Indiana State Legislators Begin Anew To Legalize iGaming

Legislation seeks an 18% tax rate on adjusted gross receipts
Indiana iGaming 2022
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Competing bills were filed in the Indiana state legislature this week to legalize iGaming in the Hoosier State, though it is uncertain if either bill will gain traction. In 2021, a similar effort did not.

HB 1356 was filed by Republican Rep. Doug Gutwein and co-authored by Republican Rep. Ethan Manning. The bill calls for an 18% tax on adjusted gaming revenue, a rate nearly double the 9.5% the state currently taxes AGR for sports wagering. As a point of comparison, neighboring Michigan taxes online casino gaming between 20% and 28% based on adjusted gross receipts.

Fellow Republican Rep. Alan Morrison filed HB 1337, the second consecutive year he has filed a bill seeking to legalize and regulate iGaming in Indiana. Morrison’s bill, which would also tax iGaming AGR at 18%, proposes expanding the Indiana Gaming Commission from its current board of seven commissioners to nine.

Both bills were assigned to the Committee on Public Policy. It is uncertain if Gov. Eric Holcomb is in favor of bringing iGaming to Indiana. He wanted to see the state’s expansion of its brick-and-mortar offerings come to fruition first, a key reason Morrison’s bill did not make it out of committee last year.

That casino expansion was uneven in 2021. On the positive side was Hard Rock Northern Indiana opening in May and adding to an already formidable casino presence in the northwest part of the state as it continues to attract revenue and tax dollars from nearby Chicago.

On the negative side was the ongoing struggle to bring a casino to Vigo County, which is part of Morrison’s 38th district. The process has proved vexing, as the IGC denied Lucy Luck a renewal of its license over the summer, reopened the licensing process, and named Churchill Downs Inc. the winner in mid-November over Full House Resorts.

CDI, however, did not formally receive the license until earlier this month, as the IGC had to first reach a settlement with Lucy Luck regarding the appeal of the renewal denial and a lawsuit filed by Full House over the selection process. Full House dropped the lawsuit this month, but not before some stinging comments from IGC Chairman Michael McManis over the filing.

Key points of HB 1356

Gutwein and Manning’s bill, which would take effect July 1 if passed, calls for licenses to be issued to casinos and the state’s two racetracks. It also calls for revenue sharing for the cities and counties where casinos operate, in order to mitigate some of the potential lost revenue for brick-and-mortar casinos from competing with iGaming.

The bill makes the IGC the governing body of iGaming for regulation and application vetting purposes and also calls upon the state agency to “add the fiscal impact study on interactive gaming in the report on sports wagering submitted to the Governor under current law.”

The bill calls for five-sixths of the tax revenue raised to be placed in the state’s General Fund, of which 3.33% would be allocated to the Addiction Services Fund, seemingly for problem gambling. The remaining one-sixth would be deposited into a revenue sharing fund for the cities and counties with casinos. The bill has a fiscal estimate of iGaming generating between $15.3 million to $30.5 million in tax revenue in Fiscal Year 2023 and reaching between $46.2 million and $92.4 million by Fiscal Year 2025.

It envisions a substantial loss of brick-and-mortar tax revenue, ranging from $12.2 million to $24 million in FY 2023 and reaching anywhere from $37.1 million to $72.9 million in FY 2025. More than half the projected tax revenue loss in the first year is mitigated by license fees estimated to be between $7.3 and $7.8 million. Overall, Gutwein and Manning’s bill projects an additional revenue ranging from $10.3 million to $14.1 million in FY 2023; $6.7 million to $13.5 million in FY 2024; and $9.7 million to $19.9 million in 2025.

Key points of HB 1337

Morrison’s bill, which would also take effect July 1 if passed, did not have any accompanying fiscal information. The fiscal note with his 2021 filing had licensing fee revenue estimates in the initial year of activation identical to those in Gutwein and Manning’s bill.

While not a like-for-like comparison given the dates of filing, Manning’s fiscal note projected a lesser added revenue total for the initial year of operation ranging from $9.2 million to $12 million while both project an additional $6.7 million to $13.5 million of tax revenue in FY 2024, which would have been the second full year of Manning’s bill versus Gutwein and Manning’s first.

In FY 2025, Morrison’s bill projected tax revenue between $8.7 million and $17.5 million, with iGaming generating between $34.3 million and $68.6 million in tax revenue versus the $46.4 million to $92.8 million projected by Gutwein and Manning.

Where Morrison’s bill could sink or swim is in the expansion of the IGC and the method of adding two commissioners. The current setup is for the governor to make all seven selections, which Morrison would keep but also allow for the House speaker and president pro tempore of the Senate to each name one commissioner. Additionally, the bill proposes that the commissioners appointed by the legislators in those positions can only be removed by legislators and not the governor.

Morrison had previously expressed frustration with the IGC’s decision to deny Lucy Luck its license renewal. He was among seven state representatives who signed a letter in August objecting to the IGC’s casino integrity rules regarding inquiries of personal and financial ties of investors in privately held casino companies.

Is projected revenue enough to sway lawmakers?

The bills were filed shortly before the IGC released its revenue numbers for December, which showed a total of $284 million in combined tax revenue from casino gaming and sports wagering in the first six months of Fiscal Year 2022. Hard Rock made a notable impact on that total, contributing more than $37 million while also quickly becoming the state’s top revenue generator from table gaming.

It is also possible legislators could see iGaming as a hedge against a potential projected loss in tax revenue from the three northwest Indiana casinos. Hard Rock, Horseshoe Hammond, and Ameristar have generated a combined $124 million in total gaming tax revenue this fiscal year, but challenges loom as both Chicago and suburban Cook County in neighboring Illinois could have their own casinos in operation by 2025.

Photo: Shutterstock

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