Companion Bill to Frank Legislation Establishes Tax Policy

9 June 2007

The second phase in U.S. Rep. Barney Frank's, D-Mass., effort to legalize Internet gambling in the United Stats materialized Thursday in the form of a companion bill authored by Rep. Jim McDermott, D-Wash. The new legislation, titled "the Internet Gambling Regulation and Tax Enforcement Act" (H.R. 2607), is the tax counterpart to the Frank bill.

H.R. 2607 would create a 2 percent tax on I-gaming deposits, with half earmarked to the federal government and half earmarked to the state government. Supporters say the bill has the potential to raise between $6 billion and $25 billion dollars for federal priorities including SCHIP, education, health care and veteran's services.

Frank's central legislation, introduced April 26, would pave the way for the regulation of Internet gambling. It would give the Financial Crimes Enforcement Network exclusive authority to issue and enforce licenses and regulations. Companies would be subject to financial and corporate scrutiny--including criminal background checks of corporate officers--during the application process. Furthermore, companies would be required to establish a corporate structure in the United States for tax-and-fees purposes. Finally, the bill requires licensed companies to adhere to federal- and state-income tax laws.

Testimony on H.R. 2046, heard Friday by the House Financial Services Committee, seems to indicate that the legislation has significant support, although many observers consider the bill a long shot for the near future.

Rep. Shelley Berkley's, D-Nev., bill calling for a one-year feasibility study could receive more serious consideration.

A fourth bill, introduced Thursday by Rep. Robert Wexler, D-Fl., seeks to modify current law to create exemptions for skill-based games, including poker.

Click here to view H.R. 2607.