According to the Associated Press (AP), Atlantic City's top casino, Borgata, recently made headlines for underpaying internet gambling taxes twice.
New Jersey regulators found that the casino claimed nearly $15 million in excessive deductions, resulting in a tax shortfall of $1.1 million. This discrepancy was due to improperly allocating deductions meant for slot machine game bonuses to other types of games.
The New Jersey Division of Gaming Enforcement (NJDGE) took decisive action, demanding that the Atlantic City casino (owned by Vici Properties and operated by MGM Resorts International) pay the full amount of taxes, including penalties and interest, totaling $1.3 million. The casino has since complied, paying the outstanding amount and a civil penalty of $75,000.
Regulatory response and penalties:
The acting director of the department, Mary Jo Flaherty, emphasized the seriousness of these oversights in her communication with Borgata. She highlighted that the casino had previously underreported nearly $10 million in total revenue and noted that this was a repeat violation, with an additional $4.5 million underreported. According to the AP, Flaherty stated in a letter dated August 15: "The department warned that such violations could lead to civil penalties, but less than 18 months later, the behavior recurred, a fact that also deserves consideration."
Reportedly, these financial discrepancies can be traced back to March 2023, when Borgata mistakenly accounted for $9.8 million worth of table game bonuses in deductions typically reserved for slot games. This error resulted in underpaid taxes of $787,000, and the casino was fined nearly $128,000, including interest and penalties.
In July 2024, a software upgrade by Borgata's parent company, MGM Resorts International, led to another significant error. The system incorrectly allocated an additional $4.5 million in credits for player bonuses that were never issued. This oversight resulted in a tax shortfall of $365,000, with the casino facing over $33,000 in fines and interest.
Ongoing compliance and casino performance:
These tax deductions are part of a broader plan aimed at alleviating the tax burden on casinos for offering free games to customers. In New Jersey, the first $90 million of promotional deductions should be taxed as part of total revenue. Any deductions beyond this threshold are not included in taxable income, and Borgata misused this rule in these instances.
Despite these financial missteps, Borgata's performance over the year remains strong. In the first seven months of the year, the casino garnered over $771 million in revenue from gamblers, far outpacing its closest competitor by more than $300 million.
The gaming enforcement department subsequently confirmed that Borgata and MGM had made the necessary adjustments to their software to prevent future discrepancies. Nevertheless, these incidents highlight the necessity of strict compliance and oversight in the casino industry's financial practices.
