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HR 2268 IH
111th CONGRESS

1st Session

H. R. 2268

To amend the Internal Revenue Code of 1986 to regulate and tax Internet gambling.

IN THE HOUSE OF REPRESENTATIVES

May 6, 2009

Mr. MCDERMOTT (for himself and Mr. FRANK of Massachusetts) introduced the following bill; which was referred to the Committee on Ways and Means


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 2009’.

(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; LICENSEE INFORMATION REPORTING.

(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. 4491. IMPOSITION OF INTERNET GAMBLING LICENSE FEE.

(a) Federal Fee- Each licensee within the meaning of section 5382 of title 31, United States Code, 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 a

ny 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).

(b) Information Returns- 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.’.

(c) Clerical Amendments-

     (1) The table of subchapters for chapter 36 is amended by adding at the end the following new item:

subchapter e. internet gambling.

     (2) 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.’.


(d) 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. 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. 4. 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. 5. TERRITORIAL EXTENT.

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 United States citizen or resident.


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