The federal tax legislation known as “One Big Beautiful Bill” is a boon for gaming operators, at the same time lawmakers try to fix one aspect of it that harms big-time gamblers on their taxes.
Among the central features of this 900-page mega-bill is extending and amending significant provisions of the federal tax code. For customers, it also places limitations on the deductibility of gambling losses of up to 90%, but has the potential for a higher threshold for reporting slot jackpots.
Chris Cylke, senior vice president of government relations for the American Gaming Association, moderated the panel discussion that included Daron Dorsey, president and CEO of the Association of Gaming Equipment Manufacturers, Rick Limardo, senior vice president of government affairs with MGM Resorts International, and Robert Stoddard, national lead tax partner for gaming with KPMG.
Stoddard broke the bill down into three buckets: the positives, potential positives with a cautionary note, and clear negatives.
“There’s quite a bit to like in the bill. Bonus appreciation was fully reinstated for qualifying capital expenditures. That’s a big deal for companies that have either a big project going on or are working on scheduled upgrades, especially tribal casinos. That’s a net positive for hotels and multi-property land-based casinos.”
Stoddard said interest limitation, which wasn’t eliminated, was reset to a more favorable time frame. Companies will get to deduct more of their business expenses than they currently do.
“We got a partial fix on research and development. We’re no longer required to capitalize R&D software development incurred domestically,” Stoddard said. “We still have the capitalization requirement for R&D and development costs incurred offshore.”
For pass-through structures in the gaming industry, Stoddard said they preserved a major deduction, a big priority for the entire business community. It has been extended.
Stoddard said while they didn’t get a fix, they got slightly more favorable rates when it comes to exporting. The rates were scheduled to increase and instead were ratcheted back to a slightly more favorable amount.
“Those are some of the positives our operators are looking at and the big one in particular, especially in the online space, is that the U.S. is not a bad place right now to put IP. We get a more favorable tax rate below the 21% and it dovetails well with what the administration is encouraging around domestic investment in IP here.”
Items in the bill considered broadly positive with some caution include the potential for raising the reporting threshold for gambling winnings from $600 to $2,000.
“The reason I view that as cautionary is that we need to see clarified or amended regulations around that. We Ultimately, think we (the threshold will be raised), but we’re not ready to say, ‘Yep, that’s the new threshold,’ without those regulations being issued.”
An issue that has gotten a lot of attention from workers is partial exemptions on overtime and tip income. It’s viewed positively by some, but Stoddard said it’s in his caution basket; there hasn’t been a lot of clarifying guidance yet. Restaurants and casinos are struggling with the reporting requirements.
“This income still has to be reported, but requires changes in the payroll system, while individuals claim these exceptions on their returns,” Stoddard said. “It’s creating some challenges to implement effectively.”
The industry saw further limitations on executive compensation relevant to public companies. For companies that have spent time investing in energy-efficient buildouts, the administration is ratcheting back those benefits and incentives.
“There are definitely some negatives out there. But overall, a lot to like from an industry perspective, particularly if you’re investing in your properties or online platforms,” Stoddard said.
Limardo agreed about investing capital expenditures in properties. He also highlighted the benefits for R&D investments. “That’s huge for company for technology.”
Limardo is hopeful about the increase in the slot threshold, an issue the industry has been working on for a long time.
“We would like to see that go up even higher, but we’ll work to ensure that number is what we think it is, $2,000,” Limardo said. “The individual tax cuts matter for the people who visit our properties. And for the international piece, those of us that operate in Macau or other jurisdictions have that certainty about improved rates. It’s a net positive and gives us an eye toward the future of how we’ll invest in our company, employees, and properties.”
Dorsey said that when it comes to suppliers, they’re happy whenever their customers are deciding to further invest, including on gaming floors with new technology and products. “But that’s tempered when you’re manufacturing or assembling devices by the tariffs and trade policies.”
According to Stoddard, the industry was fortunate that a revenge tax wasn’t added to gambling withholding, in which foreign winners would be taxed based on what their countries taxed U.S. companies. If viewed as punitive, those gamblers would have paid a higher rate.
“That would have been a real nightmare, putting a lot of pressure on cashier functions to make sure you have the documentation in place and a list of countries that could evolve on a daily basis,” Stoddard said. “It could be 24% or 34%, depending on the punitive tax. It was good that the provision was eliminated.”
Cylke said table games could have been “put at severe risk” if the players nationality had to be verified along with their tax rates. It would have been disruptive as soon as they won their first hand.
Cylke also admitted that no one likes the change in the deduction of gambling losses from 100% to 90% that takes effect in January. The industry is still working to fix that with Congress. “It has been a point of disappointment for the AGA, operators, and professional gamblers who would be potentially taxed on phantom income.”
Limardo said that in his eight years at MGM, this is by far the issue he has heard about the most.
“This has the public attention,” Limardo said. “The reason is it’s a fairness issue. Why are you being taxed on phantom income? This change happened overnight and people were frustrated. We’re certainly concerned about it and actively working on it.”
Stoddard doesn’t know what the impact will be if it’s not fixed. He questioned whether the World Series of Poker would move to Singapore or Macau. “This affects a very limited segment of the population. However, it’s a very high-value and vocal segment of players.”
Cylke said there’s bipartisan support for fixing this rider. The problem is the government is shut down, partisanship is at an all-time high, and no one knows what will happen at the end of the year.
“We’re working hard and trying to fix this before this is something we have to deal with,” Cylke said.
