IRS suggests dropping casino winnings threshold to $600

The Internal Revenue Service may lower the reporting level for casino customers who win at slot machines, keno and bingo, a change that gaming and legal advocates say is not needed and only adds more paperwork to an overly regulated industry.

The proposal, released this week by the IRS, suggests the reporting rules for winnings from gambling on slots, keno and bingo be reduced from $1,200 to $600. The agency set a 90-day period for the casino industry to respond to the suggested regulation changes.

There isn’t a guarantee the IRS will make the revision.

“This potential policy change could create additional burdensome and unnecessary reporting requirements for our industry,” Sara Rayme, senior vice president of public affairs for the American Gaming Association, told members in an email late Wednesday.

Under current IRS regulations, a casino must file tax information forms on winnings of $1,200 or more on a slot machine jackpot or a bingo game, and winnings of $1,500 on a game of keno. The thresholds were set in 1977.

If a slot machine hits a $1,200 jackpot, the machine locks up until IRS forms are filled out and the game is reset. Lowering the jackpot threshold to $600 could increase the number of times the game is shut down for a customer to complete paperwork.

In an interview Thursday, Rayme said senior tax representatives from companies that are members of the Washington, D.C.-based trade organization, will submit comments to the IRS on behalf of the industry. She said the IRS threshold hasn’t been revisited in years.

“It’s a step backward for the industry,” Rayme said of the suggested changes. “It could put the industry at a serious competitive disadvantage to other forms of entertainment the competes for consumers discretionary income.”

The changes would cover all casinos, including land-based, riverboat, racetrack casinos and Indian casinos.

“This would have a very negative impact on business,” said Penn National Gaming Senior Vice President of Public Affairs Eric Schippers. Penn National operates 29 casinos and racetracks including the M Resort.

“If anything, the reporting threshold should be increased to account for inflation,” Schippers said.

Penn National is building a $225 million slot machine-only racetrack casino in Massachusetts, which is the only state with a $600 or more tax-collecting provision. Schippers said the company is asking lawmakers to change the rules to conform with every other state.

During a tour of the project this week, Schippers told lawmakers the $600 reporting figure would keep slot machines out of play for longer time periods. He said, based on downtime estimates, the state could lose $31 million in revenue and $15.2 million a year in taxes. He also feared the paperwork hassle for every $600 jackpot would drive customers to nearby out-of-state competitors.

“We certainly plan to weigh in during the comment period,” Schippers said. “We’re very concerned about the notion of reducing the trigger level.”

In its proposal, the IRS said it was seeking comments regarding the reporting figure, including the feasibility of reducing the reporting threshold, whether electronically tracked slot machine play should have a separate reporting threshold, and if the games’ reporting amounts should be uniform.

Michelle Ferreira, an attorney with Greenberg Traurig in San Francisco who specializes in tax matters, said it appeared from reading the suggestions, that the IRS “doesn’t believe it would be a big deal” reducing the reporting requirements to $600, primarily because “much of record keeping is handled electronically.”

Ferreira said many slot machine players utilize player tracking/player loyalty cards, which record activity.

“I’ll be interested to see what the commentary is from the gaming industry,” Ferreira said. “In the IRS’s view, players check in and check out of a game electronically. The IRS may not believe this is much of an administrative hassle.”

MGM Resorts International spokeswoman Mary Hynes said the gaming company’s tax experts are still reviewing the IRS suggestions, which also contain other proposals applicable to the casino industry.

“We fully support the AGA’s efforts on this,” Hynes said.

According to the AGA’s assessment of the proposed changes, some of the IRS suggestions could be helpful to casino operators, such a single-day reporting forms for a customer’s play.

The American Gaming Association has undertaken an effort to streamline the regulatory process. The industry believes nonuniform and burdensome regulations can slow innovation. Rayme said the casino industry wants to be treated like any other American business.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Find him on Twitter: @howardstutz.