The Borgata, Atlantic City’s top-performing casino, has been ordered to pay over $1.3 million in taxes, penalties, and interest after underpaying internet gambling taxes twice. New Jersey’s Division of Gaming Enforcement (DGE) revealed that the casino took nearly $15 million more in credits than it was entitled to, resulting in a tax underpayment of $1.1 million.
Violations and Consequences
According to an Aug. 15 letter from Mary Jo Flaherty, the acting director of the DGE, the Borgata's repeated underreporting of gross revenue is a serious issue. The first violation occurred in March 2023, when the casino included $9.8 million in bonuses, such as those for table games, in deductions meant exclusively for slot games. This error led to a $787,000 underpayment in taxes, which prompted the casino to pay nearly $88,000 in interest and $40,000 in penalties.
The second incident occurred in July 2024, following a software upgrade by Borgata's parent company, MGM Resorts International. The upgrade resulted in the casino deducting more credits than the actual amount of player bonuses awarded, inflating the credits by $4.5 million and causing a $365,000 underpayment in taxes. In this instance, the Borgata was charged over $15,000 in interest and more than $18,000 in penalties.
The DGE expressed concern about the repeated nature of these violations, especially since the casino had been previously warned. Flaherty highlighted the severity of the situation, stating, “The fact that this conduct was repeated less than 18 months after the Division warned an additional violation of this type could result in a civil penalty is also to be considered.”
Immediate Payment and Corrective Actions
In response to the violations, the Borgata has already paid the full amount owed, including a $75,000 civil penalty. The casino has also implemented software fixes to prevent further issues related to bonus credits and tax deductions.
Despite the actions taken, neither the Borgata nor MGM Resorts International provided any public comment regarding the situation. The state Division of Gaming Enforcement has made it clear that it expects strict adherence to tax regulations moving forward.
At the heart of the issue is New Jersey’s tax credit system for promotional bonuses. Casinos in the state are allowed certain tax exemptions for promotional free play, but the system has specific limits. For example, the first $90 million in promotional credits is taxed as part of gross revenue. However, any amount exceeding that threshold is not subject to taxation.
The Borgata’s mistakes, particularly in how it handled credits for table games and the discrepancies caused by the software upgrade, demonstrate how easily errors can occur within this system if not carefully monitored. Regulators have emphasized the need for precision in reporting, as these bonuses directly affect tax obligations.
Despite these setbacks, the Borgata remains the dominant casino in Atlantic City. For the first seven months of 2024, the casino earned more than $771 million from gamblers, placing it over $300 million ahead of its closest competitors.
With such a strong lead in the market, Borgata’s financial success is evident. However, the recent penalties highlight the importance of compliance in maintaining a spotless reputation and avoiding further financial repercussions.
Borgata’s underpayment of internet gambling taxes serves as a reminder of the critical role that regulatory compliance plays in the gaming industry. As the largest casino in Atlantic City, Borgata must maintain rigorous standards to avoid future violations and penalties.
Regulators will likely continue to scrutinize casinos to ensure that all deductions and credits are accurately applied, and any discrepancies are promptly addressed. While the Borgata has taken corrective measures to resolve the issue, the DGE will remain vigilant to prevent similar violations from recurring.
Source:
''Atlantic City’s top casino underpaid its online gambling taxes by $1.1M, regulators say'', apnews.com, August 31, 2024.
