Nebraska proposes taxes on skill game machines

February 15, 2024 3:21 PM
Photo: Shutterstock
  • Conor Murphy, Special to CDC Gaming Reports
February 15, 2024 3:21 PM
  • Conor Murphy, Special to CDC Gaming Reports

Nebraska lawmakers have advanced a bill that would increase taxes on skill video gaming machines in convenience stores and bars.

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LB 685 was introduced as Nebraska has seen a 60 percent increase in the number of these games across the state over the past year. The final version was passed 31-0 and will advance to a second debate. It seeks to regulate and tax the machines, which operate much like video slot machines in casinos but require some skill to win. This distinguishes them from slot machines, which are considered games of chance. However, state gambling officials believe skill games are just as addictive and harmful as slot machines.

Republican State Sen. John Lowe initially proposed legislation that was met with opposition from operators, who believed it was heavy-handed and could put them out of business. As a result, Lowe came back with a compromise bill that responded to some of the criticism.

Among the provisions in LB 685 were a $100 annual fee for each machine, a 5 percent tax on proceeds from each skill game paid to the state and businesses that have skill games would be required to derive 60 percent of their revenue from sources other than the games.

The legislation also exempts veterans’ and fraternal clubs from the requirement, and their machines would not be subject to taxes. The proposed tax rate was initially 20 percent, the same paid by casino video slots, but was decreased to 5 percent for the final version of the bill.

The tax revenue collected would be used for property tax relief, tourism promotion and split between the county and city in which the machine is located. The bill is expected to provide replacement revenue for counties that receive more than $60 million a year in inheritance tax revenue.

Senators debated the legislation in the unicameral on Monday, and local lawmakers expressed concern about the proliferation of these machines and its effect on communities, also raising reservations about the difference between games of skill and games of chance.

“They’re basically a modified slot machine, and this is gambling,” said State Sen. Mike Jacobson. “There’s not a lot of skills involved here. It’s more luck. Right now, it’s been the Wild West, and that’s what we’ve gotten because the western part of the state has been shut out of having a casino and a race track. We’re getting these games of skill instead.”

“They are becoming drug magnets, where you’re finding that law enforcement is getting called to these facilities at 3 in the morning because they’re running 24/7, 365,” Jacobson added.