New Jersey is currently known as one of the top gaming states in the U.S. However, the information being reported shows values as a whole and does not truly reflect how land-based casinos have been losing out as online gaming soars. Legislation has been introduced that outlines changes to the tax liability structure for gaming by separating the gross gaming revenue generated by iGaming and online sports betting.
The proposed changes have been outlined in Assembly Bill 5587, which was introduced by Assemblyman John Armato. The main purpose of the bill is to focus on Atlantic City casinos and amend the tax structure. Currently, when the overall gross gaming revenue for the casino is viewed, it includes online and land-based operations. The reason why is because that is how it was set out in the Casino Property Tax Stabilization Act. A law that was passed in 2014 ensures that the state receives at least 120 million USD from Atlantic City casinos every year. The law came to be because, at the time, casino resorts were petitioning to have their tax rates reduced due to the aftereffects of the economic recession which subsequently affected the revenues that were decreasing.
To foster a stable casino industry and allow casino operators to stabilize their revenues, the tax bill outlines the use of an adjusting tax contribution as the annual revenue changes. So, as the gross gaming revenue increases, so do the casinos’ property tax contributions. The statute states that if the Atlantic City casinos generate less than or exactly 2.6 billion USD in gross gaming revenue then the annual property tax to be paid is set at 120 million USD. However, the property tax contribution could be as high as 165 million USD in the yearly gross gaming revenue reaches or exceeds 3.4 billion USD.
Around the world and in the few U.S. states that offer iGaming, the industry has become significantly more successful over the past few years. New Jersey is no exception and that is why Armato believes that the gross gaming revenue from online operations should be separated from the revenue generated at the land-based casino as it will clarify what the property generates and what it is liable to pay in taxes. Each of the land-based casinos has partnered with iGaming suppliers and operators to bring players the online and mobile platforms. However, the revenues are shared at all nine casinos in Atlantic City and the business arrangements between the two parties are not disclosed. This means that there is no clear indication of what portion of the revenue is paid to the casino. To offset the property tax.
Armato’s bill states that gross gaming revenue for the calendar years 2021 through 2025 will not include revenue generated by online sports betting and online casino gaming. The New Jersey Division of Gaming Enforcement (DGE) will also have to weigh in on the conversation, but no statements have been released as yet. Additionally, the latest proposed legislation will have no impact on sports betting operations at Monmouth Park, the Meadowlands and Freehold Raceways. These properties did not form part of the 2014 statute.
According to the figures presented by the DGE show that in 2020, the two sports wagering racetracks and the nine Atlantic City casinos generated revenue upwards of 2.88 billion USD. While the full figure shows lucrative results, the land-based casino gaming sector in Atlantic City took a hit of nearly 44%. The revenue from table games at the casinos was down 340.3 million USD and slot machine gaming was down by 833.7 million USD when compared to figures from 2019.
The president of Hard Rock Atlantic City, Joe Lupo said that the Atlantic City properties really need a lot of help. He added that the casinos in Atlantic City will not get the help it needs when the media reports increase in revenue when there weren’t any. Increases in the total is usually only due to the online revenue being included. Most of the money made there leaves the casino and goes with the third-party operator which is under no obligation to pay the property tax. A year-on-year analysis showed that the iGaming gross gaming revenue came in at 970.3 million USD which is more than double the 482.7 million USD the industry won from gamblers in 2019. All of this happened while land-based gaming suffered a 43.7% decrease year-on-year in 2020.