I 

111TH CONGRESS 

1ST SESSION H. R. 2268 

To amend the Internal Revenue Code of 1986 to regulate and tax Internet 

gambling. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 6, 2009 

Mr. MCDERMOTT (for himself and Mr. FRANK of Massachusetts) introduced 

the following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to regulate 

and tax Internet gambling. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Internet Gambling Regulation and Tax Enforcement Act 

6 of 2009’’. 

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend9 ment is expressed in terms of an amendment of a section 

10 or other provision, the reference shall be considered to be 


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1 made to a section or other provision of the Internal Rev2 enue Code of 1986. 

3 SEC. 2. TAX ON INTERNET GAMBLING; LICENSEE INFORMA4 TION REPORTING. 

5 (a) IN GENERAL.—Chapter 36 (relating to certain 

6 other excise taxes) is amended by adding at the end the 

7 following new subchapter: 

8 ‘‘Subchapter E—Internet Gambling 

‘‘Sec. 4491. Imposition of Internet gambling license fee. 

‘‘Sec. 4492. Record requirements. 

9 ‘‘SEC. 4491. IMPOSITION OF INTERNET GAMBLING LICENSE 

10 FEE. 

11 ‘‘(a) FEDERAL FEE.—Each licensee within the mean12 ing of section 5382 of title 31, United States Code, shall 

13 be required to pay an Internet gambling license fee by the 

14 end of each calendar month in an amount equal to two 

15 percent of all funds deposited by customers during the 

16 preceding month into an account maintained by that li17 censee or any agent of that licensee that can be used for 

18 the purpose of placing a bet or wager as defined in section 

19 5362(1) of title 31, United States Code. 

20 ‘‘(b) DEPOSITS.—Deposits made by or on behalf of 

21 a licensee of Internet gambling winnings or returns of 

22 funds by or on behalf of a licensee to the account of a 

23 customer shall not be treated as a deposit for purposes 

24 of this section. 


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1 ‘‘(c) PERSONS LIABLE FOR FEE.—The Internet gam2 bling license fee shall be the direct and exclusive obligation 

3 of the Internet gambling operator and may not be de4 ducted from the amounts available as deposits to the per5 son placing a bet. Notwithstanding the foregoing, any per6 son making a deposit for the purpose of placing a bet or 

7 wager with a person who is required but has failed to ob8 tain a license pursuant to subchapter V of chapter 53 of 

9 title 31, United States Code, shall be liable for and pay 

10 the fee under this subchapter on all such deposits, but 

11 such liability shall not excuse any failure to pay the fee 

12 on the part of the person who is required but has failed 

13 to obtain such license. 

14 ‘‘(d) UNAUTHORIZED BETS OR WAGERS.—There is 

15 hereby imposed a fee in an amount equal to 50 percent 

16 of all funds deposited into an account that can be used 

17 for placing a bet or wager within the meaning of Section 

18 5362(1) of title 31, United States Code, with any person 

19 that is not authorized pursuant to section 5382 of that 

20 title. Such tax is due by the end of each calendar month 

21 with respect to deposits during the preceding month. 

22 ‘‘(e) DISPOSITION.—Amounts paid as Internet gam23 bling license fees or on unauthorized bets or wagers under 

24 this section shall be deposited in the general fund of the 

25 Treasury and treated as revenue. 


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1 ‘‘(f) ADMINISTRATIVE PROVISIONS.—Except to the 

2 extent the Secretary shall by regulations prescribe, the 

3 fees imposed by this section shall be subject to the admin4 istrative provisions of this title applicable to excise taxes 

5 imposed by chapter 35. 

6 ‘‘SEC. 4492. RECORD REQUIREMENTS. 

7 ‘‘Each person liable for fees under this subchapter, 

8 except for a person making a deposit who is liable for fees 

9 pursuant to section 4491(e), shall keep a daily record 

10 showing deposits as defined in this subchapter, in addition 

11 to all other records required pursuant to section 

12 6001(a).’’. 

13 (b) INFORMATION RETURNS.—Subpart A of part III 

14 of subchapter A of chapter 61 (relating to information 

15 concerning persons subject to special provisions) is amend16 ed by adding at the end the following new section: 

17 ‘‘SEC. 6050X. RETURNS RELATING TO INTERNET GAMBLING. 

18 ‘‘(a) REQUIREMENT.—Every person who is a licensee 

19 (within the meaning of section 5382(3) of title 31, United 

20 States Code) or who otherwise is engaged in the business 

21 of accepting any bet or wager within the meaning of sec22 tion 5362(1) of title 31, United States Code, during a tax23 able year shall furnish, at such time and in such manner 

24 as the Secretary shall by regulations prescribe, the infor25 mation described in subsection (b), and such person shall 


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1 maintain (in the location, in the manner, and to the extent 

2 prescribed in regulations) such records as may be appro3 priate to the information described in subsection (b). 

4 ‘‘(b) REQUIRED INFORMATION.—For purposes of 

5 subsection (a), the information described is set forth 

6 below, which information may be modified as appropriate 

7 by the Secretary through regulation— 

8 ‘‘(1) the name, address, and TIN of the licensee 

9 or other person engaged in the business of accepting 

10 any bet or wager, 

11 ‘‘(2) the name, address, and TIN of each per12 son placing a bet or wager with the licensee or other 

13 person engaged in the business of accepting any bet 

14 or wager during the calendar year, 

15 ‘‘(3) the gross winnings, gross wagers, and 

16 gross losses for the calendar year of each person 

17 placing a bet or wager with the licensee or other per18 son engaged in the business of accepting any bet or 

19 wager during the year, 

20 ‘‘(4) the net Internet gambling winnings for 

21 each such person for the calendar year, 

22 ‘‘(5) the amount of tax withheld with respect to 

23 each such person for the calendar year, 


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1 ‘‘(6) beginning and end-of-year account bal2 ances for each such person for the calendar year, 

3 and 

4 ‘‘(7) amounts deposited and withdrawn by each 

5 such person during the calendar year. 

6 ‘‘(c) STATEMENT TO BE FURNISHED TO PERSONS

7 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 

8 Every person required to make a return under subsection 

9 (a) shall furnish to each person whose name is required 

10 to be set forth in such return by reason of placing a bet 

11 or wager a written statement showing— 

12 ‘‘(1) the name, address, and phone number of 

13 the information contact of the person required to 

14 make such return, and 

15 ‘‘(2) the information required to be shown on 

16 such return with respect to each person whose name 

17 is required to be set forth in such return. 

18 The written statement required under the preceding sen19 tence shall be furnished to the person on or before Janu20 ary 31 of the year following the calendar year for which 

21 the return under subsection (a) was required to be made. 

22 ‘‘(d) DEFINITIONS.— 

23 ‘‘(1) NET INTERNET GAMBLING WINNINGS.— 

24 The term ‘net Internet gambling winnings’ means 

25 gross winnings from wagers placed over the Internet 


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1 with a person required to be licensed under section 

2 5382 of chapter 53 of title 31, United States Code, 

3 less the amounts wagered. 

4 ‘‘(2) INTERNET; WAGER.—The terms ‘Internet’ 

5 and ‘wager’ shall have the respective meanings given 

6 such terms by section 5362 of chapter 53 of title 31, 

7 United States Code.’’. 

8 (c) CLERICAL AMENDMENTS.— 

9 (1) The table of subchapters for chapter 36 is 

10 amended by adding at the end the following new 

11 item: 

‘‘SUBCHAPTER E. INTERNET GAMBLING.’’. 

12 (2) The table of sections for subpart B of part 

13 III of subchapter A of chapter 61 is amended by in14 serting after the item relating to section 6050W the 

15 following new item: 

‘‘Sec. 6050X. Returns relating to Internet gambling.’’. 

16 (d) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to bets or wagers placed after the 

18 date of the enactment of this Act. 

19 SEC. 3. WITHHOLDING FROM CERTAIN GAMBLING 

20 WINNINGS. 

21 (a) NET INTERNET GAMBLING WINNINGS.—Para22 graph (3) of section 3406(b) (relating to other reportable 

23 payments for purposes of backup withholding) is amend24 ed— 


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1 (1) by striking ‘‘or’’ in subparagraph (E); 

2 (2) by striking ‘‘.’’ and inserting ‘‘, or’’ at the 

3 end of subparagraph (F); and 

4 (3) by adding at the end thereof the following 

5 new subparagraph: 

6 ‘‘(G) section 6050X(b)(4) (relating to net 

7 Internet gambling winnings).’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to bets or wagers placed after the 

10 date of the enactment of this Act. 

11 SEC. 4. WITHHOLDING OF TAX ON NONRESIDENT ALIENS. 

12 (a) TAX ON NONRESIDENT ALIEN INDIVIDUALS.— 

13 Paragraph (1) of section 871(a) (relating to income not 

14 connected with United States business) is amended— 

15 (1) by striking ‘‘and’’ at the end of subpara16 graph (C), 

17 (2) by inserting ‘‘and’’ at the end of subpara18 graph (D), and 

19 (3) by inserting after subparagraph (D) the fol20 lowing new subparagraph: 

21 ‘‘(E) the gross amount of winnings from 

22 each wager placed over the Internet with a per23 son required to be licensed under section 5382 

24 of chapter 53 of title 31, United States Code 


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1 (as such terms are defined in section 

2 6050X(d)(2)),’’. 

3 (b) EXEMPTION FOR CERTAIN GAMBLING

4 WINNINGS.—Section 871(j) (relating to exemption for cer5 tain gambling winnings) is amended by inserting before 

6 the period at the end the following: ‘‘or to any bets or 

7 wagers placed over the Internet (as such terms are defined 

8 in section 6050X(d)(2))’’. 

9 (c) WITHHOLDING OF TAX ON NONRESIDENT ALIEN

10 INDIVIDUALS.—The first sentence of subsection (b) of sec11 tion 1441 (relating to withholding of tax on nonresident 

12 aliens) is amended by inserting after ‘‘gains subject to tax 

13 under section 871(a)(1)(D),’’ the following: ‘‘the gross 

14 amount of winnings from wagers placed over the Internet 

15 described in section 871(a)(1)(E),’’. 

16 (d) SOURCE OF INTERNET GAMBLING WINNINGS.— 

17 Subsection (a) of section 861 is amending by inserting at 

18 the end thereof the following new paragraph: 

19 ‘‘(9) INTERNET GAMBLING WINNINGS.—Any 

20 Internet gambling winnings received from a licensee 

21 within the meaning of section 5382(3) of title 31, 

22 United States Code.’’. 

23 (e) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to bets or wagers placed after the 

25 date of the enactment of this Act. 


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1 SEC. 5. TERRITORIAL EXTENT. 

2 Paragraph (2) of section 4404 is amended to read 

3 as follows: 

4 ‘‘(2) placed within the United States or any 

5 Commonwealth, territory, or possession thereof by a 

6 United States citizen or resident.’’. 

Æ 


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