< Back to H.R. 2230 (112th Congress, 2011–2013)

Text of the Internet Gambling Regulation and Tax Enforcement Act of 2011

This bill was introduced on June 16, 2011, in a previous session of Congress, but was not enacted. The text of the bill below is as of Jun 16, 2011 (Introduced).

Source: GPO

I

112th CONGRESS

1st Session

H. R. 2230

IN THE HOUSE OF REPRESENTATIVES

June 16, 2011

(for himself, Mr. Campbell, and Mr. Frank of Massachusetts) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to regulate and tax Internet gambling.

1.

Short title; amendment of 1986 Code

(a)

Short Title

This Act may be cited as the Internet Gambling Regulation and Tax Enforcement Act of 2011.

(b)

Amendment of 1986 Code

Except as otherwise expressly provided, whenever in this Act an amendment is expressed in terms of an amendment of a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

2.

Tax on internet gambling

(a)

In general

Chapter 36 (relating to certain other excise taxes) is amended by adding at the end the following new subchapter:

E

Internet Gambling

Sec. 4491. Imposition of Internet gambling license tax.

Sec. 4492. Record requirements.

Sec. 4493. Elective State and Indian tribal government online gambling tax.

Sec. 4494. Regulations.

4491.

Imposition of Internet gambling license tax

(a)

Internet gambling licensee

(1)

In general

There is hereby imposed a tax on each Internet gambling licensee in an amount equal to 2 percent of all funds deposited by customers during the preceding month into an account maintained by that Internet gambling licensee or any agent of that licensee that can be used for the purpose of placing a bet or wager as defined in section 5362(1) of title 31, United States Code.

(2)

Persons liable for tax

The tax imposed by subsection (a) shall be the direct and exclusive obligation of the Internet gambling operator and may not be deducted from the amounts available as deposits to the person placing a bet. Notwithstanding the preceding sentence, any person making a deposit for the purpose of placing a bet or wager with a person who is required but has failed to obtain a license pursuant to subchapter V of chapter 53 of title 31, United States Code, shall be liable for and pay the tax under this subchapter on all such deposits, but such liability shall not excuse any failure to pay the tax on the part of the person who is required but has failed to obtain such license. The person making the deposit shall not be liable for the tax on deposits in cases of fraud.

(b)

Unauthorized bets or wagers

(1)

In general

There is hereby imposed a tax on any person that is not authorized pursuant to section 5383(b) of title 31, United States Code, to accept bets and wagers.

(2)

Amount of tax

The amount of such tax shall be equal to 50 percent of all funds deposited into an account that can be used for placing a bet or wager within the meaning of section 5362(1) of that title.

(c)

When due

The tax imposed by this section shall be due at by the end of each calendar month with respect to deposits during the preceding month.

(d)

Definitions and special rules

For purposes of this section—

(1)

Internet gambling licensee

The term Internet gambling licensee means a licensee, as defined in section 5382 of title 31, United States Code.

(2)

Deposits

Deposits made by or on behalf of an Internet gambling licensee of Internet gambling winnings or returns of funds by or on behalf of an Internet gambling licensee to the account of a customer shall not be treated as a deposit for purposes of this section.

4492.

Record requirements

Each person liable for taxes under this subchapter, except for a person making a deposit who is liable for taxes pursuant to section 4491(a)(2), shall keep a daily record showing deposits (within the meaning of this subchapter), in addition to all other records required pursuant to section 6001.

4493.

Elective State and Indian tribal government online gambling tax

(a)

In general

(1)

Payment of State and Indian tribal government tax

On a monthly basis, each Internet gambling licensee shall pay to each qualified State and each qualified Indian tribal government an amount equal to the monthly pro rata State and Indian tribal government online gambling tax.

(2)

Monthly pro rata online gambling tax

For purposes of this section, with respect to a qualified State and a qualified Indian tribal government for any calendar month, the monthly pro rata online gambling tax is the amount of the taxes described in subsection (b) received with respect to such calendar month.

(3)

Qualified State; qualified Indian tribal government

(A)

In general

For purposes of this section, the terms qualified State and qualified Indian tribal government mean a State or an Indian tribal government, respectively, for which an election to receive funds under this section is in effect. Notice of such election shall be provided by the Governor, principal chief, or other chief executive officer in such form and manner as the Secretary may prescribe.

(B)

State election not to affect tribal election

An election by a State under subparagraph (A) to receive funds under this section shall not constitute an election to be so included on behalf of any Indian tribe located within or partially within the geographic boundaries of such State.

(C)

Revocation of State or Tribal election

(i)

In general

A State or Indian Tribal government may revoke its election by notice provided by the Governor, principal chief, or other chief executive officer and in such form and manner as the Secretary may prescribe.

(ii)

Timing of revocation

Revocation of state election shall take effect the later of 6 months after receipt by the Secretary of such revocation, or on January 1st of the year following receipt by the Secretary of such revocation.

(D)

State

The term State means any State, the District of Columbia, or any commonwealth, territory or other possession of the United States.

(E)

Indian tribal government

The term Indian tribal government means the government of an Indian tribe (within the meaning of section 4 of the Indian Gaming Regulatory Act).

(4)

Time of payments

The payment made under this subsection with respect to any calendar month shall be made not later than the 11th day of the succeeding calendar month.

(5)

List of qualified States and qualified Indian tribal governments

The Secretary shall maintain a current list of qualified States and qualified Indian tribal governments and shall publish such list online.

(b)

State and Indian Tribal Government Online Gambling tax

The State and Indian tribal government online gambling tax shall be an amount equal to 6 percent of all deposited funds deposited by customers located in each qualified state or area subject to the jurisdiction of a qualified Indian tribal government at the time of the deposit.

(c)

Effect of acceptance of tax

Acceptance by a State or Indian tribal government of the State and Indian tribal government online gambling tax shall relieve Internet gambling licensees from the obligation to pay any other fee or tax to the State or Indian tribal government relating to its online gambling services, except for—

(1)

applicable State individual and corporate income taxes, which shall be unaffected by the election, and

(2)

any fees associated with an Internet gambling licensee’s choice to rely on a State or Indian tribal regulatory body certification of suitability in connection with a Federal online gambling licensing application.

4494.

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this subchapter.

.

(b)

Clerical amendment

The table of subchapters for chapter 36 is amended by adding at the end the following new item:

Subchapter E. Internet Gambling.

.

(c)

Effective date

The amendments made by this section shall apply to bets or wagers placed after the date of the enactment of this Act.

3.

Internet Gambling Licensee information reporting

(a)

In general

Subpart A of part III of subchapter A of chapter 61 (relating to information concerning persons subject to special provisions) is amended by adding at the end the following new section:

6050X.

Returns relating to internet gambling

(a)

Requirement

Every person who is an Internet gambling licensee or who otherwise is engaged in the business of accepting any bet or wager within the meaning of section 5362(1) of title 31, United States Code, during a taxable year shall furnish, at such time and in such manner as the Secretary shall by regulations prescribe, the information described in subsection (b), and such person shall maintain (in the location, in the manner, and to the extent prescribed in regulations) such records as may be appropriate to the information described in subsection (b).

(b)

Required information

For purposes of subsection (a), the information described is set forth below, which information may be modified as appropriate by the Secretary through regulation—

(1)

the name, address, and TIN of the Internet gambling licensee or other person engaged in the business of accepting any bet or wager,

(2)

the name, address, and TIN of each person placing a bet or wager with the Internet gambling licensee or other person engaged in the business of accepting any bet or wager during the calendar year,

(3)

the gross winnings, gross wagers, and gross losses for the calendar year of each person placing a bet or wager with the Internet gambling licensee or other person engaged in the business of accepting any bet or wager during the year,

(4)

the net Internet gambling winnings for each such person for the calendar year,

(5)

the amount of tax withheld with respect to each such person for the calendar year,

(6)

beginning and end-of-year account balances for each such person for the calendar year, and

(7)

amounts deposited and withdrawn by each such person during the calendar year.

(c)

Statement To be furnished to persons with respect to whom information is required

Every person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return by reason of placing a bet or wager a written statement showing—

(1)

the name, address, and phone number of the information contact of the person required to make such return, and

(2)

the information required to be shown on such return with respect to each person whose name is required to be set forth in such return.

The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made.
(d)

Definitions

(1)

Internet gambling licensee

The term Internet gambling licensee has the meaning given such term by section 4491(d)(1).

(2)

Net internet gambling winnings

The term net Internet gambling winnings means gross winnings from wagers placed over the Internet with a person required to be licensed under section 5382 of chapter 53 of title 31, United States Code, less the amounts wagered.

(3)

Internet; wager

The terms Internet and wager shall have the respective meanings given such terms by section 5362 of chapter 53 of title 31, United States Code.

.

(b)

The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6050W the following new item:

Sec. 6050X. Returns relating to internet gambling.

.

4.

Withholding from certain gambling winnings

(a)

Net internet gambling winnings

Paragraph (3) of section 3406(b) (relating to other reportable payments for purposes of backup withholding) is amended—

(1)

by striking or in subparagraph (E);

(2)

by striking . and inserting , or at the end of subparagraph (F); and

(3)

by adding at the end thereof the following new subparagraph:

(G)

section 6050X(b)(4) (relating to net Internet gambling winnings).

.

(b)

Effective date

The amendment made by this section shall apply to bets or wagers placed after the date of the enactment of this Act.

5.

Withholding of tax on nonresident aliens

(a)

Tax on nonresident alien individuals

Paragraph (1) of section 871(a) (relating to income not connected with United States business) is amended—

(1)

by striking and at the end of subparagraph (C),

(2)

by inserting and at the end of subparagraph (D), and

(3)

by inserting after subparagraph (D) the following new subparagraph:

(E)

the gross amount of winnings from each wager placed over the Internet with a person required to be licensed under section 5382 of chapter 53 of title 31, United States Code (as such terms are defined in section 6050X(d)(2)),

.

(b)

Exemption for certain gambling winnings

Section 871(j) (relating to exemption for certain gambling winnings) is amended by inserting before the period at the end the following: or to any bets or wagers placed over the Internet (as such terms are defined in section 6050X(d)(2)).

(c)

Withholding of tax on nonresident alien individuals

The first sentence of subsection (b) of section 1441 (relating to withholding of tax on nonresident aliens) is amended by inserting after gains subject to tax under section 871(a)(1)(D), the following: the gross amount of winnings from wagers placed over the Internet described in section 871(a)(1)(E),.

(d)

Source of internet gambling winnings

Subsection (a) of section 861 is amending by inserting at the end thereof the following new paragraph:

(10)

Internet gambling winnings

Any Internet gambling winnings received from an Internet gambling licensee (as defined by section 4491(d)(1)).

.

(e)

Effective date

The amendments made by this section shall apply to bets or wagers placed after the date of the enactment of this Act.

6.

Wager tax applicable to Federal online gambling activities

(a)

In general

Subsection (a) of section 4401 is amended to read as follows:

(a)

Wagers

(1)

Authorized wagers

There shall be imposed on any wager authorized under Federal law or the law of the State in which accepted an excise tax equal to 0.25 percent of the amount of such wager.

(2)

Unauthorized wagers

There shall be imposed on any wager not described in paragraph (1) an excise tax equal to 2 percent of the amount of such wager.

.

(b)

Effective date

The amendment made by subsection (a) shall apply to wagers made after the date on which subchapter V of chapter 53 of title 31, United States Code, first applies.

7.

No exclusions under Federal wager tax for online gambling activities

(a)

In general

Section 4402 is amended to read as follows:

4402.

Exemptions

(a)

In general

No tax shall be imposed by this subchapter—

(1)

on any wager placed with, or on any wager placed in a wagering pool conducted by, a parimutuel wagering enterprise licensed under State law and that is not carried out online;

(2)

on any wager placed in a coin-operated device (as defined in section 4462 as in effect for years beginning before July 1, 1980), or on any amount paid, in lieu of inserting a coin, token, or similar object, to operate a device described in section 4462 (a)(2) (as so in effect), and that is not carried out online; or

(3)

on any wager placed in a sweepstakes, wagering pool, or lottery which is conducted by an agency of a State acting under authority of State law, but only if such wager is placed with the State agency conducting such sweepstakes, wagering pool, or lottery, or with its authorized employees or agents.

(b)

Online gambling activities

Notwithstanding the exemption listed in subsection (a)(3), all online gambling activities conducted pursuant to a Federal license shall be subject to the wagering tax set forth in section 4401.

.

(b)

Effective date

The amendment made by subsection (a) shall apply to wagers made after December 31, 2010.

8.

Territorial extent

(a)

In general

Paragraph (2) of section 4404 is amended to read as follows:

(2)

placed within the United States, or any Commonwealth, territory, or possession thereof, by a person who is a United States citizen or resident.

.

(b)

Effective date

The amendment made by subsection (a) shall apply to wagers made after December 31, 2010.

9.

American Heritage Program

(a)

Implementation of program

From funds appropriated to the American Heritage Block Grant Fund for a fiscal year, the Secretary of the Treasury shall make grants to eligible States to carry out an American Heritage Program through State arts agencies.

(b)

Allotment of funds

Funds allotted for a fiscal year shall be allotted among eligible States in the same proportion as funds are allotted among the States under section 5(g)(3) of the National Foundation on the Arts and the Humanities Act of 1965 (20 U.S.C. 954(g)(3)).

(c)

Eligibility To receive grants

To be eligible to receive a grant under subsection (a) for a fiscal year, a State shall submit to the Secretary an application in such form, and containing such information and assurances, as the Secretary may require by rule, including assurances that—

(1)

not more than 80 percent of the cost of any qualified activity carried out under this section shall be paid with such grant, and

(2)

not more that 20 percent of such grant may be expended for administrative costs.

(d)

Definitions

For purposes of this section—

(1)

the term American Heritage Program means a program carried out by a State that provides qualified activities directly, or by contract with nonprofit organizations (including community-based organizations) or units of local government, for all the people and communities in the State,

(2)

the term Secretary means the Secretary of the Treasury,

(3)

the term State has the meaning given such term in section 4 of the National Foundation on the Arts and the Humanities Act of 1965 (20 U.S.C. 953),

(4)

the term State arts agency has the same meaning given such term as used in the National Foundation on the Arts and the Humanities Act of 1965 (20 U.S.C. 951 et seq.), and

(5)

the term qualified activities means activities that develop projects, productions, workshops, or programs that will encourage public knowledge, education, understanding, and appreciation of American heritage and the arts.

(e)

American Heritage Block Grant Fund

(1)

Establishment

There is established in the Treasury of the United States a trust fund to be known as the “American Heritage Block Grant Fund”, consisting of such amounts as may be appropriated or credited to the American Heritage Block Grant Fund as provided in this subsection.

(2)

Transfer to Fund

There are appropriated to the American Heritage Block Grant Fund amounts equal to .5 percent of the taxes received by the Treasury after December 31, 2010, that the Secretary determines are attributable to Internet gambling.

(3)

Method of transfer

The amounts appropriated by paragraph (1) shall be transferred from time to time from the general fund of the Treasury. Such amounts shall be determined on the basis of estimates by the Secretary of the taxes, specified in paragraph (1), paid to or deposited into the Treasury. Proper adjustments shall be made in amounts subsequently transferred to the extent prior estimates are in excess of or are less than the taxes specified in paragraph (1).

(4)

Expenditures from American Heritage Block Grant Fund

Amounts in the American Heritage Block Grant Fund shall be available, as provided by appropriation Acts, for making expenditures to carry out subsection (a).

10.

Block grants to States for transitional assistance

The Social Security Act is amended by adding at the end the following new title:

XXII

Block grants to States for transitional assistance

2201.

Transitional Assistance Trust Fund

(a)

Creation of trust fund

There is established in the Treasury of the United States a trust fund to be known as the “Transitional Assistance Trust Fund”, consisting of such amounts as may be appropriated or credited to the Transitional Assistance Trust Fund as provided in this section.

(b)

Transfer to Transitional Assistance Trust Fund of amounts equivalent to certain taxes

(1)

In general

There are hereby appropriated to the Transitional Assistance Trust Fund, out of any money in the Treasury not otherwise appropriated, amounts equivalent to 25 percent of the taxes received in the Treasury after December 31, 2010, that the Secretary of the Treasury determines are attributable to Internet gambling.

(2)

Method of transfer

The amounts appropriated by paragraph (1) shall be transferred from time to time from the general fund in the Treasury to the Transitional Assistance Trust Fund. Such amounts shall be determined on the basis of estimates by the Secretary of the Treasury of the taxes, specified in paragraph (1) of this subsection, paid to or deposited into the Treasury. Proper adjustments shall be made in amounts subsequently transferred to the extent prior estimates were in excess of or were less than the taxes specified in paragraph (1) of this subsection.

(c)

Expenditures from Transitional Assistance Trust Fund

Amounts in the Transitional Assistance Trust Fund shall be available, as provided by appropriation Acts, for making expenditures to carry out section 2202.

2202.

Transitional assistance grant program

(a)

In general

Each State shall be entitled to a payment under this section for each fiscal year in an amount equal to its allotment for such fiscal year, to be used by such State to carry out the State’s plan for transitional assistance described in subsection (c), subject to the requirements of this section.

(b)

Plan approval required

No State may receive a payment under this section unless the State submits the State’s plan for transitional assistance described in subsection (c) to the Secretary and the Secretary approves such plan.

(c)

State plan for transitional assistance

A State plan for transitional assistance is described by this subsection if the plan—

(1)

provides for expanded education opportunities for individuals who are, or were formerly, in foster care, including streamlining and coordinating education financing opportunities and providing counseling and assistance to such individuals for the purpose of ensuring completion of their academic goals;

(2)

provides for job training opportunities for individuals who are, or were formerly, in foster care;

(3)

provides, primarily through expanding access to and investment in community colleges, for expanded post-secondary education and job training opportunities that lead to a certificate, for individuals who are working in, or had worked in, declining sectors of the economy, as defined by the Secretary, and who want to pursue a new career in a sector of the economy with the potential for high wages and high growth, as defined by the Secretary; and

(4)

provides a subsidy for the use of public transportation by—

(A)

individuals qualifying for benefits or services under title XX, including the Federal-State Unemployment Insurance Program; and

(B)

individuals participating in programs under the Workforce Investment Act.

(d)

Allotment

The allotment for a fiscal year for a State receiving an allotment for such fiscal year shall be an amount equal to—

(1)

the amount appropriated for such fiscal year under subsection (f), multiplied by

(2)

the ratio by which the population of the State bears to the population of all the States receiving an allotment for such fiscal year as determined by the Secretary (on the basis of the most recent data available from the Department of Commerce).

(e)

Definitions

For purposes of this section:

(1)

In foster care

The term in foster care means, with respect to an individual, an individual who is under the care and placement responsibility of the State agency responsible for administering a plan, in connection with such individual, under part B or part E of title IV.

(2)

Secretary

The term Secretary means the Secretary of Health and Human Services.

(3)

State

The term State means the 50 States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.

(f)

Authorization of appropriations

There are authorized to be appropriated for each fiscal year to the Secretary the amount deposited into the Transitional Assistance Trust Fund pursuant to section 2201 to carry out this section.

.