U.S. Federal Budget Bill Includes Raising Tax Threshold On Slot Jackpots

July 2, 2024
A report accompanying an appropriations bill in the U.S. Congress includes language directing the Internal Revenue Service to increase the threshold for reporting slot machine winnings to the taxman from $1,200 to $5,000.

A report accompanying an appropriations bill in the U.S. Congress includes language directing the Internal Revenue Service (IRS) to increase the threshold for reporting slot machine winnings to the taxman from $1,200 to $5,000.

The report released by the House Appropriations Committee explains federal spending approved by the Financial Services and General Government Subcommittee for the fiscal year ending September 30, 2025.

Among the 98 pages of spending requests was language raising the close to 50-year-old threshold, which an executive with the American Gaming Association (AGA) believes is a crucial step toward passing the language into law.

“The committee recognizes that the IRS Advisory Committee (IRSAC) Public Report published in November 2023, recommends the reporting threshold for Form W-2G to be increased to $5,000,” according to the report.

“The IRSAC report also notes, and the Committee (on Appropriations) agrees, that the IRS is authorized to modify thresholds for Form W-2G, that the IRS administratively set the threshold in 1977, and that the IRS has not modified it since that time.”

The bill directs the IRS “to update this threshold in accordance with the recommendation of the IRSAC.”

“Our hope is the IRS can do this quickly on their own but having direction from Congress in an appropriations report would be an important fallback if they don’t,” said Chris Cylke, the AGA’s senior vice president of government relations. “It sends a message in the interim that this is an important priority for Congress.”

In its report, the IRSAC noted that failure to index the reporting thresholds has placed an unnecessary compliance burden on the taxpayer, increased compliance costs for tribal and commercial casinos, and created paperwork backlogs of W2-G forms at the IRS. The IRSAC also recommended the new $5,000 limit be adjusted periodically for inflation.

Cylke said the committee’s report was important because it was by an independent group that advises the IRS on policy.

“They made a pretty clear statement not only on this but also in their view the IRS had the regulatory authority to make that adjustment, which has been somewhat in question over the past couple of years,” Cylke told Vixio GamblingCompliance.

Cylke said the previous comment the industry had received from the Biden administration was that they did not think they have the regulatory authority to raise the threshold.

“So, the IRS Advisory Committee saying we think you do was important,” he added.

Slot Tax Threshold Under IRS Consideration

IRS commissioner Danny Werfel confirmed the slot tax increase recommendation that IRSAC put forward “is under serious consideration.”  

“I’m aware of this issue,” Werfel said in response to a question during a recent hearing posed by Republican Representative David Joyce of Ohio and chair of the Financial Services and General Government Subcommittee.

“I think it is very valuable when we get input from the tax-paying community and from our advisory council on when thresholds might be out of date,” Werfel said.

“The determination of something like this that is of a regulatory nature, and while they would consult with me, a decision rests with the Treasury’s office of tax policy in consultation with the secretary” of the Treasury Janet Yellen.

The $1,200 reporting limit dates back to 1977, when Joe Biden was a freshman Democratic U.S. senator from Delaware. The IRS originally proposed a limit of $600 but doubled it after consultations with the gaming industry.

“Our position has been that raising the threshold benefits not only the industry but consumers as well as the IRS,” Cylke told Vixio.

Cylke stressed that the number of W-2G forms filed “are going up and up every year” and are now in the tens of millions becoming a compliance burden for commercial and tribal casinos.

The AGA estimates raising the slot threshold to $5,000 would result in as much as $500m in annual savings to the gaming industry.

“I think it will not only alleviate a compliance burden on our end but also give the IRS the ability to focus on those who are likely going to have a taxable gain at the end of the year because they have a significant number of jackpots instead of deluging them with millions of these forms from people who had smaller jackpots and likely were net losers at the end of the year,” Cylke said.

Next Steps In Congress

Cylke admitted that it will be challenging, as it was last year, to pass a spending bill to keep the federal government open but he expected there will be some kind of funding resolution that passes.

“Congress will kick the can down the road past the election and into the lame-duck session,” Cylke told Vixio. “There will be another resolution there. For us, it is important to have this language in the bill and to have it as a live issue when there is a resolution.”

As introduced by Democratic Representative Dina Titus of Nevada, HR 3125 would raise the reporting threshold from one slot machine play to $5,000, but has yet to be considered since being referred to the House Ways and Means Committee in May 2023.

Cylke credited Senator Jacky Rosen, a Democrat from Nevada, for also taking a leadership role in reaching out to the Biden administration “to encourage them to proactively pursue a regulatory change that is not even directed by Congress but done on their own.”

“It is good to have support from both chambers on this,” he added.

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