PA Casino Tax

PA Casino Tax Revenue In Danger Because Of Court Ruling, Legislative Inaction

The amount of money Pennsylvania is getting from casinos is in a state of flux, partially because of court action, and also because of the legislature’s inaction.

PA Supreme Court nixes host tax

The Pennsylvania Supreme Court recently ruled that a “host tax” that sees some casinos pay at least $10 million to their home municipalities is unconstitutional.

The tax accounts for about $140 million annually, and has generated well over a billion dollars for the state over the past dozen years.

The court decision will leave a major gap in the budgets of some jurisdictions, who depend on the money to fund their governments. The court, however, stayed the ruling for 120 days, so that the legislature can act to fix the law.

More from Penn Live on the ruling, which was a challenge to the existing law by Mount Airy Casino in the Poconos:

Mount Airy claimed on appeal that the now-stricken tax is illegal because it was based on an inequitable two-tier arrangement. That system required casinos to pay a municipal tax of 2 percent of their gross terminal revenue from slot machines or a lump sum of $10 million, whichever was greater.

That creates unconstitutionally disparate tax rates between non-Philadelphia casinos based on their income, Mount Airy argued.

The court sided with Mount Airy on the question of some casinos being taxed disproportionately.

Also unsure: PA’s gambling expansion

What looked like it might be a done deal for a gambling expansion — one that would have authorized PA online casinos and PA online poker — has hit a speed bump.

In the summer, the state legislature and Gov. Tom Wolf agreed to a state budget that counted on $100 million from new gambling laws. The bulk of that would have been generated via licenses to operate iGaming; however, actual legislation had not been passed regarding gambling at the time.

Summer has turned to fall, and it’s unclear if the legislature will keep its promise to pass a gambling bill and fund the government. The House has passed an iGaming bill, and some lawmakers have called online gambling regulation a “no-brainer.” 

The Senate, however, has not yet acted, and it only has six more active session days before the November elections. That means action on online gambling — if it takes place at all — could be delayed until 2017.

What will the statehouse do, and could the issues be linked?

With the state government scrambling to get municipalities the money they are counting on, what will the statehouse do?

That’s obviously a matter of speculation. Steve Ruddock at Online Poker Report makes the argument that online gambling legislation might be used to make up part of the difference:

Following the Supreme Court ruling, the House Gaming Oversight Committee sprung back into action, announcing back-to-back hearings. The first, to be held on Oct. 18, is on the Supreme Court tax decision. The following day, the committee will offer an update on where the state stands when it comes to online gambling and daily fantasy sports.

Once again, it appears the House is ready to act, perhaps making the case for adding the local tax reform to the already existing gaming reform bill. The question is, will the Senate follow suit? Or, can the House force the Senate to act?

Other media reports, such as the Morning Call, seem to think the court decision will be handled by the legislature via a more straightforward tax solution. The Pittsburgh Post-Gazette had it down the middle, saying the court decision could be handled in October, or lumped in with other gambling issues this fall.

Meanwhile, some media outlets are calling for a quick fix for their communities, like GoErie.com:

A new deal that fairly compensates host communities must be brokered immediately to allow this kind of investment to continue at current levels. That’s what communities were promised in return for allowing casino gambling in their midst, and they deserve nothing less.

What will happen? Stay tuned this month to find out.