United States Congress to consider bill that would repeal the 0.25% federal handle tax

The United States Congress is set to consider a new federal bill that would repeal the 0.25% federal excise tax on sports betting handle.

The federal excise tax of 0.25% on betting handle was first introduced in 1951 and applies to all legal sports wagers. However, some types of betting, which include betting on horse racing and sports betting operations that are overseen by state lotteries are exempt from the tax. 

On top of this, businesses that pay the federal excise tax are also required to pay an annual $50 per-employee tax on those who work in sportsbooks and can accept wagers.

HB 2350 would eliminate the excise tax

The new bill, HB 2350, which is also known as HR 2350, proposes making an amendment to Chapter 35 of the Internal Revenue Code of 1986, which specifically relates to the taxation of wagering.

The bill would repeal the 0.25% excise tax on wagering and would eliminate the need for employer’s to pay the $50 per-employee tax on sportsbook employees.

Nevada Representative Dina Titus introduced the bill, which is also sponsored by Nevada’s Mark Amodei and Steven Horsford and Pennsylvania Representative Guy Reschenthaler.

In July last year, Titus and Reschenthaler introduced a similar bill but this failed to make it past the committee stage and ultimately failed.

However, according to Titus, the momentum for repealing the tax was “finally on our side.”

Titus said: “As more states recognize the benefits of legalizing and regulating sports betting, repealing the handle tax will create jobs in Southern Nevada and across the country. At a time when Las Vegas is experiencing the second highest unemployment rate of any large metro area in the country, forcing sportsbooks to pay an additional tax on each employee makes it harder to bring about economic recovery. 

“I have proposed this legislation for years and I finally feel like the momentum is on our side. I look forward to continuing to work with Congressman Reschenthaler to make this bill become law.”

Reschenthaler added: “Gaming has a $6.34 billion economic impact in Pennsylvania and supports over 33,000 jobs.

“The bill will ensure the gaming industry, hit hard by COVID-19 mandated closures and the cancellation of sporting events, is able to support good-paying jobs and economic growth in southwestern Pennsylvania and across the country. I’m grateful to my Gaming Caucus Co-Chair, Rep. Dina Titus, for joining me once again on this important effort.”

The legislation is currently with the House Committee on Ways and Means.

The tax “encourages consumers to place bets illegally” 

According to Titus, “the handle tax punishes legal gaming operators and encourages consumers to place bets illegally.”

This sentiment was echoed by Reschenthaler who said the tax favoured the offshore wagering market.

Reschenthaler said: “Unfortunately, the industry is hindered by an outdated tax code and burdensome regulations that penalize legal, regulated operators while providing illegal operations with an unfair advantage.”

The American Gaming Association (AGA) estimated that the federal excise tax on wagering generated less than $33m for the US government in 2019. 

The AGA has also thrown its support behind the legislative effort stating that tax aids the illegal offshore market.

In a statement, the AGA president and CEO Bill Miller said: “While the federal excise tax’s original purpose was to punish illegal operators, this antiquated tax now aids the offshore, illegal market and disadvantages safe, legal and regulated sportsbooks nationwide. If Congress wants to position the legal sports betting market for success, it needs to eradicate this unnecessarily burdensome tax to level the playing field for legal sportsbooks.

“I’m grateful to Congressional Gaming Caucus Co-Chairs Reps. Titus and Reschenthaler for introducing this much-needed legislation that will continue fostering growth for the legal market and better protect customers.”