The Pennsylvania House of Representatives passed in June a gambling expansion bill that allowed for the legalization and regulation of online gambling options and daily fantasy sports, among others. Over the next several months, there has been little mention of what was going to happen next and when the state was to open a legalized iGaming market.
Legislators’ silence on the matter continued up until September when a pressing local tax revenue issue required their immediate attention. Late last month, the state Supreme Court ruled that the portion of the Gambling Act 2004 (Pennsylvania’s gambling law) that dealt with casinos’ taxation was unconstitutional as it lacked in uniformity.
It all started with Mount Airy Casino Resort, one of the state’s 12 casinos, filing a petition, which argued that the current taxation system favored larger gambling venues over smaller ones. In the first place, nine of Pennsylvania’s gambling venues are required to pay a minimum of $10 million in tax revenue to host municipalities. SugarHouse Casino in Philadelphia and two smaller casino resorts in other parts of the state are exempted.
The latest financial report by the Pennsylvania Gaming Control Board showed that the lack of uniformity in taxation cost them $48.5 million for the fiscal year ended June 30, 2016.
The controversial part of the state gambling law also dealt with taxes on slot machines revenue. At present, state casinos are divided into two classes – casinos with annual slots revenue of more than $500 million and casinos generating less than $500 million. Generally speaking, larger gambling venues pay 2% of their slots revenue in a municipal tax and smaller ones have a higher effective rate.
The state Supreme Court gave the Legislature 120 days to find an effective solution to the problem, one that would provide a homogeneous tax system for all casinos operating within Pennsylvania’s borders.
With the state struggling to find revenue streams for its 2016-17 budget and the possibility of losing $50 million in casino tax revenue, lawmakers brought the online gambling bill back on the table. And there have been certain positive developments for the gambling expansion proposal over the past week.
On Tuesday, October 25, the state Senate approved a temporary fix for the tax issue. Although the Legislature was scheduled to adjourn on Wednesday for an Election Day break, the House of Representatives convened on Thursday to discuss and vote on certain pending issues, including ones related to the state’s gambling industry.
The House approved HB 1887 after amending it to provide a permanent solution to the local tax issue and tacking onto it the gambling expansion proposal it voted on in June. In other words, HB 1887 includes a fix to the tax dispute that would hopefully give peace to casino operators, host municipalities, and the state as a whole, and a plan for the legalization and regulation of online gambling and betting on daily fantasy sports.
If Internet gaming is allowed in Pennsylvania, it is expected to contribute $100 million in tax revenue, the exact amount lawmakers had vowed to secure for next year’s state budget.
With the House voting in favor of HB 1887, the bill is now in the Senate’s hands. The Legislature is set to reconvene on November 16 for a single-day lame-duck session. Although the online gambling proposal has gained serious momentum over the past week, chances for Pennsylvania to become the fourth US state with a legalized iGaming market before the year’s end are very slim. Senate members have indeed indicated that the latest bill on the table will be considered during the extraordinary legislative session but will probably not be voted on. If the proposal fails to pass the Senate, it will have to be introduced again next year and work on its passage will have to start from scratch.
