Internet Gambling Regulation and Tax Enforcement Act of 2013

To amend the Internal Revenue Code of 1986 to regulate and tax Internet gambling, and for other purposes. 1. Short title; amendment of 1986 Code (a) Short Title This Act may be cited as the Internet Gambling Regulation and Tax Enforcement Act of 2013 (b) Amendment of 1986 Code Except as otherwise expressly provided, whenever in this Act an amendment is expressed in terms of an amendment of a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. 2. Tax on Internet gambling (a) In general Chapter 36 (relating to certain other excise taxes) is amended by adding at the end the following new subchapter: E Internet Gambling Sec. 4491. Imposition of Internet gambling license tax. Sec. 4492. Record requirements. Sec. 4493. Elective State and Indian tribal government online gambling tax. Sec. 4494. Regulations. 4491. Imposition of Internet gambling license tax (a) Internet gambling licensee (1) In general There is hereby imposed a tax on each Internet gambling licensee in an amount equal to 4 percent of all funds deposited by customers making deposits while located within the United States during the preceding month into an account maintained by that Internet gambling licensee or any agent of that licensee that can be used for the purpose of placing a bet or wager as defined in section 5362(1) (2) Persons liable for tax The tax imposed by subsection (a) shall be the direct and exclusive obligation of the Internet gambling operator and may not be deducted from the amounts available as deposits to the person placing a bet. Notwithstanding the preceding sentence, any person making a deposit for the purpose of placing a bet or wager with a person who is required but has failed to obtain a license pursuant to subchapter V of chapter 53 (b) Unauthorized bets or wagers (1) In general There is hereby imposed a tax on any person who accepts a bet or wager and who is not authorized pursuant to section 5383(b) (2) Amount of tax The amount of such tax shall be equal to 50 percent of all funds deposited into an account that can be used for placing a bet or wager within the meaning of section 5362(1) (c) Credits for returns of funds (1) In general There shall be allowed as a credit against the tax imposed by this section an amount equal to the sum of the following taxes which are paid on any funds returned by or on behalf of an Internet gambling licensee to the account of a customer: (A) The tax imposed by this section. (B) Any State or Indian tribal Internet gambling tax imposed under section 4493(b). (C) Any tax imposed on overseas Internet gambling under section 4493(d). (2) Limitation The amount allowed as a credit under paragraph (1) with respect to a customer may not exceed 12 percent of the funds received in deposits from the customer. (d) When due The tax imposed by this section shall be due at by the end of each calendar month with respect to deposits during the preceding month. (e) Definitions and special rules For purposes of this subchapter— (1) Internet gambling licensee The term Internet gambling licensee section 5382 (2) Deposits Deposits made by or on behalf of an Internet gambling licensee of Internet gambling winnings or returns of funds by or on behalf of an Internet gambling licensee to the account of a customer shall not be treated as a deposit for purposes of this section. 4492. Record requirements Each person liable for taxes under this subchapter, except for a person making a deposit who is liable for taxes pursuant to section 4491(a)(2), shall keep a daily record showing deposits (within the meaning of this subchapter), in addition to all other records required pursuant to section 6001. 4493. Elective State and Indian tribal government online gambling tax (a) In general (1) Payment of State and Indian tribal government tax On a monthly basis, each Internet gambling licensee shall pay to each qualified State and each qualified Indian tribal government an amount equal to the monthly pro rata State and Indian tribal government online gambling tax. (2) Monthly pro rata online gambling tax For purposes of this section, with respect to a qualified State and a qualified Indian tribal government for any calendar month, the monthly pro rata online gambling tax is the amount of the taxes described in subsection (b) received with respect to such calendar month. (3) Qualified State; qualified Indian tribal government (A) In general For purposes of this section, the terms qualified State qualified Indian tribal government (B) State election not to affect tribal election An election by a State under subparagraph (A) to receive funds under this section shall not constitute an election to be so included on behalf of any Indian tribe located within or partially within the geographic boundaries of such State. (C) Revocation of State or Tribal election (i) In general A State or Indian Tribal government may revoke its election by notice provided by the Governor, principal chief, or other chief executive officer and in such form and manner as the Secretary may prescribe. (ii) Timing of revocation Revocation of state election shall take effect the later of 6 months after receipt by the Secretary of such revocation, or on January 1st of the year following receipt by the Secretary of such revocation. (D) State The term State (E) Indian tribal government The term Indian tribal government (4) Time of payments The payment made under this subsection with respect to any calendar month shall be made not later than the 11th day of the succeeding calendar month. (5) List of qualified States and qualified Indian tribal governments The Secretary shall maintain a current list of qualified States and qualified Indian tribal governments and shall publish such list online. (b) State and Indian Tribal Government Online Gambling tax The State and Indian tribal government online gambling tax shall be an amount equal to 8 percent of all deposited funds deposited by customers located in each qualified state or area subject to the jurisdiction of a qualified Indian tribal government at the time of the deposit. (c) Effect of acceptance of tax Acceptance by a State or Indian tribal government of the State and Indian tribal government online gambling tax shall relieve Internet gambling licensees from the obligation to pay any other fee or tax to the State or Indian tribal government relating to its online gambling services, except for— (1) applicable State individual and corporate income taxes, which shall be unaffected by the election, and (2) any fees associated with an Internet gambling licensee’s choice to rely on a State or Indian tribal regulatory body certification of suitability in connection with a Federal online gambling licensing application. (d) Overseas internet gambling tax There is hereby imposed a tax on each Internet gambling licensee in an amount equal to 12 percent of all funds deposited by customers making deposits while located without the United States during the preceding month into an account maintained by that Internet gambling licensee or any agent of that licensee that can be used for the purpose of placing a bet or wager as defined in section 5362(1) 4494. Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this subchapter. . (b) Clerical amendment The table of subchapters for chapter 36 Subchapter E. Internet Gambling. . (c) Effective date The amendments made by this section shall apply to bets or wagers placed after the date of the enactment of this Act. 3. Internet Gambling Licensee information reporting (a) In general Subpart A of part III of subchapter A of chapter 61 (relating to information concerning persons subject to special provisions) is amended by adding at the end the following new section: 6050X. Returns relating to Internet gambling (a) Requirement Every person who is an Internet gambling licensee or who otherwise is engaged in the business of accepting any bet or wager within the meaning of section 5382(1) (b) Required information For purposes of subsection (a), the information described is set forth below, which information may be modified as appropriate by the Secretary through regulation— (1) the name, address, and TIN of the Internet gambling licensee or other person engaged in the business of accepting any bet or wager, (2) the name, address, and TIN of each person placing a bet or wager with the Internet gambling licensee or other person engaged in the business of accepting any bet or wager during the calendar year, (3) the gross winnings, gross wagers, and gross losses for the calendar year of each person placing a bet or wager with the Internet gambling licensee or other person engaged in the business of accepting any bet or wager during the year, (4) the net Internet gambling winnings for each such person for the calendar year, (5) the amount of tax withheld with respect to each such person for the calendar year, (6) beginning and end-of-year account balances for each such person for the calendar year, and (7) amounts deposited and withdrawn by each such person during the calendar year. (c) Statement To be furnished to persons with respect to whom information is required Every person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return by reason of placing a bet or wager a written statement showing— (1) the name, address, and phone number of the information contact of the person required to make such return, and (2) the information required to be shown on such return with respect to each person whose name is required to be set forth in such return. The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made. (d) Definitions (1) Internet gambling licensee The term Internet gambling licensee (2) Net internet gambling winnings The term net Internet gambling winnings chapter 53 (3) Internet; wager The terms Internet wager chapter 53 . (b) The table of sections for subpart B of part III of subchapter A of chapter 61 Sec. 6050X. Returns relating to Internet gambling. . 4. Withholding from certain gambling winnings (a) Net internet gambling winnings Paragraph (3) of section 3406(b) (relating to other reportable payments for purposes of backup withholding) is amended— (1) by striking or (2) by striking . , or (3) by adding at the end thereof the following new subparagraph: (G) section 6050X(b)(4) (relating to net Internet gambling winnings). . (b) Effective date The amendment made by this section shall apply to bets or wagers placed after the date of the enactment of this Act. 5. Withholding of tax on nonresident aliens (a) Tax on nonresident alien individuals Paragraph (1) of section 871(a) (relating to income not connected with United States business) is amended— (1) by striking and (2) by inserting and (3) by inserting after subparagraph (D) the following new subparagraph: (E) the gross amount of winnings from each wager placed over the Internet with a person required to be licensed under section 5382 of chapter 53 . (b) Exemption for certain gambling winnings Section 871(j) (relating to exemption for certain gambling winnings) is amended by inserting before the period at the end the following: or to any bets or wagers placed over the Internet (as such terms are defined in section 6050X(d)(2)) (c) Withholding of tax on nonresident alien individuals The first sentence of subsection (b) of section 1441 (relating to withholding of tax on nonresident aliens) is amended by inserting after gains subject to tax under section 871(a)(1)(D), the gross amount of winnings from wagers placed over the Internet described in section 871(a)(1)(E), (d) Source of internet gambling winnings Subsection (a) of section 861 is amending by inserting at the end thereof the following new paragraph: (10) Internet gambling winnings Any Internet gambling winnings received from an Internet gambling licensee (as defined by section 4491(d)(1)). . (e) Effective date The amendments made by this section shall apply to bets or wagers placed after the date of the enactment of this Act. 6. Territorial extent (a) In general Paragraph (2) of section 4404 (2) placed within the United States, or any Commonwealth, territory, or possession thereof, by a person who is a United States citizen or resident. . (b) Effective date The amendment made by subsection (a) shall apply to wagers made after December 31, 2012. 7. Foreign licensees subject to United States Federal income tax (a) Nonresident alien individuals Section 872 (c) Income earned by nonresident alien individuals operating internet gambling facilities (1) Treatment as United States trade or business For purposes of this title, a nonresident alien individual who is a licensee or operates an Internet gambling facility for which a license is required under section 103 of the Internet Gambling Regulation and Enforcement Act of 2013 at any time during a taxable year shall be deemed to be engaged in the conduct of a trade or business within the United States during the taxable year. (2) Treatment of gross income as effectively connected income For purposes of this title, all gross income related to domestic wagers that are placed over the Internet shall be deemed to be effectively connected with the licensee’s trade or business within the United States. (3) Treatment of gross income as attributable to permanent establishment For purposes of any applicable United States income tax treaty, a nonresident alien individual who is a licensee or operates an Internet gambling facility for which a license is required under section 103 of the Internet Gambling Regulation and Enforcement Act of 2013 at any time during a taxable year shall be deemed to have a permanent establishment located in the United States, and all gross income arising from domestic wagers that are placed over the Internet shall be treated as attributable to the permanent establishment of such nonresident alien individual. (4) Definitions For purposes of this subsection— (A) Domestic wager The term domestic wager (B) Wager The term wager bet or wager (C) Internet The term Internet section 5362(5) . (b) Foreign corporations Section 882 (1) redesignating subsections (e) and (f) as subsections (f) and (g), respectively, and (2) by inserting after subsection (d) the following: (e) Income earned by foreign corporations operating internet gambling facilities (1) Treatment as United States trade or business For purposes of this title, a foreign corporation that is a licensee or operates an Internet gambling facility for which a license is required under section 103 of the Internet Gambling Regulation and Enforcement Act of 2013 at any time during a taxable year shall be deemed to be engaged in the conduct of a trade or business within the United States during the taxable year. (2) Treatment of gross income as effectively connected income For purposes of this title, all gross income related to domestic wagers that are placed over the Internet shall be deemed to be effectively connected with the licensee’s trade or business within the United States. (3) Treatment of gross income as attributable to permanent establishment For purposes of any applicable United States income tax treaty, a foreign corporation that is a licensee or operates an Internet gambling facility for which a license is required under section 103 of the Internet Gambling Regulation and Enforcement Act of 2013 at any time during a taxable year shall be deemed to have a permanent establishment located in the United States, and all gross income arising from domestic wagers that are placed over the Internet shall be treated as attributable to the permanent establishment of such foreign corporation. (4) Definitions (A) Domestic wager The term domestic wager (B) Wager The term wager bet or wager (C) Internet The term Internet section 5362(5) . (c) Effective date The amendment made by this section shall apply to payments made after the date of the enactment of this Act. 8. American Heritage Program (a) Implementation of program From funds appropriated to the American Heritage Block Grant Fund for a fiscal year, the Secretary of the Treasury shall make grants to eligible States to carry out an American Heritage Program through State arts agencies. (b) Allotment of funds Funds allotted for a fiscal year shall be allotted among eligible States in the same proportion as funds are allotted among the States under section 5(g)(3) of the National Foundation on the Arts and the Humanities Act of 1965 ( 20 U.S.C. 954(g)(3) (c) Eligibility To receive grants To be eligible to receive a grant under subsection (a) for a fiscal year, a State shall submit to the Secretary an application in such form, and containing such information and assurances, as the Secretary may require by rule, including assurances that— (1) not more than 80 percent of the cost of any qualified activity carried out under this section shall be paid with such grant, and (2) not more that 20 percent of such grant may be expended for administrative costs. (d) Definitions For purposes of this section— (1) the term American Heritage Program (2) the term Secretary (3) the term State 20 U.S.C. 953 (4) the term State arts agency 20 U.S.C. 951 et seq. (5) the term qualified activities (e) American Heritage Block Grant Fund (1) Establishment There is established in the Treasury of the United States a trust fund to be known as the American Heritage Block Grant Fund (2) Transfer to Fund There are appropriated to the American Heritage Block Grant Fund amounts equal to .5 percent of the taxes received by the Treasury after December 31, 2012, that the Secretary determines are attributable to Internet gambling. (3) Method of transfer The amounts appropriated by paragraph (1) shall be transferred from time to time from the general fund of the Treasury. Such amounts shall be determined on the basis of estimates by the Secretary of the taxes, specified in paragraph (1), paid to or deposited into the Treasury. Proper adjustments shall be made in amounts subsequently transferred to the extent prior estimates are in excess of or are less than the taxes specified in paragraph (1). (4) Expenditures from American Heritage Block Grant Fund Amounts in the American Heritage Block Grant Fund shall be available, as provided by appropriation Acts, for making expenditures to carry out subsection (a). 9. Block grants to States for transitional assistance The Social Security Act is amended by adding at the end the following new title: XXII Block grants to States for transitional assistance 2201. Transitional Assistance Trust Fund (a) Creation of trust fund There is established in the Treasury of the United States a trust fund to be known as the Transitional Assistance Trust Fund (b) Transfer to Transitional Assistance Trust Fund of amounts equivalent to certain taxes (1) In general There are hereby appropriated to the Transitional Assistance Trust Fund, out of any money in the Treasury not otherwise appropriated, amounts equivalent to 25 percent of the taxes received in the Treasury after December 31, 2012, that the Secretary of the Treasury determines are attributable to Internet gambling. (2) Method of transfer The amounts appropriated by paragraph (1) shall be transferred from time to time from the general fund in the Treasury to the Transitional Assistance Trust Fund. Such amounts shall be determined on the basis of estimates by the Secretary of the Treasury of the taxes, specified in paragraph (1) of this subsection, paid to or deposited into the Treasury. Proper adjustments shall be made in amounts subsequently transferred to the extent prior estimates were in excess of or were less than the taxes specified in paragraph (1) of this subsection. (c) Expenditures from Transitional Assistance Trust Fund Amounts in the Transitional Assistance Trust Fund shall be available, as provided by appropriation Acts, for making expenditures to carry out section 2202. 2202. Transitional assistance grant program (a) In general Each State shall be entitled to a payment under this section for each fiscal year in an amount equal to its allotment for such fiscal year, to be used by such State to carry out the State’s plan for transitional assistance described in subsection (c), subject to the requirements of this section. (b) Plan approval required No State may receive a payment under this section unless the State submits the State’s plan for transitional assistance described in subsection (c) to the Secretary and the Secretary approves such plan. (c) State plan for transitional assistance A State plan for transitional assistance is described by this subsection if the plan— (1) provides for expanded education opportunities for individuals who are, or were formerly, in foster care, including streamlining and coordinating education financing opportunities and providing counseling and assistance to such individuals for the purpose of ensuring completion of their academic goals; (2) provides for job training opportunities for individuals who are, or were formerly, in foster care; (3) provides, primarily through expanding access to and investment in community colleges, for expanded post-secondary education and job training opportunities that lead to a certificate, for individuals who are working in, or had worked in, declining sectors of the economy, as defined by the Secretary, and who want to pursue a new career in a sector of the economy with the potential for high wages and high growth, as defined by the Secretary; and (4) provides a subsidy for the use of public transportation by— (A) individuals qualifying for benefits or services under title XX, including the Federal-State Unemployment Insurance Program; and (B) individuals participating in programs under the Workforce Investment Act. (d) Allotment The allotment for a fiscal year for a State receiving an allotment for such fiscal year shall be an amount equal to— (1) the amount appropriated for such fiscal year under subsection (f), multiplied by (2) the ratio by which the population of the State bears to the population of all the States receiving an allotment for such fiscal year as determined by the Secretary (on the basis of the most recent data available from the Department of Commerce). (e) Definitions For purposes of this section: (1) In foster care The term in foster care (2) Secretary The term Secretary (3) State The term State (f) Authorization of appropriations There are authorized to be appropriated for each fiscal year to the Secretary the amount deposited into the Transitional Assistance Trust Fund pursuant to section 2201 to carry out this section. .

Summary: Internet Gambling Regulation and Tax Enforcement Act of 2013 - Amends the Internal Revenue Code, with respect to the taxation of Internet gambling transactions, to: impose a tax on Internet gambling licensees equal to 4% of all funds deposited by their customers while located within the United States into accounts maintained by such licensees; impose an additional 50% tax on unauthorized bets or wagers; require Internet gambling licensees to keep daily records of gambling deposits and file informational returns identifying themselves and the individuals placing bets or wagers with them; require Internet gambling licensees to pay state and Indian tribal governments an amount equal to the monthly pro rata state and Indian tribal government online gambling tax; impose a tax on each Internet gambling licensee equal to 12% of all funds deposited by customers making deposits while located outside the United States into an account maintained by such licensee; require withholding of tax on net Internet gambling winnings and on the gross amount of winnings of nonresident aliens; extend the excise tax on wagers to include wagers placed within any commonwealth, territory, or possession of the United States by a U.S. citizen or resident; and make income earned by nonresident alien individuals and foreign corporations that are licensees of, or operating, an Internet gambling facility subject to U.S. taxation. Directs the Secretary of the Treasury to make grants to states to carry out an American Heritage Program through state arts agencies. Allocates .5% of the tax revenues received after December 31, 2012, that are attributable to Internet gambling to the American Heritage Block Grant Fund to finance the American Heritage Program. Amends the Social Security Act to establish the Transitional Assistance Trust Fund to finance state plans for transitional education and job training assistance to individuals who are, or were formerly, in foster care. Allocates 25% of the tax revenues received after December 31, 2012, that are attributable to Internet gambling to the Trust Fund.