Impact of the US tax code reform on the gambling industry

The gaming business will be greatly affected by the modifications approved by Congress. While members of the industry will have to wait to see the ultimate impact of these changes, the AGA has issued an analysis of the major modifications involving this sector.

The corporate tax rate has been reduced from 35% to 21%, requiring many industries to concede significant, long-standing tax preferences and deductions. In this climate, in accordance with the AGA, the gambling industry emerged with several important wins. Specifically, the final agreement protects three priorities for the gaming sector:

• Largely preserves the ability for our customers who itemize to net their gambling income, despite a late effort in the Senate to eliminate this deduction;
• Exempts most operators from limitations on interest deductibility and provides reasonable transition provisions for all businesses that pay interest on corporate debt; and
• Helps to ensure favorable rules for research and development, which gaming suppliers rely on to constantly innovate.

While there were wins, there are other areas where the AGA considers that they will need to continue to engage to protect and promote the industry as “fixes” are considered in 2018 and beyond. AGA's high priority targets include:

• Lifting the Slot Tax Reporting Threshold: The $1,200 slot tax reporting threshold was set in the 1970s. The tax reform debate provided AGA an opportunity to introduce this topic to legislators and pave the way for adjusting the threshold in a favorable way for their members and customers. They claim that a higher reporting threshold will help lower administrative costs and provide the members' customers an improved experience when they visit their facilities;
• Promulgating Regulations that Work for the Industry: Legislation of this size and scope will undoubtedly require significant details to be determined by the IRS and the Treasury Department. AGA claims that it will remain vigilant to ensure any rulemaking by executive agencies is consistent with industry practices and priorities; and
• Assessing and Addressing the Impact of Certain Changes: It may take some time to fully understand the effect some changes have on the industry and their customer base. For example, doubling the standard deduction for individuals will likely result in fewer taxpayers electing to itemize and net their gambling income/losses.

A more detailed summary of the key provisions to the gaming industry is available HERE and a document discussing the impact of tax reform on casino patrons can be found HERE.