Virginia Budget Proposal Reinstates Sports-Betting Promotional Tax Deductions

February 21, 2023
Back
As the Virginia General Assembly gets set to close out this year’s regular legislative session on Saturday, the fate of restoring promotional tax credits for sports-betting operators will be left up to lawmakers negotiating the fate of this session’s budget proposal.

Body

As the Virginia General Assembly gets set to close out this year’s regular legislative session on Saturday (February 25), the fate of restoring promotional tax credits for sports-betting operators will be left up to lawmakers negotiating the fate of this session’s budget proposal.

“It is still a live ball, only action is now in the budget process,” said Nathan Click, a spokesman for the Sports Betting Alliance, a coalition of BetMGM, DraftKings, Fanatics Sportsbook and FanDuel.

“The language for allowable deductions is in the Senate budget proposal, so it will be up to the budget conference committee over the next couple of weeks,” Click told VIXIO GamblingCompliance on Friday (February 17).

A budget amendment passed last year prohibited mobile sports-betting operators from excluding bonuses or promotions from adjusted gross revenue 12 months after they began offering bets in Virginia.

The Sports Betting Alliance has been lobbying lawmakers to restore the tax deductions in some capacity. In an op-ed published January 28 in the Richmond Times-Dispatch, Click said eliminating the deductions placed an “unnecessary tax burden on online operators,” making it difficult to attract customers to a legal and regulated market.

Click noted that promotional credits are used by many industries, including ride-sharing companies, airlines and food delivery companies, to grow their business and market.

“States typically allow these promotions because it is well recognized that they incentivize customer engagement, resulting in greater business and, in the long run, greater tax revenue,” Click wrote.

A pair of bills supported by the Sports Betting Alliance were tabled in the House Appropriations Committee this month. The two bills would have allowed operators to keep deducting promotional credits and bonuses from taxable revenue after 12 months, but only up to an equivalent of 1.75 percent of total wagering handle.

That decision left a budget amendment as the only possible way to reinstate promotional tax credits in Virginia.

Senate Bill 1142, which easily passed the Senate earlier this month by a 31-7 vote, was tabled in the House Appropriations Committee after Delegate Mark Sickles, a Democrat, expressed his opposition to reinstating the tax credit.

“There are 16 sports-betting licensees in Virginia,” Sickles said during a committee hearing on February 13. “Three of them are before us asking us to help support their free money, free bets that they give.”

Virginia sports betting

Sickles reminded his colleagues and state Senator Jeremy McPike, a Democrat, who presented his bill to the committee, that the General Assembly gave the sports-betting industry a 15 percent tax rate prior to mobile wagering launching in January 2021.

“These three companies that have 63 percent of the market really don’t want to pay their 15 percent,” Sickles said, referring to FanDuel, DraftKings and BetMGM. “I just point out that New York has a 51 percent tax rate and zero deductibility for these free bets.”

According to a Virginia Lottery report, FanDuel has the largest share of the state’s sports-betting market at 41.08 percent, followed by DraftKings at 23.06 percent and BetMGM at 18.30 percent.

“We have a 15 percent tax rate and people want us to continue doing that even though we did quite well this last six months since we changed the policy here and raised as much in the last six months as we did in the first 18 months of having legalized sports betting,” Sickles said.

For calendar year 2022, the Virginia Lottery reported a total of more than $81.39m in allowable bonuses and deductions taken by sports-betting licensees.

McPike’s amended bill would have allowed new licensees for mobile sports betting to continue to deduct unlimited promotional credits in their first year of operations, but after that it reduced those deductions to 1.75 percent of total wagers.

McPike said the 1.75 percent cap would also apply to anyone who is in the market beyond the one-year mark.

On February 3, the committee also voted 21-0 to approve a motion to lay House Bill 2202 on the table and remove it from active consideration.

Members of the General Assembly received the governor's official state budget proposal earlier this month but the difference between the separate proposals offered by the House of Delegates and the Senate could lead to putting the budget process to a conference committee.

Any conference committee includes representative from each political party, who will try to resolve their differences behind closed doors.

If a budget is not passed by Saturday, Virginia will continue to operate under the biennial budget passed last year.

Republican Governor Glenn Youngkin could call a special session of the General Assembly to reach a budget agreement.

Our premium content is available to users of our services.

To view articles, please Log-in to your account, or sign up today for full access:

Opt in to hear about webinars, events, industry and product news

Still can’t find what you’re looking for? Get in touch to speak to a member of our team, and we’ll do our best to answer.
No items found.