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Why is charitable gambling taxed more than for-profit competitors?

02 Jun 2017 10:27 | Amanda Horner (Administrator)

This article was written by Al Lund and originally appeared in the Rochester Post Bulletin on May 31, 2017.

Toward the end of the 2017 legislative session, a seven-page bill (House File 1415) legalizing the online daily fantasy sports business was heard in committee in the Minnesota House of Representatives. The bill also licenses, regulates and taxes for-profit companies such as Fan Duel and Draft Kings. All in the space of seven pages.

By comparison, Minnesota's community-based, non-profit charitable gaming organizations -- the operators of bingo, raffles and pull tab games that invest directly in their local communities -- have at least 200 pages of statutes and rules that regulate everything they do.

The organizations that the Legislature believes need more regulation than the secretive, billion-dollar fantasy sports enterprises include groups like the Rochester American Legion Post 92. This nonprofit raises funds for local missions like youth baseball and hockey programs, Boy and Girl Scouts troops and high school graduation parties

In addition to the excessive regulation, the Rochester American Legion is taxed at a rate of over 27 percent and paid more than $33,235 more in taxes to the state than they were able to donate to their mission.

The Rochester American Legion Post 92 is only one of many organizations working throughout Southeast Minnesota to make our communities better places to live and work – all at no cost to taxpayers.

The Legislature's treatment of the Legion and similar groups is unfair and here's why:

Charitable gaming is not against competition or afraid of competition, but a leveling of the playing field is needed. Giving the keys to the state to for-profit competitors that only take is hard to understand and even harder to stomach.

Fantasy sports will be the fourth group of for-profit direct competitors to charitable gaming (card rooms, horse racing and casinos being the other three). They are all being regulated and taxed

at a fraction of charitable gaming. We would take their deal in a heartbeat.

These other gaming organizations are taxed at only the corporate rate of 9.5 percent. If charitable gaming organizations had that rate, we would have had another $35 million to help our communities and missions. Charities are paying up to seven times the rate of their for-profit

competition. That is an insult to everything that we do and stand for.

The two behemoths in daily fantasy sports, Fan Duel and Draft Kings, have not paid any tax or provided any social benefits to Minnesota in the five years that they have been in business. Charitable gaming is paying $60 million in taxes this fiscal year and putting another $60 million into our communities. Add to that the fact that we are employing thousands of people and paying $25 million in local rents, helping to keep our sites in business.

The daily fantasy sports bill was abruptly pulled by its authors before the end of session, keeping the games legal and operating with even less regulation than outlined in the bill. The issue is all but certain to come up again in future legislative sessions.

Between now and February 2018 when the Legislature re-convenes, we will be talking to Minnesotans about the importance of tax and regulation relief for charitable gaming organizations. The current structure of community charities paying 36 percent in order to pay for the billion-dollar NFL stadium while fantasy sports and other forms of gaming in Minnesota enjoy a tax rate of less than 10 percent does not sit well with many Minnesotans. Many communities across the

state are already feeling the effects as charities are forced to turn down local grants to pay their tax bill.

What our members are asking for is simple: either treat for-profit gaming companies like us, or treat us like everybody else.

"Something has to change," said Roger Vangness, Legion Post 92 gambling manager. "We didn't get into charitable gaming to be a revenue stream for the state. We want to help our

community."


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