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House Subcommittee to Discuss Internet Gaming

Panel, to meet Dec. 10, has tackled several issues related to horses in recent weeks.

The House Subcommittee on Commerce, Manufacturing, and Trade of the House Energy and Commerce Committee will hold a hearing Dec. 10 at 12:30 p.m. on "The State of Online Gaming."  

This will be the third hearing this subcommittee has held on direct or indirect issues related to horses in four weeks. The subcommittee held a hearing two weeks ago on racing medication legislation and four weeks ago on amendments to the Horse Protection Act, dealing with the soring of horses.

The hearing will focus on the staus of online gaming, including the legalization of such gaming in the states. Currently, pari-mutuel wagering on races is the only interstate wagering allowed on the internet but some states are adding intrastate gaming online.

The subcommittee also will review the Internet Poker Freedom Act of 2013 (H.R. 2666) introduced by Congressman Joe Barton (R-Texas) July 13. Barton's bill would authorize Internet poker for operators licensed by a state or tribal agency, and establish a system for the licensing process that would be administered by the federal government through the Department of Commerce. Licenses could be issued for five years. The bill calls for fines up to $250,000 and/or criminal penalties of up to five years for violations.

Witnesses for the hearing have yet to be announced.

On Nov. 14, Congressman Jim McDermott (D-Wash.) introduced the Internet Gambling Regulation and Tax Enforcement Act of 2013 (H.R. 3491).   

With several bills introduced in this Congress to license and regulate Internet wagering. McDermott's measure sets up a procedure to tax such betting if any of the other bills are enacted into law. It is a redrafted version of legislation introduced in previous Congresses and appears to be the tax component of the internet licensing bill (H.R. 1174) already introduced by Congressmen Peter King (R-N.Y.).

The bill would impose a 4% tax on any company licensed by the Department of Treasury to offer Internet wagering. The 4% tax would be paid every 30 days based on the funds deposited with the operator by bettors during that period. The fee could not be paid out of funds deposited by bettors. This tax would be 50% on unlicensed operators. The bill would also entitle states and tribes to impose up to an additional 8% tax on funds deposited by customers from the state or tribal nation. A 12% tax would be imposed on foreigners wagering with U.S. licensed operators. 

Internet gambling operators must also report to the Treasury the names of bettors, addresses, tax IDs, gross winnings, gross wagers, and gross losses, net winnings, amounts deposited and withdrawn, and opening and closing balances each year to the authorities. Operators must withhold taxes owed on net winnings and implement measures to ensure that all taxes applicable to Internet gambling are collected from the operators and individual bettors and paid to the Treasury. 

Funds raised would be put into a special fund to be used to promote the arts and to improve the education, job-training, and care of foster children.

McDermott's bill has been referred to the Committee on Ways and Means and to the Committee on Education and the Workforce. The American Horse Council has not taken a formal position on this legislation yet but the additional tax provisions are a concern.