board use of the player-tracking tool for tax reporting purposes,” stated Mr. Freeman. “Rather than mandating across-the-board use for tax reporting, we believe a more targeted approach is possible for achieving the IRS’ objective.”

Freeman detailed how a new voluntary electronic player tracking arrangement could be established for slot tax reporting if casinos were given sufficient lead time to develop systems and controls. Electronic tracking would also need to be an option for casinos, voluntary for customers and suitable for the IRS.

Mr. Freeman also made clear the industry’s opposition to the potential proposal to lower the slot jackpot reporting threshold from the current $1,200 level to $600.

“The casino gaming industry strongly opposes any such reduction,” he said.

After the IRS announced the proposal on March 4, the AGA convened experts from member companies for regular meetings to assess each aspect of it, built consensus and formulated an effective response. AGA officials also met with the IRS in person to discuss the proposal last month.

Notably, 17 members of Congress from eleven states previously sent a letter to the IRS outlining their concerns with the proposal. States represented were Arizona, Colorado, Florida, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, New Jersey and Ohio.

“If the proposed regulations are set forth as mandatory, then the gaming industry’s significant labor cost and lost business revenue to comply would be detrimental to local, state and national economies that depend on needed dollars to support critical services,” wrote the members of congress.

In its previously submitted comments, the AGA expressed concern with the proposed mandatory slot tax information reporting that is based on electronic player tracking by the casino. Such a requirement would adversely affect a crucial casino marketing tool and could have a chilling effect, as customers would be reluctant to use or sign up for loyalty cards associated with tax tracking and collection.

The AGA also warned that current electronic player tracking systems were designed for marketing purposes and lack the types of controls necessary to ensure proper compliance with tax information reporting. Conflicting state tax reporting and withholding requirements would also pose serious challenges.

To read the AGA’s IRS hearing testimony as prepared, please click here.


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