The efforts to legalize and regulate online poker in Pennsylvania in 2016 ultimately failed, but that isn’t stopping some lawmakers from trying again this year. State Senator Jay Costa filed a Senate Co-Sponsorship Memorandum on January 2nd, providing a brief outline of a bill to legalize online gambling that he intends to introduce “in the near future.”
The most pressing matter that the bill will tackle is the settling of the “host fees” or “local share provisions,” as Costa calls them, that the state’s dozen brick-and-mortar casinos pay to their local municipalities and counties. The nine casinos outside of Philadelphia have been paying the greater of $10 million or two percent of slot machine “gross terminal revenue” (the Philly casinos have different agreements). Because of the size of the casinos, all of them have been paying the $10 million.
That’s where the problem lies. In 2016, the owner of the Mount Airy casino filed a lawsuit, saying that the host fees are an unconstitutional tax because since the casinos all pay the $10 million, they are effectively paying different tax rates. The Pennsylvania Supreme Court agreed and gave the legislature 120 days from late-September to come up with a solution.
Costa’s solution is to make the host fee have nothing to do with revenue. Instead, the casinos would just be assessed a flat $10 million annual fee. It amounts to the same thing as before, but it seems like since it is not tied to revenue, it isn’t technically a tax (is that right? I’m not a tax attorney), so it would therefore be constitutional.
Then there is the online gambling portion of the bill. Costa intends to legalize all forms of casino gaming on the internet, including online poker. The twelve land-based casinos would be eligible to apply for licenses; those licenses would cost $10 million, while licenses for software partners would be $5 million. Internet gaming revenues would be taxed at 25%, with three-fifths of that tax going to the state’s Property Tax Relief fund, with the rest going into a fund to pay for economic development projects.
Players may sign-up for online gambling accounts online or at a casino, though casinos may not allow online play on their premises.
The online gambling part of the bill also addresses gambling expansion at Pennsylvania airports. This was subject to much debate in the legislature, as lawmakers were split on whether or not they wanted to expand gaming that much. Costa’s bill would implement gaming on tablets and similar devices in the Philadelphia and Pennsylvania airports on a five-year test basis. Licenses would cost $2.5 million and like with the regular internet gaming licenses, the airport gaming revenue would be taxed at 25 percent.
Real-money daily fantasy sports would also be legalized with the bill.
There was a lot of back-and-forth regarding online gambling in Pennsylvania in 2016. The projected revenues generated by it were promised to fill a $100 million gap in the state budget, but obviously that gap still needs to be filled.
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