The Pennsylvania Senate passed legislation June 27 that would eliminate an obstacle that has kept slot machine casinos from being licensed. But the bill includes a potentially volatile provision that would raise the tax on casino slots revenue by 4%.The Senate voted 29-21 to drop language in the 2004 slots law that requires casinos to buy gaming devices from Pennsylvania-based suppliers. Republicans have called the distributor requirement an intrusion into the gambling industry intended to benefit well-connected businessmen.Removing the distributor requirement is designed to resolve a yearlong dispute between two members of the Pennsylvania Gaming Control Board -- one appointed by a Democratic legislator and one by a Republican -- that has held up regulations governing the operation of distributors. The board is scheduled to meet June 28 to tackle the issue.Democrats have defended the distributor requirements as a way to create job opportunities for small businesses in Pennsylvania.The provision to raise taxes on slots revenues to support gaming regulation and enforcement is sure to complicate the bill's prospects in the House of Representatives, particularly with the 52% base tax rate on slots revenues already criticized by the industry as high. (The rate includes the minimum 12% of gross revenue that would go toward purses and breed development for horse racing.)Gaming board chairman Tad Decker warned earlier that, unless the impasse is resolved, the opening of Pennsylvania's first slots parlors may be delayed from this fall until late 2007. On July 5, the two-year anniversary of the slots law being approved, the board loses its two-year exemption from the normal state review for regulations. Any distributor regulations approved by the board after that would face a process Decker said could take many months or a year.Some owners of proposed racetrack casinos already have balked at an interpretation of the law that would hike the tax on casinos to benefit local government. Mohegan Sun at Pocono Downs, located near Wilkes-Barre in northeastern Pennsylvania, has said a tax increase could lead it to rethink its plans to build a slots casino.Meanwhile, Greenwood Racing -- which owns Philadelphia Park in Bensalem Township -- is proceeding with plans to renovate the first two floors of its grandstand to accommodate slots when a license is finally granted. The track canceled this year's Pennsylvania Derby (gr. II), which produces its biggest day of the year, to facilitate construction.The law allows for slots casinos at racetracks and non-track facilities around the state. The gaming board has scheduled public hearings on the racetrack casinos for Aug. 7-9 in the state capital at Harrisburg.Pennsylvania has four operating tracks -- Penn National Race Course and Philly Park, both Thoroughbred, and The Meadows and Pocono, both harness facilities. Regulators have licensed Presque Isle Downs, a Thoroughbred track planned for the Erie area in the northwest part of the state, and Harrah's Chester Downs, a harness racino in Chester, not far from Philadelphia.