Iowa casinos got some meaningful financial concessions from the Iowa General Assembly at the end of the legislative session. Last week — in the final days of the session, the legislature passed a bill providing a phaseout of tax on promotional play.
Another bill passed ensures that casinos don’t have to continue paying above federal minimum wage if that minimum increases.
However, casinos did not get through a bill authorizing esports wagering for Iowa sportsbooks.
Iowa casinos must wait a little longer on tax phaseout
Currently, Iowa casinos pay taxes on marketing dollars until the figure exceeds $25,820,000 in any single year. Essentially, casinos pay the same 22% tax on gaming revenue for money they are giving away in promotions.
The Iowa Gaming Association has been pushing a three-year phaseout of the tax for years. This time around, the association used the pandemic in making its case for relief.
It worked.
Although the promotional play bill introduced didn’t make it to the finish line, the language was added in the final week to S 619, a large tax reform bill.
However, lawmakers granted the phaseout over five years rather than the three pitched by the association. Beginning July 1, that will decrease by 4.4% each year until it reaches zero.
Wes Ehrecke, president of the Iowa Gaming Association, said:
“We’re pleased to see that we got that resolved to have a phase out over the next five years. We’ve been working on the promotional play tax for several years, making the case that it’s important to have as level a playing field as possible.”
Tribal casinos in Iowa and casinos in neighboring states, such as Illinois, don’t pay tax on promotional play. That favored those entities in offering more promotions to entice customers over Iowa commercial casinos.
Sports wagering promotional tax disappears entirely
Beginning July 1, Iowa sportsbooks no longer pay any tax on promotional play.
This should benefit Iowans with the casinos offering more promotions and credit to create accounts.
And it comes at a good time, with the first NFL regular season without the in-person registration requirement for mobile wagering accounts is around the corner.
Ehrecke said:
“It won’t hurt in efforts to promote the respective sportsbook site. They can encourage people who love to watch sports by giving them some promotional play coupons to try it if they haven’t yet.”
Policy brings federal minimum wage to Iowa casino employees
For the past 30 years, the industry has paid 25% above the federal minimum wage for employees. Currently, the minimum wage is at $7.25 an hour, so casinos pay a starting wage of at least $9.06.
Casinos were concerned over President Joe Biden’s push to increase the federal minimum wage to $15 an hour. A bill introduced in Congress proposes the increase to $15 by 2025.
If that happened and the 25% premium stayed in place, Iowa casinos would need to more than double their minimum wage to $18.75.
Ehrecke said:
“That creates compression issues and layoffs and a variety of things that can happen with mandated wage above the other wage.”
An Appropriations Committee bill, S 615, addressed this. Going forward, Iowa casinos will continue paying employees at least $9.06 an hour. But, if the federal minimum wage increases above that, they can pay at federal minimum wage rather than 25% higher.
Iowa esports wagering will have to wait until next year
When the pandemic shut down the major professional sports for months, people were looking for activities on which to bet.
Some turned to esports. The multiplayer video game competitions could continue being played in a socially distanced world.
But Iowa sportsbooks weren’t allowed to take those bets. The Iowa Racing and Gaming Commission approved daily fantasy sports sites doing esports last June.
The association explained it was going off a legal opinion from the Iowa attorney general’s office. Iowa’s law expressly allows esports as a “simulated game or contest” under the fantasy sports section. The sports betting section has no such language.
Casinos sought to change that. Rep. Bobby Kaufmann, who sponsored the sports betting bill in 2019, introduced H 200, simply amending that law to add “electronic sports events” as authorized sporting events for wagering.
Ehrecke said:
“Esports is something we’ll likely come back and try to pursue next year. We heightened awareness on it this session. I think we had a lot of support, but there were a lot of other things going on.”
