Extras on Excise: Indiana Places its Bets on New Supplemental Wagering Tax


 

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On May 2, 2017, Indiana Gov. Eric Holcomb (R) signed H.B. 1350 into law, vastly changing the state’s gambling tax regime. Some of these changes are set to take place several years in the future, while others will take effect in a matter of days.

One important change casinos are particularly pleased with is the elimination of the add-back tax, which will gradually occur over the next eight years, while a change with more immediate effect relates to Indiana’s $3 casino admissions tax.

Pursuant to Ind. Code Ann. § 4-33-12-1, until July 1, 2017, every casino in the state is required to pay $3 each time an individual enters the casino floor, regardless of whether the individual actually gambles.  For resort-style casinos, this system can lead to higher tax liabilities. As reported by The Chicago Tribune, the Blue Chip Casino and Spa in Michigan City, Ind., had significantly higher tax payments due to increased foot traffic after adding “a new hotel tower, an events center, a spa, and several new restaurants.”

However, beginning July 1, 2017, inland (non-riverboat) casinos will no longer have to pay the admissions tax and, effective July 1, 2018, the admissions tax will be fully repealed throughout the state.

To make up for lost revenue, lawmakers amended Ind. Code Ann. § 4-33-12-1 to impose a supplemental wagering tax on inland casinos beginning July 1, 2017, and on all casinos beginning July 1, 2018.

At first, inland casinos will be taxed at a rate of 3 percent of adjusted gross receipts from July 1, 2017, to June 30, 2018.

Then, beginning July 1, 2018, every casino will be taxed based on a ratio determined by dividing (1) the casino’s admissions taxes paid between July 2016 and June 2017 by (2) its adjusted gross receipts from the same time period. That ratio will then be multiplied by the casino’s gross receipts from the applicable year to determine the casino’s tax liability for that year, though the tax will be capped at 4 percent of gross receipts between July 1, 2018, and June 30, 2019, and 3.5 percent of adjusted gross receipts beginning July 1, 2019.

Because of the shift in tax structure, the economic impacts to Indiana and its localities are anything but certain.

The bill’s final fiscal note states that supplemental wagering tax revenue will be lower than the riverboat admissions tax by approximately $2.3 million in fiscal year 2019 and $3.6 million each year afterwards, while David Strow—spokesperson for the Blue Chip Casino—believes the bill provides “stability from a tax perspective,” and “should encourage other Indiana casino operators to continue re-investing in their properties."

Given the varying possibilities of H.B. 1350’s impact, be sure to follow Bloomberg BNA’s products to stay abreast of news and updates surrounding the bill.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Do you think Indiana’s gambling tax changes will have a positive impact in the state?

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