I 

110TH CONGRESS 

2D SESSION H. R. 5523 

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

gambling. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 4, 2008 

Mr. MCDERMOTT 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 2008’’. 

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 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. LICENSE FEE ON INTERNET GAMBLING OPERA4 TORS; LICENSEE INFORMATION 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 Operators 

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

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

10 FEE. 

11 ‘‘(a) IN GENERAL.—Each Internet gambling operator 

12 licensed by the Director in accordance with subchapter V 

13 of chapter 53 of title 31, United States Code, shall be re14 quired to pay to the Director by the end of each month 

15 an Internet gambling license fee. 

16 ‘‘(b) INTERNET GAMBLING LICENSE FEE.—For pur17 poses of this section, the Internet gambling license fee is 

18 an amount equal to 2 percent of all funds deposited during 

19 the preceding month with or on behalf of such Internet 

20 gambling operator into an account that can be used for 

21 the purpose of placing a bet or wager. Deposits made by 

22 or on behalf of any such operator of Internet gambling 

23 winnings shall not be treated as a deposit for purposes 

24 of this section. 


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1 ‘‘(c) DISPOSITION.—Amounts paid to the Director as 

2 Internet gambling license fees under this section shall be 

3 deposited in the general fund of the Treasury and treated 

4 as revenue. 

5 ‘‘(d) DIRECT AND EXCLUSIVE OBLIGATION OF LI6 CENSEE.—The Internet gambling license fee shall be the 

7 direct and exclusive obligation of the Internet gambling 

8 operator and may not be deducted from the amounts avail9 able as deposits to the person placing a bet. 

10 ‘‘(e) DIRECTOR.—For purposes of this subchapter, 

11 the term ‘Director’ shall have the meaning given such 

12 term by section 5382 of chapter 53 of title 31, United 

13 States Code. 

14 ‘‘(f) ADMINISTRATIVE PROVISIONS.—To the extent 

15 the Secretary shall by regulations prescribe, the Internet 

16 gambling license fee shall be treated as an excise tax for 

17 purposes of the administrative provisions of this title ap18 plicable to excise taxes imposed by chapter 35.’’. 

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

20 of subchapter A of chapter 61 (relating to information 

21 concerning persons subject to special provisions) is amend22 ed by adding at the end the following new section: 


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1 ‘‘SEC. 6039J. RETURNS OF INTERNET GAMBLING OPERA2 TORS. 

3 ‘‘(a) REQUIREMENT.—Every person who is an Inter4 net gambling operator subject to section 4491 during a 

5 taxable year shall furnish, at such time and in such man6 ner as the Secretary shall by regulations prescribe, the in7 formation described in subsection (b), and such person 

8 shall maintain (in the location, in the manner, and to the 

9 extent prescribed in regulations) such records as may be 

10 appropriate to the information described in subsection (b). 

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

12 subsection (a), the information described in this sub13 section is such information as the Secretary may prescribe 

14 by regulations relating to— 

15 ‘‘(1) the Internet gambling operator’s name, ad16 dress, and tax information number, 

17 ‘‘(2) the name, address, and tax information 

18 number of each person placing a wager with the 

19 Internet gambling operator during the calendar year, 

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

21 gross losses of each such person during the year, 

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

23 each such person, 

24 ‘‘(5) beginning and end-of-year account bal25 ances for each such person, and 


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1 ‘‘(6) amounts deposited and withdrawn by each 

2 such person during the calendar year. 

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

4 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 

5 Every person required to make a return under subsection 

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

7 to be set forth in such return a written statement show8 ing— 

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

10 the information contact of the person required to 

11 make such return, and 

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

13 such return with respect to such person. 

14 The written statement required under the preceding sen15 tence shall be furnished to the person on or before Janu16 ary 31 of the year following the calendar year for which 

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

18 (c) CLERICAL AMENDMENTS.— 

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

20 amended by adding at the end the following new 

21 item: 

‘‘SUBCHAPTER E. INTERNET GAMBLING OPERATORS.’’. 

22 (2) The table of sections for subpart A of part 

23 III of subchapter A of chapter 61 is amended by inVerDate Aug 31 2005 04:07 Mar 05, 2008 Jkt 069200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5523.IH H5523

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1 serting after the item relating to section 6039I the 

2 following new item: 

‘‘Sec. 6039J. Returns of Internet gambling operators.’’. 

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

4 this section shall apply to wagers made after December 

5 31, 2008. 

6 SEC. 3. WITHHOLDING FROM CERTAIN GAMBLING 

7 WINNINGS. 

8 (a) NET INTERNET GAMBLING WINNINGS.—Para9 graph (3) of section 3402(q) (relating to extension of with10 holding to certain gambling winnings) is amended by add11 ing at the end thereof the following new subparagraph: 

12 ‘‘(D) NET INTERNET GAMBLING

13 WINNINGS.—Proceeds of net Internet gambling 

14 winnings of more than $5,000 in any one cal15 endar year.’’. 

16 (b) NO EXEMPTION FOR CERTAIN WINNINGS.— 

17 Paragraph (5) of section 3402(q) is amended by inserting 

18 ‘‘(other than winnings described in paragraph (3)(D)’’ 

19 after ‘‘winnings’’. 

20 (c) DEFINITIONS.—Subsection (q) of section 3402 is 

21 amended by redesignating paragraph (7) as paragraph (8) 

22 and by inserting after paragraph (6) the following new 

23 paragraph: 

24 ‘‘(7) PROCEEDS OF NET INTERNET GAMBLING

25 WINNINGS.—For purposes of this subsection— 


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1 ‘‘(A) IN GENERAL.—The term ‘proceeds of 

2 net Internet gambling winnings’ means 

3 amounts of net Internet gambling winnings 

4 withdrawn from an account established for the 

5 purpose of Internet gambling. 

6 ‘‘(B) NET INTERNET GAMBLING

7 WINNINGS.—The term ‘net Internet gambling 

8 winnings’ means gross winnings from a wager 

9 placed over the Internet with a person required 

10 to be licensed under section 5382 of chapter 53 

11 of title 31, United States Code, less the amount 

12 wagered. 

13 ‘‘(C) INTERNET; WAGER.—The terms 

14 ‘Internet’ and ‘wager’ shall have the respective 

15 meanings given such terms by section 5382 of 

16 chapter 53 of title 31, United States Code.’’. 

17 (d) BACKUP WITHHOLDING.—Section 3406 (relating 

18 to backup withholding) is amended by redesignating sub19 section (i) as subsection (j) and by adding the following 

20 new subsection: 

21 ‘‘(i) For purposes of this section, net Internet gam22 bling winnings shall be treated as other reportable pay23 ments, an Internet gambling operator shall be treated as 

24 payor, and the person placing a wager with an Internet 

25 gambling operator shall be treated as payee. For purposes 


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1 of the preceding sentence, terms used in such sentence 

2 which are also used in section 3402(q)(7) shall have the 

3 meanings given such terms by such section.’’. 

4 (e) EFFECTIVE DATE.—The amendment made by 

5 this section shall apply to wagers placed with a licensee 

6 after December 31, 2008. 

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

8 (a) TAX ON NONRESIDENT ALIEN INDIVIDUALS.— 

9 Subparagraph (A) of section 871(a)(1) (relating to income 

10 not connected with United States business—30 percent 

11 tax) is amended— 

12 (1) by striking ‘‘and other fixed’’ and inserting 

13 ‘‘, other fixed’’, and 

14 (2) by adding ‘‘and net Internet gambling in15 come,’’ at the end. 

16 (b) EXEMPTION FOR CERTAIN GAMBLING

17 WINNINGS.—Section 871(j) (relating to exemption for cer18 tain gambling winnings) is amended by inserting before 

19 the period at the end the following: ‘‘or to any wagers 

20 placed over the Internet (as such terms are defined in sec21 tion 3402(q)(7))’’. 

22 (c) WITHHOLDING OF TAX ON NONRESIDENT ALIEN

23 INDIVIDUALS.—The first sentence of subsection (b) of sec24 tion 1441 (relating to withholding of tax on nonresident 

25 aliens) is amended— 


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1 (1) by striking ‘‘and gains on transfers’’ and in2 serting ‘‘gains on transfers’’, and 

3 (2) by inserting before the period at the end the 

4 following: ‘‘, and proceeds of net Internet gambling 

5 winnings (as defined in section 3402(q)(7)) of more 

6 than $5,000 in any one calendar year’’. 

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

8 this section shall apply to wagers placed with a licensee 

9 after December 31, 2008. 

10 SEC. 5. TAX ON WAGERS. 

11 (a) PERSONS LIABLE FOR TAX.—Subsection (c) of 

12 section 4401 (relating to persons liable for tax on wagers) 

13 is amended by adding at the end thereof the following sen14 tence: ‘‘Any person placing a wager with a person who 

15 is required to obtain a license within the meaning of sec16 tion 4491 but who has failed to obtain such license shall 

17 be liable for and pay the tax under this subchapter on 

18 all such wagers.’’. 

19 (b) TERRITORIAL EXTENT.—Paragraph (2) of sec20 tion 4404 is amended to read as follows: 

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

22 Commonwealth, territory, or possession thereof by a 

23 United States citizen or resident.’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to wagers made after December 

3 31, 2008. 

Æ 


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