Sports Betting Tax Revenues: Not Just “Fantasy”

New Jersey appears to be paving the way for states to generate more tax revenue from sports betting.

Last week, New Jersey Governor Chris Christie signed into law a bill that imposes a 10.5 percent tax on winnings for companies that operate daily fantasy sports leagues. The New Jersey legislature estimates that the bill will produce an annual net revenue gain of at least $5.8 million. The legislation also requires fantasy sports game providers to acquire a permit from the state’s Department of Consumer Affairs, and sets up penalties for providers who fail to abide by the law’s requirements.

According to a study by Ipsos Public Affairs, 57.4 million players engage in fantasy sports leagues in the U.S. and Canada, with 1.5 million players in the State of New Jersey alone.

NJ.com covers the story:

In 2015, during a Republican presidential primary debate, Christie rejected out of hand the idea of regulating fantasy sports.

“Are we really talking about getting the government involved in fantasy football?” Christie asked. “Wait a second. We have $19 trillion in debt, we have people out of work, we have ISIS and al Qaeda attacking us — and we’re talking about fantasy football? Can we stop?” …

On Thursday, Marc LaVorgna, a spokesperson for [fantasy sports operators] DraftKings and FanDuel, praised Christie for “protecting fantasy sports fans and guaranteeing their right to play the games they love, while establishing rules to protect consumers as the industry grows and ensure the continued integrity of fantasy sports contests.”

Last January, Maryland Comptroller Peter Franchot promulgated regulations requiring, among other things, that fantasy sports operators file certain information with his office, and limit participants to a maximum of $1,000 in deposits per month under most circumstances. The regulations were authorized under a bill passed by the General Assembly in 2012 specifically exempting fantasy sports betting from the state’s general gambling prohibitions.

In June, the U.S. Supreme Court announced that it will hear a New Jersey case challenging the constitutionality of a federal statute preempting most states from authorizing sports betting.

The Taxing Impacts Of The New Look Vacation

Mike Coveyou, Montgomery County Division of Treasury

The sharing economy is rapidly changing the way people work, play and travel. Online platforms like Airbnb and VRBO offer tourists and business travelers alike entirely new ways to experience Maryland counties, providing opportunities to experience the greatest they have to offer from entirely new vantage points.

This remodeling of tourism also offers county residents new avenues to earn income and provide services for profit – begging the need for local governments to reexamine whether their methods of tax collection remain as equitable as they were when hospitality depended upon the brick and mortar, multi-unit hotel or motel.

At the MACo Summer Conference session, The New Look Vacation: Opportunities & Responsibilities in the Sharing Economy, held on Friday, August 18, at 2:15 pm, participants heard a wide range of perspectives from Airbnb Policy Director Will Burns, Maryland Hotel and Lodging Association President and CEO Amy Rohrer, and Montgomery County Chief of Treasury Michael Coveyou on how to best balance innovative new opportunity with principles of tax equity. Attendees learned about viewpoints of the issue from traditional brick and mortar establishments, solutions implemented by Airbnb nationwide, and the perspective of the county tax collector on the impacts these changes have on county coffers and operations.

The Honorable Jason Buckel, Maryland House of Delegates moderated the panel.

 

#MACoCon Panelists Discuss “Cannabusiness” in Maryland

During the 2017 MACo Summer Conference panel “The Green Rush? Cannabusiness in Maryland Counties” attendees learned about the growing “cannabusiness” industry, the challenges and opportunities it presents, and what counties need to know moving forward.’

Shad Ewart discusses how Maryland’s medical cannabis industry will create a host of ancillary jobs

Being a new – and unique – enterprise, many entrepreneurs struggle with how to best leverage this emerging industry…and counties struggle with how to fit these “cannabis-adjacent” businesses into their communities, economies, and local policies.

Shad Ewart, Professor, Entrepreneurial Opportunities in Emerging Markets: Marijuana Legalization, Anne Arundel Community College, began the session by discussing Maryland’s medical cannabis program. Mr. Ewart talked about how the medical cannabis industry continues to advance and legitimize, and how mainstream professionals are increasingly interested in economizing on this opportunity. As part of his presentation, Mr. Ewart described the ancillary businesses within the medical cannabis industry. According to Mr. Ewart,  “the people who profited from the Gold Rush were not the ones mining for gold, but the people who sold them the picks and shovels.”

According to Darren H. Weiss, Esq., Principal, Bethesda Office, Offit Kurman, because the medical cannabis industry is a new – and unique – enterprise, many entrepreneurs struggle with how to best leverage this emerging industry… and counties struggle with how to fit these “cannabis-adjacent” businesses into their communities, economies, and local policies. Mr. Weiss discussed some of the legal challenges associated with medical cannabis in Maryland, explained how growers and dispensaries become licensed to operate in Maryland, and how they will operate in local communities.

Gail Rand, CFO, Patient Advocate, ForwardGro, closed the session by discussing her advocacy efforts for medical cannabis in Maryland. ForwardGro is licensed to grow medical cannabis and has begun operations in Anne Arundel County. Mrs. Rand offered insight into the medical cannabis licensing process from an applicant’s point of view.

The session was moderated by Senator Brian Feldman and was held on Thursday, August 17, 2017.

New Look Vacation, Old Look Taxation

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Will Burns, Airbnb Policy Director speaks at the MACo Summer Conference session, The New Look Vacation: Opportunities & Responsibilities in the Sharing Economy.  Photo courtesy @CitoyenBurns.

The sharing economy is rapidly changing the way people work, play and travel. Online platforms like Airbnb and VRBO offer tourists and business travelers alike entirely new ways to experience Maryland counties, providing opportunities to experience the greatest they have to offer from entirely new vantage points.

This remodeling of tourism also offers county residents new avenues to earn income and provide services for profit – begging the need for local governments to reexamine whether their methods of tax collection remain as equitable as they were when hospitality depended upon the brick and mortar, multi-unit hotel or motel. After all, if it acts like a hotel, shouldn’t we tax it like one?

At the MACo Summer Conference session, The New Look Vacation: Opportunities & Responsibilities in the Sharing Economy, representatives of the traditional lodging industry, Airbnb and county government all address how counties can apply hotel taxes equitably without undermining the sharing economy’s economic development and tourism potential. Hear perspectives from Airbnb Policy Director Will Burns, Maryland Hotel and Lodging Association President and CEO Amy Rohrer, and Montgomery County Chief of Treasury Michael Coveyou on how to best balance innovative new opportunity with basic principles of tax equity.

The New Look Vacation: Opportunities & Responsibilities in the Sharing Economy

The sharing economy is revolutionizing the tourism industry – and also disrupting how counties regulate and tax it. With a multitude of services from accommodations to transportation now booked online with everyday providers just trying to earn an extra buck, the way we tax and regulate the tourism industry must treat all providers equitably while also ensuring the safety of our residents. Join this session to learn more about the challenges, potential solutions, and county responsibilities in the sharing economy.

Speakers:

  • Will Burns, Midwest Policy Director, Airbnb
  • Amy Rohrer, President & CEO, MD Hotel and Lodging Association
  • Michael Coveyou, Chief, Division of Treasury, Montgomery County Department of Finance

Moderator: The Honorable Jason Buckel, Maryland House of Delegates

Date/Time: Friday, August 18, 2017; 2:15 pm – 3:15 pm

MACo’s Summer Conference is August 16-19, 2017 at the Roland Powell Convention Center in Ocean City Maryland.

Learn more about MACo’s Summer Conference:

 

NACo: Keeping An Eye On Tax Reform

The National Association of Counties (NACo) has weighed in on the Joint Statement on Tax Reform issued by the Administration and congressional leadership. While calling the “much-anticipated statement … light on details,” NACo emphasizes that it will continue to advocate on behalf of all counties to retain the  tax-exempt status of municipal bonds and the deductibility of state and local taxes.

From the NACo blog post:

Counties have a significant stake in tax reform discussions, as simplification and lowering of rates could significantly boost economic development and help constituents around the country. However, key county priorities remain in the crosshairs of tax reform discussions: the tax-exempt status of municipal bonds and the deductibility of state and local taxes.

Tax-exempt municipal bonds are a critical county financing tool for major infrastructure purposes, including roads, bridges, hospitals and schools. Additionally, eliminating deductibility of state and local taxes would be a double tax on constituents, significantly impacting local middle class tax payers and asking them to shoulder an increased burden for key local priorities. …

NACo will continue monitor tax reform efforts and advocate for key county priorities as the process moves forward.

NACo will be exhibiting at MACo’s Summer Conference this August 16-19. Visit them in Booth 525. Register today for lowest available rates – they expire on August 4!

Learn more about MACo’s Summer Conference:

ALEC Fostering Group Focusing on Local Governments

The American Legislative Exchange Council (ALEC), a conservative national group probably best known for developing model legislation for introduction in state legislatures, is fostering a fairly new initiative to focus efforts at the city and county level.

From an AP news report:

The American Legislative Exchange Council is one of the country’s most prominent conservative groups, and its annual convention in Denver last week drew thousands of state legislators and lobbyists for panels on school choice and marijuana legalization, as well as speeches from conservative luminaries like Secretary of Education Betsy DeVos and former Senator James DeMint.

But as attendees rubbed shoulders with the right’s elite, a few dozen crowded into a small conference room for the fourth meeting of the American City County Exchange, the conservative group’s new local government wing.

The city council project is the brainchild of Jon Russell, a councilman from the Virginia town of Culpepper, population 18,000. He was dissatisfied that the traditional, nonpartisan municipal groups, like the National League of Cities, seemed to constantly think more government was the answer to problems.

“Now we can communicate with 2,500 elected officials across the country that we know share our values and push back against some of the progressivism that’s gotten into cities,” Russell said.

Congressional Leadership On Tax Reform: No Border Adjustment Tax

Congressional Republican leadership and the Trump administration just released a joint statement on tax reform – and it abandons the border adjustment tax as a possible solution.

As previously reported in Conduit Street, a federal border adjustment tax could negatively affect counties’ cash flow by causing downturns in the municipal bond market.

From the joint statement:

We are all united in the belief that the single most important action we can take to grow our economy and help the middle class get ahead is to fix our broken tax code for families, small business, and American job creators competing at home and around the globe. …

Above all, the mission of the [House Ways and Means and Senate Finance] committees is to protect American jobs and make taxes simpler, fairer, and lower for hard-working American families. We have always been in agreement that tax relief for American families should be at the heart of our plan. We also believe there should be a lower tax rate for small businesses so they can compete with larger ones, and lower rates for all American businesses so they can compete with foreign ones. The goal is a plan that reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas. And we are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base. While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform.

Given our shared sense of purpose, the time has arrived for the two tax-writing committees to develop and draft legislation that will result in the first comprehensive tax reform in a generation.

Useful Links

Quill, Brick & Mortar and Sales Tax

The Supreme Court might take up the issue of whether states and local governments can require retailers to collect sales tax when they do not maintain a local physical presence – and it might might do so within the next year. According to the National League of Cities’ publication, Citiesspeak:

The billion-dollar question for local governments is whether the Supreme Court will take a case where it is asked to overturn Quill Corp. v. North Dakota (1992). In Quill, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. In Direct Marketing Association v. Brohl (2015), Justice Kennedy stated that the “legal system should find an appropriate case for this court to reexamine Quill.” South Dakota passed a law requiring remote vendors to collect sales tax, which is currently being litigated in state court. If the South Dakota Supreme Court strikes down this law by the end of August, it is possible the Supreme Court could decide this question by June 2018.

Read about other potential Supreme Court cases of consequence to local governments in the article, 2018 Supreme Court Preview for Local Governments.

Your One-Stop-Shop for Federal Advocacy on County Issues

NACo has released a timely “Summer Advocacy Toolkit” for use by county officials engaging on federal issues. Inside are links, quick summaries, and talking points on a wide range of topics relevant to county governments. Additionally, from the pdf document, users can search relevant committee membership to help target their messages.

A few quick selections from the NACo guide follow:

On Municipal Bonds:

• A fundamental feature of the first federal tax code written in 1913, tax-exempt financing is used by state and local
governments to raise capital to finance public capital improvements and other projects, including infrastructure
facilities that are vitally important to sustained economic growth.

• Between 2003 and 2012, counties, localities, states and state/local authorities financed $3.2 trillion in infrastructure
investment through tax-exempt municipal bonds.

• If municipal bonds were fully taxable during the 2003-2012 period, it is estimated that the financing for the 21 largest
infrastructure purposes would have cost state and local governments an additional $495 billion of interest expense. If
the 28 percent cap were in effect, the additional cost to state and local governments would have been approximately
$173.4 billion.

• For 2012, the debt service burden for counties would have risen by $9 billion if municipal bonds were fully taxable over
the last 15 years and roughly $3.2 billion in the case of a 28 percent cap. Americans, as investors in municipal bonds
and as taxpayers securing the payment of municipal bonds, would have borne this burden.

• The municipal bond tax-exemption represents a fair allocation of the cost of projects between federal and state/local
levels of government. Through the use of tax-exempt municipal bonds, state and local governments invested 2.5 times
more in infrastructure than the federal government.

• Tax-exempt bonds are vital for infrastructure, justice and health needs because counties own and operate 45 percent
of public roads and highways, own almost a third of the nation’s transit systems and airports, own 961 hospitals,
manage 1,943 health departments and own the vast majority of the nation’s jails.

On Infrastructure:

NACo believes that counties should be recognized as major owners of transportation infrastructure in any potential
package presented by the administration. Key funding and financing measures must include all of the following:

• Preservation of Tax-Exempt Status of Municipal Bonds

• Dedicated Funding for locally owned infrastructure

• Policies to provide an Environment for Innovative Financing

The Toolkit also includes direct links to other NACO resources, like this concise “one-pager” on State and Local Tax Deductibility (aka SALT).

Study to Review Impact of Wicomico Tax Revenue Cap

In 2000, Wicomico County voters supported a property tax revenue cap, a controversial move that limits the amount of money the county can collect each year.

According to Delmarvanow,

Now a new study sponsored by the Greater Salisbury Committee will take a look at what impact it has had and how it may affect the future of the county.

“We think it’s appropriate to simply take a look at it,” said Mike Dunn, the group’s president and CEO. “We want people to know what the law of the land is.”

The cap limits new revenue from property taxes to 2 percent or the Consumer Price Index, whichever is less. The CPI has been less than 2 percent during the past five years.

The study by Memo Diriker, director of the Business Economic and Community Outreach Network, or BEACON, at Salisbury University, and a group of graduate students is expected to be released this fall, Dunn said.

The revenue cap came about following a tax revolt led by a group called VOICE, or Voters Opposed to Increased County-City Expenditures, after the County Council in 1999 approved a 46-cent property tax hike and a 1 percent increase in the property transfer tax.

VOICE founders Don Coffin, John Palmer and Jack Plummer were successful in getting their proposal for a revenue cap on the ballot for the 2000 election. It was supported by more than 60 percent of the voters and went into effect the following year.

Dunn said Palmer and Plummer both met with Greater Salisbury Committee members who are serving on the committee looking at the revenue cap to offer a better sense of what happened in 1999.

Many younger county residents have no idea there is a revenue cap or remember the “great political battle” of 2000, including a lot of up-and-coming civic and business leaders under the age of 40, Dunn said.

“These people were literally in high school,” he said.

Wicomico County Executive Bob Culver and members of the County Council were all informed about the study when it got underway last year, Dunn said. Once completed, it will be presented to the Greater Salisbury Committee membership, then to Culver and the County Council.

Previous examinations of the revenue cap may have been politically motivated, but Dunn said the new study will take an unbiased look at the cap and the effects it has had.

Through the years, county officials have discussed the possibility of increasing the cap, especially when the Great Recession hit and the budget had to be cut by as much as 20 percent, said County Council President John Cannon.

But the County Council was politically conservative then as it is now, and resisted making changes to the cap, he said.

If council members wanted to change the cap or repeal it altogether, they would have to amend the county charter, said County Council Administrator Laura Hurley. The council would first have to approve the charter amendment and then it would go to referendum. If the majority of the votes are in favor of the charter amendment, it would go into effect 30 days following the election.

Cannon said so far no one seems inclined to seek a change in the cap.

 “I can’t see where it’s had a negative impact on the county,” he said. “We haven’t seen a need or desire to raise it above that level.”

Read the full article for more information.