New Bill in NJ Would Remove iGaming From Property Tax
A new bill recently introduced in New Jersey would remove iGaming from the casino property tax paid in Atlantic City.
New legislation recently introduced in the state of New Jersey is perking the interest of casino owners. The bill seeks to remove online gaming gross revenues from the annual property taxes owed by venues in Atlantic City. Assembly Bill 5587 was introduced by Assemblyman John Armato and it would change the tax structure in the state involving the casinos in the Boardwalk town. Right now, gross gaming revenues from land-based and online services are combined within the Casino Property Tax Stabilization Act. The new bill would change all that.
In 2014, the Casino Property Tax Stabilization Act was passed into law. It guarantees at minimum of $120 million a year from casinos in Atlantic City. The Act was created in response to resorts petitioning to have the property tax payments reduced during an economic recession. The casinos were struggling, and the legal change was a problem solver.
According to the statue, the property tax bill of casinos will increase as the gross gaming revenues grow. Any property with a gross gaming revenue total of $2.6 billion or less, then $120 million in taxes is paid. The amount increase to $165 million when the GGR is over $3.4 billion.
Armato does not feel that the GGR should include the online earnings as part of the tax payment obligation. Each of the nine casinos in Atlantic City have teamed up with an interactive gaming supplier to offer services, both online and via mobile devices.
The casinos share revenues with the third-party companies and do not disclose the nature of their partnership agreements. The Assemblyman stated that the GGR total should not include online casino gaming or online sports betting from 2021 to 2025.
The proposal would not have an impact on racinos that offer casino gaming, including Freehold Raceway, the Meadowlands, and Monmouth Park. These properties were not part of the tax structure change in 2014.
Low Earnings due to COVID-19
Over the past year, the land-based gaming industry in Atlantic City has suffered greatly from the COVID-19 pandemic. Venues were shut down fully beginning in March and reopened a few months later at lower capacity levels. For about a year now, the monthly revenue earnings have been significantly lower than they normally are.
The 2020 GGR declined by over 16% but the numbers show more than was really earned. The Division of Gaming Enforcement reported that the nine casinos and racinos in the state earned over $2.88 billion. Yet the casinos actually earned less than reported because the online totals were included.
For the land-based industry without the online totals, the slot machine revenues dropped to just over $833 million which is a more than 40% decrease from the previous year. Table games dropped own to $340 million.
The land-based totals were down, but the online industry has been soaring over the past year. Players were restricted at home due to the virus, so more time was spent playing online casino games. The gross gaming revenues for the online gaming industry jumped by more than 50% for the year.
In 2019, the industry generated over $482 million. For 2020, that total increased to over $970 million. Players have been logging on in record numbers and the New Jersey online gaming industry is reaching record highs each month as more players take part in the services provided.
It will be interesting to see if the tax proposal bill will move forward or if other lawmakers will come out in opposition to the idea. Casinos will certainly be on board as it lowers the amount they would have to pay for annual tax bills.