Bill To Reinstate VA Sports Betting Deductions Changed

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VA sports betting

An industry-backed proposal that would return VA sports betting promotional deductions for all operators was amended to lower those potential deductions.

Both SB 1142 and HB 2202 moved in their respective chambers Tuesday. SB 1142 was referred out of Finance and Appropriations by an 11-4 vote, while HB 2202 was passed out of a General Laws subcommittee by a 6-2 vote.

Two representatives from lobbying group Sports Betting Alliance spoke in favor of the bill at the House committee despite the change.

The proposal is in response to a change in Virginia’s biennial budget, which ended unlimited promotional deductions from taxable revenue for VA sportsbooks that have been live for a year or longer.

VA sports betting promo phases stripped out

The original proposal had four different phases after operators move beyond the first year when unlimited deductions are allowed.

The first phase would have allowed operators to deduct promotional deductions equal to 2.5% of their monthly handle until June 2024. That percentage would have dropped 0.25 percentage points each year until bottoming out at 1.75% in July 2026.

Instead, the amended bills only allow promotional deductions of 1.75% of total monthly handle once those first 12 months are up.

How would sports betting deductions affect taxes?

The new budget went into effect in July, which led to new record sports betting taxes in September, only to be topped in November. Total tax paid for the five months since the change is $29.5 million. In the 18 months from January 2021 through June 2022. operators paid $35.5 million in total.

That is because the change meant seven operators responsible for 93.2% of all promotional deductions from launch through May 2022 could no longer deduct those promos. Despite that change, October and November were the first two months where handle topped $500 million.

If all operators could deduct promotional costs equal to 1.75% of their handle, the $518.8 million bet in November would mean nearly $9.1 million could be deducted from taxable revenue. In reality, only $817,857 was deducted.

That remaining $8.3 million equals $1.2 million in tax dollars at Virginia’s 15% tax rate.

Concerns over problem gambling funding

Del. Paul Krizek voted in support of the bill, but with a caveat that it does not hurt the problem gambling program.

Sports betting contributes the highest percentage to the problem gambling fund out of any gambling in the state at 2.5%, Krizek said.

“My understanding is had we not had that, we would have run out of money before the end of last year,” Krizek said. “So that is really critical. I’m going to support this to send it up to appropriations because I want to see what the fiscal impact is but that’s my concern, that we have enough money for the problem gambling fund.”

Which VA sportsbooks can still deduct?

Under the current law, there are only five sportsbooks that can still deduct their promotional costs: