Updated March 5, 2023 - 8:02 am
Rep. Dina Titus, D-Nev., plans to take another swing at an archaic tax formula involving slot machine winnings by raising the reporting threshold.
Whenever a slot player wins a jackpot of more than $1,200, the operator — a casino, tavern, restaurant or convenience store, or even airport personnel — are required to prepare a W-2G form that reports the amount of those winnings to the Internal Revenue Service.
When the policy was adopted in 1977, a $1,200 jackpot was a big deal, and Nevada was the only state offering legal casino gambling. Fast forward 46 years, and the landscape has changed dramatically.
The first Atlantic City casinos opened in 1978, and over the years, commercial and tribal casinos have expanded to all but two states, and many of them have casinos with slot machines.
“There was a time when we were trying to get the Treasury Department to do this through regulation, but they never moved, so we’re just going to push the legislation instead,” Titus said in an interview with the Review-Journal.
Now, with a gaming caucus she heads in place, she looks to receive bipartisan support from states that have some form of commercial or tribal gaming, adding that “the caucus is going to make it a cause.”
Not just for Las Vegas
“One of the important things is we’re not just doing this just for Las Vegas, we’re doing it for everybody,” said Titus, whose legislative district includes the Strip.
When a jackpot hits at a slot machine in a casino, attendants are summoned to the machine, which is taken offline. Attendants check the machine and the winner’s identification and prepare the appropriate paperwork.
But depending on the time and location of the win, it could take a while for the process to begin.
When a casino is busy and personnel are occupied with other responsibilities, the patron could wait for an hour or longer for someone to start the process. There are tales of slot machine winners at Harry Reid International Airport that scored big wins and waited for paperwork assistance, missing their flights.
“That patron could be sitting for quite a long time waiting for a casino employee to help them with the paperwork,” said Alex Costello, vice president of government relations for the American Gaming Association, which represents gaming companies across the United States.
“It certainly is a drain on the consumer,” she said. “Our customers are excited to win a jackpot and it takes a little air out of the tires, and it certainly is a compliance headache for our operators for the machine to be out of service and to file all this paperwork.”
Some casinos, Costello said, have acquired technology that scans a winner’s ID and fills in the blanks of the W-2G paperwork to speed up the process.
She said in 2020, the last year statistics are available, more than 15 million W-2Gs were filed. With casino companies on a roll since the pandemic ended, there are more and more jackpots to process.
“Quite frankly, our other contention is that this is a headache for the IRS,” she said.
Under Titus’ proposal, the threshold would be raised to $5,000 and indexed to inflation so that the amount would keep up over time.
“This threshold was set back in the ’70s, and we all know how inflation works and what it looks like today,” Costello said. “Back then, a $1,200 jackpot meant something completely different than what it means today.”
Titus said she knows of no opposition to her proposal, and she expects it would win bipartisan support — if the measure is enough of a priority for most members of Congress. Once the bill makes it through the House, she expects Nevada’s senators would carry the ball to win Senate approval.
While Titus and Costello are confident the legislation can succeed, at least one analyst isn’t as sure.
“It’s ridiculous that we haven’t had some sort of escalator put in place for 45 years,” said Brendan Bussmann, gaming industry analyst with Las Vegas-based B Global. “You have these in place for inflation and standard deductions; the same should be said for this provision.”
Bussmann’s pessimism is based on Congress rarely agreeing on anything.
“The challenge that we are going to face is that you have a dysfunctional legislative body that won’t see this as a bipartisan issue,” he said. “It’s time to update the system and up the threshold on taxable winnings. This should be a no-brainer, but in an age where we live by continuing resolutions, this gets lost in the shuffle.”
But if there is success, Costello said Titus and her caucus should address another archaic rule that has been on the books since 1951: the 0.25 percent federal excise tax on sports wagers. Titus and Rep. Guy Reschenthaler, R-Pa., her ally on the slot machine threshold plan, introduced a bill to repeal that tax last year, and it, too, was unsuccessful.
Costello expects that bill and the slot threshold legislation will be revived within the next two months.