Internet Gambling Regulation and Tax Enforcement Act of 2010 - Amends the Internal Revenue Code to: (1) impose an Internet gambling license fee on Internet gambling operators and an additional tax on unauthorized bets or wagers; (2) require such operators to keep daily records of gambling deposits and file informational returns identifying themselves and the individuals placing bets or wagers with them; (3) require operators to pay state and Indian tribal governments a 6% fee on gambling deposits; (4) require withholding of tax on net Internet gambling winnings and on the gross amount of winnings of nonresident aliens; and (5) extend the excise tax on wagers to include wagers placed with the United States or any commonwealth, territory, or possession by a U.S. citizen or resident.
Directs the Secretary of the Treasury to make grants to states to carry out an American Heritage Program through state arts agencies. Allocates .5% of the tax revenues attributable to Internet gambling to the American Heritage Block Grant Fund to finance the American Heritage Program.
Amends the Social Security Act to establish the Transitional Assistance Trust Fund to finance state plans for transitional education and job training assistance to individuals who are, or were formerly, in foster care. Allocates 25% of the tax revenues attributable to Internet gambling to the Trust Fund.
[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4976 Introduced in House (IH)]
111th CONGRESS
2d Session
H. R. 4976
To amend the Internal Revenue Code of 1986 to regulate and tax Internet
gambling.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 25, 2010
Mr. McDermott (for himself, Mr. Larson of Connecticut, Mr. Frank of
Massachusetts, and Mr. Blumenauer) introduced the following bill; which
was referred to the Committee on Ways and Means, and in addition to the
Committee on Education and Labor, for a period to be subsequently
determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to regulate and tax Internet
gambling.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) Short Title.--This Act may be cited as the ``Internet Gambling
Regulation and Tax Enforcement Act of 2010''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment is expressed in terms of an
amendment of a section or other provision, the reference shall be
considered to be made to a section or other provision of the Internal
Revenue Code of 1986.
SEC. 2. TAX ON INTERNET GAMBLING.
(a) In General.--Chapter 36 (relating to certain other excise
taxes) is amended by adding at the end the following new subchapter:
``Subchapter E--Internet Gambling
``Sec. 4491. Imposition of Internet gambling license fee.
``Sec. 4492. Record requirements.
``Sec. 4493. Elective State and Indian tribal government online
gambling fee.
``SEC. 4491. IMPOSITION OF INTERNET GAMBLING LICENSE FEE.
``(a) Federal Fee.--Each licensee within the meaning of section
5382 of title 31, United States Code, (hereafter in this subchapter
referred to as `licensee') shall be required to pay an Internet
gambling license fee by the end of each calendar month in an amount
equal to two percent of all funds deposited by customers during the
preceding month into an account maintained by that licensee or any
agent of that licensee that can be used for the purpose of placing a
bet or wager as defined in section 5362(1) of title 31, United States
Code.
``(b) Deposits.--Deposits made by or on behalf of a licensee of
Internet gambling winnings or returns of funds by or on behalf of a
licensee to the account of a customer shall not be treated as a deposit
for purposes of this section.
``(c) Persons Liable for Fee.--The Internet gambling license fee
shall be the direct and exclusive obligation of the Internet gambling
operator and may not be deducted from the amounts available as deposits
to the person placing a bet. Notwithstanding the foregoing, any person
making a deposit for the purpose of placing a bet or wager with a
person who is required but has failed to obtain a license pursuant to
subchapter V of chapter 53 of title 31, United States Code, shall be
liable for and pay the fee under this subchapter on all such deposits,
but such liability shall not excuse any failure to pay the fee on the
part of the person who is required but has failed to obtain such
license.
``(d) Unauthorized Bets or Wagers.--There is hereby imposed a fee
in an amount equal to 50 percent of all funds deposited into an account
that can be used for placing a bet or wager within the meaning of
Section 5362(1) of title 31, United States Code, with any person that
is not authorized pursuant to section 5382 of that title. Such tax is
due by the end of each calendar month with respect to deposits during
the preceding month.
``(e) Disposition.--Amounts paid as Internet gambling license fees
or on unauthorized bets or wagers under this section shall be deposited
in the general fund of the Treasury and treated as revenue.
``(f) Administrative Provisions.--Except to the extent the
Secretary shall by regulations prescribe, the fees imposed by this
section shall be subject to the administrative provisions of this title
applicable to excise taxes imposed by chapter 35.
``SEC. 4492. RECORD REQUIREMENTS.
``Each person liable for fees under this subchapter, except for a
person making a deposit who is liable for fees pursuant to section
4491(e), shall keep a daily record showing deposits as defined in this
subchapter, in addition to all other records required pursuant to
section 6001(a).
``SEC. 4493. ELECTIVE STATE AND INDIAN TRIBAL GOVERNMENT ONLINE
GAMBLING FEE.
``(a) In General.--
``(1) Payment of state and indian tribal government fee.--
On a monthly basis, each licensee shall pay to each qualified
State and each qualified Indian tribal government an amount
equal to the monthly pro rata State and Indian tribal
government online gambling fee amount.
``(2) Monthly pro rata online gambling fee amount.--For
purposes of this section, with respect to a qualified State and
a qualified Indian tribal government for any calendar month,
the monthly pro rata online gambling fee amount is the amount
of the fees described in subsection (b) received with respect
to such calendar month that are attributable to deposits for
online wagers made by persons residing within the jurisdiction
of such State or Indian tribal government.
``(3) Qualified state; qualified indian tribal
government.--
``(A) In general.--For purposes of this section,
the terms `qualified State' and `qualified Indian
tribal government' mean a State or an Indian tribal
government, respectively, that has not elected (by
notice provided by the Governor, principal chief, or
other chief executive officer and in such form and
manner as the Secretary may prescribe) to be excluded
from the receipt of funds under this section.
``(B) State election not to affect tribal
election.--An election by a State under subparagraph
(A) to be excluded from the receipt of funds under this
section shall not constitute an election to be so
excluded on behalf of any Indian tribe located within
or partially within the geographic boundaries of such
State.
``(C) Applicability of election.--An election made
under subparagraph (A) shall be effective--
``(i) upon receipt by the Secretary, if
such election is received within 90 days of the
date of the enactment of the section; and
``(ii) in any other case, on the first
January 1 that occurs at least 60 days after
the later of--
``(I) the receipt of such election
by the Secretary; or
``(II) the effective date specified
in such election.
``(D) State.--The term `State' means any State, the
District of Columbia, or any commonwealth, territory or
other possession of the United States.
``(E) Indian tribal government.--The term `Indian
tribal government' means the government of an Indian
tribe (within the meaning of section 4 of the Indian
Gaming Regulatory Act).
``(4) Time of payments.--The payment made under this
subsection with respect to any calendar month shall be made not
later than the 11th day of the succeeding calendar month.
``(b) State and Indian Tribal Government Online Gambling Fee.--The
State and Indian tribal government online gambling fee shall be an
amount equal to 6 percent of all deposited funds deposited by customers
residing in each State or area subject to the jurisdiction of an Indian
tribal government.
``(c) Effect of Acceptance of Fee.--Acceptance by a State or Indian
tribal government of the State and Indian tribal government online
gambling fee shall relieve licensees from the obligation to pay any
other fee or tax to the State or Indian tribal government relating to
its online gambling services, except for--
``(1) applicable State individual and corporate income
taxes, which shall be unaffected by the election, and
``(2) any fees associated with a licensee's choice to rely
on a State or Indian tribal regulatory body certification of
suitability in connection with a Federal online gambling
licensing application.''.
(b) Clerical Amendment.--The table of subchapters for chapter 36 is
amended by adding at the end the following new item:
``subchapter e--internet gambling
``Sec. 4491. Imposition of Internet gambling license fee.
``Sec. 4492. Record requirements.
``Sec. 4493. Elective State and Indian tribal government online
gambling fee.''.
(c) Effective Date.--The amendments made by this section shall
apply to bets or wagers placed after the date of the enactment of this
Act.
SEC. 3. LICENSEE INFORMATION REPORTING.
(a) In General.--Subpart A of part III of subchapter A of chapter
61 (relating to information concerning persons subject to special
provisions) is amended by adding at the end the following new section:
``SEC. 6050X. RETURNS RELATING TO INTERNET GAMBLING.
``(a) Requirement.--Every person who is a licensee (within the
meaning of section 5382(3) of title 31, United States Code) or who
otherwise is engaged in the business of accepting any bet or wager
within the meaning of section 5362(1) of title 31, United States Code,
during a taxable year shall furnish, at such time and in such manner as
the Secretary shall by regulations prescribe, the information described
in subsection (b), and such person shall maintain (in the location, in
the manner, and to the extent prescribed in regulations) such records
as may be appropriate to the information described in subsection (b).
``(b) Required Information.--For purposes of subsection (a), the
information described is set forth below, which information may be
modified as appropriate by the Secretary through regulation--
``(1) the name, address, and TIN of the licensee or other
person engaged in the business of accepting any bet or wager,
``(2) the name, address, and TIN of each person placing a
bet or wager with the licensee or other person engaged in the
business of accepting any bet or wager during the calendar
year,
``(3) the gross winnings, gross wagers, and gross losses
for the calendar year of each person placing a bet or wager
with the licensee or other person engaged in the business of
accepting any bet or wager during the year,
``(4) the net Internet gambling winnings for each such
person for the calendar year,
``(5) the amount of tax withheld with respect to each such
person for the calendar year,
``(6) beginning and end-of-year account balances for each
such person for the calendar year, and
``(7) amounts deposited and withdrawn by each such person
during the calendar year.
``(c) Statement To Be Furnished to Persons With Respect to Whom
Information Is Required.--Every person required to make a return under
subsection (a) shall furnish to each person whose name is required to
be set forth in such return by reason of placing a bet or wager a
written statement showing--
``(1) the name, address, and phone number of the
information contact of the person required to make such return,
and
``(2) the information required to be shown on such return
with respect to each person whose name is required to be set
forth in such return.
The written statement required under the preceding sentence shall be
furnished to the person on or before January 31 of the year following
the calendar year for which the return under subsection (a) was
required to be made.
``(d) Definitions.--
``(1) Net internet gambling winnings.--The term `net
Internet gambling winnings' means gross winnings from wagers
placed over the Internet with a person required to be licensed
under section 5382 of chapter 53 of title 31, United States
Code, less the amounts wagered.
``(2) Internet; wager.--The terms `Internet' and `wager'
shall have the respective meanings given such terms by section
5362 of chapter 53 of title 31, United States Code.''.
(b) The table of sections for subpart B of part III of subchapter A
of chapter 61 is amended by inserting after the item relating to
section 6050W the following new item:
``Sec. 6050X. Returns relating to internet gambling.''.
SEC. 4. WITHHOLDING FROM CERTAIN GAMBLING WINNINGS.
(a) Net Internet Gambling Winnings.--Paragraph (3) of section
3406(b) (relating to other reportable payments for purposes of backup
withholding) is amended--
(1) by striking ``or'' in subparagraph (E);
(2) by striking ``.'' and inserting ``, or'' at the end of
subparagraph (F); and
(3) by adding at the end thereof the following new
subparagraph:
``(G) section 6050X(b)(4) (relating to net Internet
gambling winnings).''.
(b) Effective Date.--The amendment made by this section shall apply
to bets or wagers placed after the date of the enactment of this Act.
SEC. 5. WITHHOLDING OF TAX ON NONRESIDENT ALIENS.
(a) Tax on Nonresident Alien Individuals.--Paragraph (1) of section
871(a) (relating to income not connected with United States business)
is amended--
(1) by striking ``and'' at the end of subparagraph (C),
(2) by inserting ``and'' at the end of subparagraph (D),
and
(3) by inserting after subparagraph (D) the following new
subparagraph:
``(E) the gross amount of winnings from each wager
placed over the Internet with a person required to be
licensed under section 5382 of chapter 53 of title 31,
United States Code (as such terms are defined in
section 6050X(d)(2)),''.
(b) Exemption for Certain Gambling Winnings.--Section 871(j)
(relating to exemption for certain gambling winnings) is amended by
inserting before the period at the end the following: ``or to any bets
or wagers placed over the Internet (as such terms are defined in
section 6050X(d)(2))''.
(c) Withholding of Tax on Nonresident Alien Individuals.--The first
sentence of subsection (b) of section 1441 (relating to withholding of
tax on nonresident aliens) is amended by inserting after ``gains
subject to tax under section 871(a)(1)(D),'' the following: ``the gross
amount of winnings from wagers placed over the Internet described in
section 871(a)(1)(E),''.
(d) Source of Internet Gambling Winnings.--Subsection (a) of
section 861 is amending by inserting at the end thereof the following
new paragraph:
``(9) Internet gambling winnings.--Any Internet gambling
winnings received from a licensee within the meaning of section
5382(3) of title 31, United States Code.''.
(e) Effective Date.--The amendments made by this section shall
apply to bets or wagers placed after the date of the enactment of this
Act.
SEC. 6. WAGER TAX APPLICABLE TO FEDERAL ONLINE GAMBLING ACTIVITIES.
(a) In General.--Subsection (a) of section 4401 is amended to read
as follows:
``(a) Wagers.--
``(1) Authorized wagers.--There shall be imposed on any
wager authorized under Federal law or the law of the State in
which accepted an excise tax equal to 0.25 percent of the
amount of such wager.
``(2) Unauthorized wagers.--There shall be imposed on any
wager not described in paragraph (1) an excise tax equal to 2
percent of the amount of such wager.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to wagers made after December 31, 2010.
SEC. 7. NO EXCLUSIONS UNDER FEDERAL WAGER TAX FOR ONLINE GAMBLING
ACTIVITIES.
(a) In General.--Section 4402 is amended to read as follows:
``SEC. 4402. EXEMPTIONS.
``(a) In General.--No tax shall be imposed by this subchapter--
``(1) on any wager placed with, or on any wager placed in a
wagering pool conducted by, a parimutuel wagering enterprise
licensed under State law and that is not carried out online;
``(2) on any wager placed in a coin-operated device (as
defined in section 4462 as in effect for years beginning before
July 1, 1980), or on any amount paid, in lieu of inserting a
coin, token, or similar object, to operate a device described
in section 4462 (a)(2) (as so in effect), and that is not
carried out online; and
``(3) on any wager placed in a sweepstakes, wagering pool,
or lottery which is conducted by an agency of a State acting
under authority of State law, but only if such wager is placed
with the State agency conducting such sweepstakes, wagering
pool, or lottery, or with its authorized employees or agents,
and is not carried out online.
``(b) Online Gambling Activities.--All online gambling activities
conducted pursuant to a Federal license shall be subject to the
wagering tax set forth in section 4401.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to wagers made after December 31, 2010.
SEC. 8. TERRITORIAL EXTENT.
(a) In General.--Paragraph (2) of section 4404 is amended to read
as follows:
``(2) placed within the United States, or any Commonwealth,
territory, or possession thereof, by a person who is a United
States citizen or resident.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to wagers made after December 31, 2010.
SEC. 9. AMERICAN HERITAGE PROGRAM.
(a) Implementation of Program.--From funds appropriated to the
American Heritage Block Grant Fund for a fiscal year, the Secretary of
the Treasury shall make grants to eligible States to carry out an
American Heritage Program through State arts agencies.
(b) Allotment of Funds.--Funds allotted for a fiscal year shall be
allotted among eligible States in the same proportion as funds are
allotted among the States under section 5(g)(3) of the National
Foundation on the Arts and the Humanities Act of 1965 (20 U.S.C.
954(g)(3)).
(c) Eligibility To Receive Grants.--To be eligible to receive a
grant under subsection (a) for a fiscal year, a State shall submit to
the Secretary an application in such form, and containing such
information and assurances, as the Secretary may require by rule,
including assurances that--
(1) not more than 80 percent of the cost of any qualified
activity carried out under this section shall be paid with such
grant, and
(2) not more that 20 percent of such grant may be expended
for administrative costs.
(d) Definitions.--For purposes of this section--
(1) the term ``American Heritage Program'' means a program
carried out by a State that provides qualified activities
directly, or by contract with nonprofit organizations
(including community-based organizations) or units of local
government, for all the people and communities in the State,
(2) the term ``Secretary'' means the Secretary of the
Treasury,
(3) the term ``State'' has the meaning given such term in
section 4 of the National Foundation on the Arts and the
Humanities Act of 1965 (20 U.S.C. 953),
(4) the term ``State arts agency'' has the same meaning
given such term as used in the National Foundation on the Arts
and the Humanities Act of 1965 (20 U.S.C. 951 et seq.), and
(5) the term ``qualified activities'' means activities that
develop projects, productions, workshops, or programs that will
encourage public knowledge, education, understanding, and
appreciation of American heritage and the arts.
(e) American Heritage Block Grant Fund.--
(1) Establishment.--There is established in the Treasury of
the United States a trust fund to be known as the ``American
Heritage Block Grant Fund'', consisting of such amounts as may
be appropriated or credited to the American Heritage Block
Grant Fund as provided in this subsection.
(2) Transfer to fund.--There are appropriated to the
American Heritage Block Grant Fund amounts equal to .5 percent
of the taxes received by the Treasury after December 31, 2010,
that the Secretary determines are attributable to Internet
gambling.
(3) Method of transfer.--The amounts appropriated by
paragraph (1) shall be transferred from time to time from the
general fund of the Treasury. Such amounts shall be determined
on the basis of estimates by the Secretary of the taxes,
specified in paragraph (1), paid to or deposited into the
Treasury. Proper adjustments shall be made in amounts
subsequently transferred to the extent prior estimates are in
excess of or are less than the taxes specified in paragraph
(1).
(4) Expenditures from american heritage block grant fund.--
Amounts in the American Heritage Block Grant Fund shall be
available, as provided by appropriation Acts, for making
expenditures to carry out subsection (a).
SEC. 10. BLOCK GRANTS TO STATES FOR TRANSITIONAL ASSISTANCE.
The Social Security Act is amended by adding at the end the
following new title:
``TITLE XXII--BLOCK GRANTS TO STATES FOR TRANSITIONAL ASSISTANCE
``SEC. 2201. TRANSITIONAL ASSISTANCE TRUST FUND.
``(a) Creation of Trust Fund.--There is established in the Treasury
of the United States a trust fund to be known as the ``Transitional
Assistance Trust Fund'', consisting of such amounts as may be
appropriated or credited to the Transitional Assistance Trust Fund as
provided in this section.
``(b) Transfer to Transitional Assistance Trust Fund of Amounts
Equivalent to Certain Taxes.--
``(1) In general.--There are hereby appropriated to the
Transitional Assistance Trust Fund, out of any money in the
Treasury not otherwise appropriated, amounts equivalent to 25
percent of the taxes received in the Treasury after December
31, 2010, that the Secretary of the Treasury determines are
attributable to Internet gambling.
``(2) Method of transfer.--The amounts appropriated by
paragraph (1) shall be transferred from time to time from the
general fund in the Treasury to the Transitional Assistance
Trust Fund. Such amounts shall be determined on the basis of
estimates by the Secretary of the Treasury of the taxes,
specified in paragraph (1) of this subsection, paid to or
deposited into the Treasury. Proper adjustments shall be made
in amounts subsequently transferred to the extent prior
estimates were in excess of or were less than the taxes
specified in paragraph (1) of this subsection.
``(c) Expenditures From Transitional Assistance Trust Fund.--
Amounts in the Transitional Assistance Trust Fund shall be available,
as provided by appropriation Acts, for making expenditures to carry out
section 2202.
``SEC. 2202. TRANSITIONAL ASSISTANCE GRANT PROGRAM.
``(a) In General.--Each State shall be entitled to a payment under
this section for each fiscal year in an amount equal to its allotment
for such fiscal year, to be used by such State to carry out the State's
plan for transitional assistance described in subsection (c), subject
to the requirements of this section.
``(b) Plan Approval Required.--No State may receive a payment under
this section unless the State submits the State's plan for transitional
assistance described in subsection (c) to the Secretary and the
Secretary approves such plan.
``(c) State Plan for Transitional Assistance.--A State plan for
transitional assistance is described by this subsection if the plan--
``(1) provides for expanded education opportunities for
individuals who are, or were formerly, in foster care,
including streamlining and coordinating education financing
opportunities and providing counseling and assistance to such
individuals for the purpose of ensuring completion of their
academic goals;
``(2) provides for job training opportunities for
individuals who are, or were formerly, in foster care;
``(3) provides, primarily through expanding access to and
investment in community colleges, for expanded post-secondary
education and job training opportunities that lead to a
certificate, for individuals who are working in, or had worked
in, declining sectors of the economy, as defined by the
Secretary, and who want to pursue a new career in a sector of
the economy with the potential for high wages and high growth,
as defined by the Secretary; and
``(4) provides a subsidy for the use of public
transportation by--
``(A) individuals qualifying for benefits or
services under title XX, including the Federal-State
Unemployment Insurance Program; and
``(B) individuals participating in programs under
the Workforce Investment Act.
``(d) Allotment.--The allotment for a fiscal year for a State
receiving an allotment for such fiscal year shall be an amount equal
to--
``(1) the amount appropriated for such fiscal year under
subsection (f), multiplied by
``(2) the ratio by which the population of the State bears
to the population of all the States receiving an allotment for
such fiscal year as determined by the Secretary (on the basis
of the most recent data available from the Department of
Commerce).
``(e) Definitions.--For purposes of this section:
``(1) In foster care.--The term `in foster care' means,
with respect to an individual, an individual who is under the
care and placement responsibility of the State agency
responsible for administering a plan, in connection with such
individual, under part B or part E of title IV.
``(2) Secretary.--The term `Secretary' means the Secretary
of Health and Human Services.
``(3) State.--The term `State' means the 50 States of the
United States, the District of Columbia, the Commonwealth of
Puerto Rico, the United States Virgin Islands, Guam, American
Samoa, and the Northern Mariana Islands.
``(f) Authorization of Appropriations.--There are authorized to be
appropriated for each fiscal year to the Secretary the amount deposited
into the Transitional Assistance Trust Fund pursuant to section 2201 to
carry out this section.''.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Ways and Means, and in addition to the Committee on Education and Labor, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to House Ways and Means
Referred to House Education and Labor
Referred to the Subcommittee on Higher Education, Lifelong Learning, and Competitiveness.
Referred to the Subcommittee on Healthy Families and Communities.
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