Bill Considered To Lower Tax Rate On Casino Promotional Play In Iowa

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A bill in the Iowa General Assembly which calls for a gradual reduction in the tax rate for promotional play at the state’s 19 casinos passed through a committee hearing Tuesday.

HSB 512 looks to reduce the current tax rate in 20% increments over the next four fiscal years, starting July 1 for Fiscal Year 2021, and also would remove the capped threshold of taxed promotional play receipts at $25.82 million. The previous cap was passed as an amendment in 2016.

The current tax rate of 22% applies to all but two of Iowa’s 19 casinos — Prairie Meadows in Altoona and Horseshoe in Council Bluff are taxed at 24%.

The next step for the bill, which had been recommended for passage last week, is to advance it to the Ways and Means Committee, with the goal of mirroring companion bill SSB 1104, which was introduced last year into the Iowa Senate. That bill will have to be reintroduced into a new subcommittee in that chamber before having its language modified to match the House version.

Tax rate reduction long-sought by casinos

While sports betting is also included among the adjusted gross receipts, the desire to have the tax rate reduced preceded its introduction last summer according to Iowa Gaming Association President and Chief Executive Officer Wes Ehrecke, who told Hawkeye Bets he “felt good about the 22-3 vote coming out of committee.”

“This was proposed four or five years ago in bringing this up long before sports wagering was authorized,” Ehrecke explained last month when the bill was introduced. “If you have a coupon from a company for $20, bought a $100 item … pay $80, that company, they pay no taxes on the $20. When we send out a promotional play for slot machines, if (people) go and play, they get taxed at 22 percent.”

Ehrecke added Tuesday the main goal is to remain competitive within the state and in the Midwest. He noted the tribal casinos in Iowa “don’t pay any tax let alone one on promotional play” and that neighboring Illinois does not have a tax on promotional play as part of its massive gaming expansion bill signed into law last summer by Governor J.B. Pritzker.

“By at least keeping a stable market, we are hoping to consistently able to provide over $320 million to the state,” Ehrecke said. “The Iowa Racing and Gaming Commission have four economic impact factors for casinos — jobs, to buy Iowa First, charities, and taxes. It all provides a $1 billion economic impact for Iowa.

“We’re proud of that — we’re often major employers in a community, have made $80 million plus in charitable contributions and spent $250 million in Iowa First.”

The casinos have generated approximately $871.5 million in tax revenue over the last three fiscal years, with the highest $291.8 million in 2018, and narrowly missed matching that mark in Fiscal Year 2019 at $291.1 million. Through the first seven months of this fiscal year according to the IRGC, nearly $167.8 million in tax revenue has been generated — 2.6% higher than the pace set in Fiscal Year 2019.

Sports betting — taxed at a 6.75% rate — has generated $1.53 million since the first wagers were accepted last August.

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Chris Altruda

Chris Altruda has been a sportswriter with ESPN, The Associated Press, and STATS over more than two decades. He recently expanded into covering sports betting and gambling around the Midwest.

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