Deducting promotional sports betting credits
A bill aimed at providing some financial relief to the casinos in Atlantic City made progress in the New Jersey legislature on September 17, while another relief bill was held back.
unanimously cleared by the 11-member Assembly Appropriations Committee
Bill A4002/S2257 was unanimously cleared by the 11-member Assembly Appropriations Committee. The bill would give casino operators and racetracks that offer sports betting the ability to deduct promotional gaming credits that they offer customers from gross sports betting revenue above certain thresholds. These thresholds are the first $8m of in-person/retail bets and the initial $12m of online/mobile bets in a given tax year.
The committee pulled another bill, A4032/S2400, which aimed to offer both temporary and permanent tax breaks for casinos.
Progressing bill specifics
Bill A4002/S2257 was introduced in May but only recently got referred to the committee. The nonpartisan Office of Legislative Services (OLS) could not generate an accurate estimate as to how much this proposed legislation might save operators. However, the OLS did state: “For each $1 million in promotional gaming credits that a (casino or racetrack) permit holder can deduct against gross revenue because of this bill, the state revenue loss would be roughly $100,000 to $150,000.”
The bill would require the New Jersey Division of Gaming Enforcement to create regulations to make sure the deduction of “free wagering credits” would not lead to a negative fiscal impact for the state’s General Fund or Casino Revenue Fund.
many of these businesses are struggling to stay afloat”
After the advancement of this bill, primary sponsor Assemblyman Ralph Caputo spoke about the significant issues the casino industry has been dealing with in the wake of the coronavirus pandemic. He said: “At a time when many of these businesses are struggling to stay afloat and keep their workers employed, we need to help relieve any undue burden on the industry.”
Other measure held back
The bill that was held back was looking to drop the tax rates on casino revenue and online betting, as well as reduce certain fees. Co-sponsored by Senate President Stephen Sweeney and Senator Chris Brown, the measure estimated that its implementation would save the casinos about $93m over the course of a year.
It was originally passed in the state Senate in June with a few amendments. No explanation was given as to why the bill was held back this time, but the Press of Atlantic City reports that there could be an amendment to the legislation to include racetracks.
Dealing with the pandemic
Casinos in Atlantic City had to close their doors on March 16 as a result of New Jersey Governor Phil Murphy’s pandemic shutdown order. These properties could not reopen until July 2 and only at 25% capacity, ensuring that extensive health and safety restrictions were in place.
Eight of the city’s nine casinos reopened as soon as possible on July 2, while the Borgata waited until July 26 to reopen to the general public. The latter was forced to lay off 2,295 employees at the end of August, representing about 42.5% of the operator’s total workforce.
The COVID-19 shutdown led to a cumulative gross operating loss of $112m in the second quarter. Gross gaming revenue for the first half of 2020 dropped by $767m year-on-year.?There were some green shoots in August, with the state’s sports betting handle hitting a US monthly record of $668m. Casino revenue also showed signs of recovery at $199.1m – nearly 70% of the August 2019 revenue and an increase of 23% on July 2020 results.