NIGA Member Tribes
Chairman Ernest L. Stevens Jr.
Jason C. Giles, Executive Director
Danielle Her Many Horses, Deputy Executive Director/General Counsel
IRS Issues Final Regulations on Filing Information Returns on Bingo, Slot Machine, and Keno Winnings
January 5, 2017
On December 30, 2016, the Internal Revenue Service (IRS) published a final rule in the Federal Register establishing updated procedures when gaming operations, including tribal gaming operations, file information returns to report winnings from bingo, keno, and slot machine play. The update changes the filing, form, and content of gaming-related returns, allows for an additional form of payee identification, and provides an optional aggregate reporting method. This is an industry wide victory for our casino patrons so that they can continue to enjoy their experience and not get caught up in additional burdensome and onerous rules and regulations.
On March 4, 2015, the U.S. Department of Treasury and the IRS published a notice of proposed rulemaking which offered an initial version of this new rule. Among the components of the proposed rule were procedures for establishing electronically tracked slot machine play, which would record and track a patron's reportable winnings, enhanced payee identification procedures, and an optional aggregate reporting method. The IRS also requested comments on the feasibility of lowering the reporting threshold for patron winnings in bingo, slot machines (both at $1,200), and keno ($1,500) to $600.
On June 17, 2015, the IRS held a public hearing on the proposed rule. Over 14,000 comments were submitted over the course of the rulemaking process.
Summary of New Language in Final Rule
Replacing rules first promulgated in 1977, the final rule updates information reporting requirements as well as the form and content of the information return. Many of these changes are procedural and clarify existing practices, such as gaming operations (known as "payors" in the regulation) sending statements of reportable gambling winnings to patrons (known as "payees" in the regulation) on or before January 31st.
One substantive change to the reporting requirements affects how gaming operations properly identify patrons who receive reportable winnings. A properly completed Form W-9 will now be officially accepted in lieu of a form of identification with a social security number. Although this alternative is acceptable, one of the two required forms of identification must include a photograph of the patron. The only exception to a photo-required identification involves another new addition to the list of acceptable forms of ID, a tribal member identification card. A patron need not provide a photo ID if the patron is a member of the tribe and the gaming operation is an establishment by the tribal government that issued the tribal ID to the patron.
Another substantive change involves an optional alternative method of reporting patron winnings. By aggregating a payee's reportable winnings in an "information reporting period" (defined as a "calendar day" or a "gaming day" depending on the gaming operation), gaming operations do not have to report each individual instance where the patron receives a reportable gambling winning. Provided that record-keeping requirements are followed, gaming operations will be able to streamline their reporting practices by filing fewer reporting forms.
Omissions from the Final Rule
Thanks in part to a large swell of opposition from the gaming industry, two major proposed changes to the existing regulation were not included in the IRS's final rule.
- Electronically Tracked Slot Machine Play. In an effort to track the wagers and winnings of gaming operation patrons on slot machines, the IRS had proposed that gaming operation owners used existing electronic player tracking systems "such as a player's card or similar system." The proposed regulation would have used this system to help report on patrons who had netted $1,200 or more during either a "session" of play or in one play.
In declining to adopt this provision, the IRS cite to concerns from commentators on the feasibility of using existing player tracking systems for tax reporting purposes. These systems exist in gaming operations as a marketing tool to draw more patrons into facilities. Adopting the provision would have chilled interest in patrons becoming members of a "player's club," while some systems would not have been able to supply the tax reporting data without burdensome costs and labor. As a result of these concerns, the IRS did not adopt the proposed provision for electronically tracked slot machine play.
- Reporting Thresholds. The IRS invited comments on the feasibility of reducing thresholds for reporting patron winnings in bingo and slot machines from $1,200 to $600. The agency also sought comments on the feasibility of reducing the reporting threshold for reporting patron winnings in keno from $1,500 to $600.
This proposition received mainly negative feedback. In addition to the increased paperwork and labor costs in reporting more patron winnings in bingo, slot machines, and keno, commenters also suggested that reporting thresholds should increase to account for inflation; the current thresholds were established in 1977. In response to the overwhelming negative feedback, the IRS has not changed the reporting requirements.
The new rule is available in the December 30th edition of the Federal Register and on this website: https://www.federalregister.gov/documents/2016/12/30/2016-31575/information-returns-winnings-from-bingo-keno-and-slot-machines.