More Hoops for Massachusetts Casino Hopefuls to Jump Through

Tuesday, January 21st, 2014 | Written by April Bergman
More Hoops for Massachusetts Casino Hopefuls to Jump Through

The Massachusetts casino industry has had its share of headlines even before the first casino has broken ground. Now there are problems with a state casino law that may deter high rollers from ever visiting the state’s future casinos. Current Massachusetts tax law requires that table games be covered under state tax reporting and withholding requirements, the same law that has plagued the racing and simulcast industries in the past. One interpretation of this law states that anytime a player is paid $600 or more, tax protocol would delay continuation of play on that table because the payee would have to stop and fill out paperwork on his or her winnings.

In a typical high roller room, it’s not uncommon for payouts greater than $600 to be made on practically every winning hand, so this may cause a problem for those players who do not want the hassle of tax paperwork after every payout.

Another game affected would be slots, which in Massachusetts, require tax filings and withholdings of 5% for all jackpots above $600, which is a very low amount compared to reporting requirement amounts of other states, as well as federal requirements.

The state will issue its first casino licenses in the upcoming months, so applicants are starting to worry about the strict reporting requirements. They worry it will only annoy slot patrons and high rollers, driving out potential customers who will turn to other states where laws are less stringent.

Senior VP at Penn National Gaming Eric Schippers says, “The machine will literally lock up and the customer will have to fill out paperwork.” Penn National Gaming is one of the three casino brands that has applied for the state’s sole slot license in this region.

According to the IRS, federal requirements for tax reporting that necessitate paperwork is for slot payouts greater than or equal to $1,200 and for other games when the payout is $600 or greater and the winnings total more than 300 times the wager (300-to-1 odds on long-shot bets such as a racing trifecta). Federal reporting laws do not generally affect table games, according to state officials, because they don’t typically involve bets with odds greater than 300-to-1. Massachusetts’ laws do not have the 300-to-1 requirement.

Enrique Zuniga, gambling commission member for the state, has studied this issue and explains that whether or not the Massachusetts rules would apply to such table games as blackjack is an open question.

Zuniga says, “There is a possibility, an interpretation, that any payment of $600 or more could trigger a taxable event in Massachusetts.”

Managing partner for Cordish Companies, another slot parlor applicant, Joe Weinberg, believes that the state reporting rules would require “ten times” the paperwork for slot players than federal requirements.

Weinberg says, “You have exponentially more jackpots at $600 than at $1,200. You’d end up with real customer experience issues.”

It takes about 10 minutes to fill out the paperwork required for taxes each time a payout is made. This would ultimately result in a lag in operator and tax revenue while the player has stopped playing. With hundreds or thousands of machines in one casino, this could create even more problems for operators and regulators.

He says, “It’s not in anyone’s interest — the state, the property owner, or the customer — to set the threshold at an artificially low level.”

Casino giants and Massachusetts casino license applicants Wynn Resorts and MGM have brought the issue to the attention of state officials. Wynn Resorts is proposing an Everett casino, while MGM hopes to operate a downtown Springfield casino. The commission is now studying the matter following complaints and plans to address the issue in an upcoming public session, according to the panel’s chairman Stephen Crosby.

In an interview, Crosby explained, “It’s going to be hard to repatriate our high rollers back to Massachusetts under these circumstances,” though no formal position has been taken by the full commission.

Zuniga feels the law should be amended and says, “We should try to make this a competitive environment.”

Amherst Democrat and one of the architects for the casino law that was passed in 2011, State Senator Stanley Rosenberg, commented through a spokesperson that a recommendation from the commission for changing the law is expected by the Legislature, and they look forward to seeing what the panel comes up with.

The new withholding requirement went into effect last year at the onset of the racing season after the casino law was passed the year prior, much to the dismay of track operators. Crosby said it brought “tremendous pushback from the operators.”

Shortly after the new requirements went into effect, the New England Horsemen’s Benevolent and Protective Association contacted the commission, writing that the law “made no sense,” and warned that high roller gamblers were likely to choose to gamble somewhere other than Massachusetts race tracks. Industry analysts conjectured that bettors would end up splitting large bets into smaller ones to avoid reporting paperwork on wins over $600. However, Suffolk Downs, Raynham Park, and Plainridge Racecourse, Massachusetts’ pari-mutuel betting operators, saw a rise in the number of tax report tickets of about 60% over 2012, according to the commission’s director of racing Jennifer Durenberger.

Suffolk Downs COO Chip Tuttle says the state’s simulcast and flagging racing industries have not benefited from the new withholding provision, and in fact, it may be hurting the bottom line.

In a statement, Tuttle says, “Based on the comparisons from 2012 to 2013, there seems to have been a negative effect. Our customers were clearly upset by it, and it may very well be encouraging them to go to simulcast facilities in New Hampshire and Rhode Island.”

Analysts foresee a re-write of the law before the first Massachusetts casino opens for business.