The American Gaming Association recently announced its support of federal legislation that would raise the reporting threshold for slot machine winnings.
Introduced by U.S. Reps. Dina Titus (D-NV) and Guy Reschenthaler (R-PA), the Shifting Limits on Thresholds (SLOT) Act would raise the jackpot threshold that requires a player to report a gain to the IRS. The threshold has been $1,200 since 1977.
For both Ohio casinos and the state’s gamblers, passing the law would be a welcome change to an onerous and antiquated process.
Antiquated gambling law is due for an update via the SLOT Act
Currently, if a player at any slot machine in the U.S. wins a prize of $1,200 or more, the player is required to fill out paperwork reporting the income to the IRS. The casino has to temporarily suspend the machine while the paperwork is sorted.
The threshold for reporting was set in 1977 and has never been adjusted to keep up with inflation. When adjusted for inflation, $1,200 in 1977 dollars would be over $5,000 today. Since slot machine jackpots have increased over the years, which also increases the number of wins that players have to report. That means more work for casinos and more forms being sent to the IRS.
Proponents of the SLOT Act argue that setting the threshold at $5,000 would reduce burden on the casino industry and the IRS.
In a press release, AGA President and CEO Bill Miller said, “Increasing the slot tax threshold to account for inflation is a long overdue change that will alleviate unnecessary administrative burdens on casino operators, their customers and an understaffed and overwhelmed IRS.”
Reporting burden incentivizes illegal games
Titus also says that stopping game play more frequently is an impediment to players, which can have unintended consequences.
“Shutting down slot machines for low-dollar amounts pushes people toward the illegal market, and flooding the IRS with automated, outdated forms helps no one. This legislation would reduce the paperwork burden on businesses and players while ensuring our tax code reflects economic reality,” Titus said in a press release.
The illegal market includes so-called “skill games,” which are an ongoing issue in Ohio and other markets. Unlicensed operators offer these games at skill game parlors, many of which have been shut down in Ohio. But some of them remain open.
News 5 Cleveland investigated three of these parlors in Medina, Akron and Mentor-on-the-Lake in 2021. They found patrons playing slot-machine-like games, and winning cash.
News 5 brought their findings to the Ohio Casino Control Commission. Andromeda Morrison, the OCCC’s director of skill games, said, “In reality, what they are offering is illegal slot machines.”
Skill games are actually legal and regulated in Ohio, including Skee Ball, Pop-a-Shot and claw machines. These games have a true element of skill involved, and operators are only allowed to offer merchandise as prizes — no cash.
Current slot threshold presents an undue tax burden to casino patrons
When a casino issues a W2-G form to a player, a 24% federal tax is withheld. The amount of money a player might have spent seeking out their big win is not accounted for. Even casual players at casinos might spend hundreds of dollars in a single visit.
It is possible for gamblers to deduct their gambling losses from winnings when filing their taxes. But according to IRS.gov, “You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and kept a record of your winnings and losses.”
Most casino visitors are not likely to be keeping accurate records of their wins and losses. So, for most, a small win becomes even smaller.
This is an issue that Reschenthaler hopes to address with the new legislation.
“Because the threshold has not kept up with inflation, it has resulted in a drastic increase in reportable jackpots, which trigger tax burdens for winners and compliance burdens for casinos,” said the Pennsylvania congressman. “Increasing the threshold will eliminate this onerous red tape, ensuring the gaming industry can continue to support good-paying jobs and foster economic growth in southwestern Pennsylvania and across the country.”