I 
112TH CONGRESS 
1ST SESSION H. R. 2230 
To amend the Internal Revenue Code of 1986 to regulate and tax Internet 
gambling. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 16, 2011 
Mr. MCDERMOTT (for himself, Mr. CAMPBELL, and Mr. FRANK of Massachu-
setts) introduced the following bill; which was referred to the Committee 
on Ways and Means, and in addition to the Committee on Education and 
the Workforce, for a period to be subsequently determined by the Speak-
er, in each case for consideration of such provisions as fall within the ju-
risdiction of the committee concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to regulate 
and tax Internet gambling. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 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 2011’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
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ment 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 Rev-
enue Code of 1986. 
SEC. 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: 
‘‘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. 
‘‘SEC. 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 2 percent of all funds deposited by cus-
tomers 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 sec-
tion 5362(1) of title 31, United States Code. 
‘‘(2) PERSONS LIABLE FOR TAX.—The tax im-
posed by subsection (a) shall be the direct and exclu-
sive obligation of the Internet gambling operator and 
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may not be deducted from the amounts available as 
deposits to the person placing a bet. Notwith-
standing 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 ob-
tain a license pursuant to subchapter V of chapter 
53 of title 31, United States Code, shall be liable for 
and pay the tax under this subchapter on all such 
deposits, but such liability shall not excuse any fail-
ure to pay the tax on the part of the person who is 
required but has failed to obtain such license. The 
person making the deposit shall not be liable for the 
tax on deposits in cases of fraud. 
‘‘(b) UNAUTHORIZED BETS OR WAGERS.— 
‘‘(1) IN GENERAL.—There is hereby imposed a 
tax on any person that is not authorized pursuant 
to section 5383(b) of title 31, United States Code, 
to accept bets and wagers. 
‘‘(2) AMOUNT OF TAX.—The amount of such 
tax shall be equal to 50 percent of all funds depos-
ited into an account that can be used for placing a 
bet or wager within the meaning of section 5362(1) 
of that title. 
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‘‘(c) 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. 
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) INTERNET
GAMBLING
LICENSEE.—The 
term ‘Internet gambling licensee’ means a licensee, 
as defined in section 5382 of title 31, United States 
Code. 
‘‘(2) DEPOSITS.—Deposits made by or on be-
half of an Internet gambling licensee of Internet 
gambling winnings or returns of funds by or on be-
half of an Internet gambling licensee to the account 
of a customer shall not be treated as a deposit for 
purposes of this section. 
‘‘SEC. 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 sub-
chapter), in addition to all other records required pursuant 
to section 6001. 
‘‘SEC. 4493. ELECTIVE STATE AND INDIAN TRIBAL GOVERN-
MENT ONLINE GAMBLING TAX. 
‘‘(a) IN GENERAL.— 
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‘‘(1) PAYMENT OF STATE AND INDIAN TRIBAL 
GOVERNMENT
TAX.—On a monthly basis, each 
Internet gambling licensee shall pay to each quali-
fied State and each qualified Indian tribal govern-
ment 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 gov-
ernment 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’ and ‘quali-
fied Indian tribal government’ mean a State or 
an Indian tribal government, respectively, for 
which an election to receive funds under this 
section is in effect. Notice of such election shall 
be provided by the Governor, principal chief, or 
other chief executive officer in such form and 
manner as the Secretary may prescribe. 
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‘‘(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 lo-
cated 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, prin-
cipal chief, or other chief executive officer 
and in such form and manner as the Sec-
retary may prescribe. 
‘‘(ii) TIMING OF REVOCATION.—Rev-
ocation of state election shall take effect 
the later of 6 months after receipt by the 
Secretary of such revocation, or on Janu-
ary 1st of the year following receipt by the 
Secretary of such revocation. 
‘‘(D) STATE.—The term ‘State’ means any 
State, the District of Columbia, or any com-
monwealth, territory or other possession of the 
United States. 
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‘‘(E) INDIAN TRIBAL GOVERNMENT.—The 
term ‘Indian tribal government’ means the gov-
ernment of an Indian tribe (within the meaning 
of section 4 of the Indian Gaming Regulatory 
Act). 
‘‘(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 QUALI-
FIED
INDIAN
TRIBAL
GOVERNMENTS.—The Sec-
retary 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 ON-
LINE GAMBLING TAX.—The State and Indian tribal gov-
ernment online gambling tax shall be an amount equal to 
6 percent of all deposited funds deposited by customers 
located in each qualified state or area subject to the juris-
diction 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 
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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 elec-
tion, and 
‘‘(2) any fees associated with an Internet gam-
bling 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. 
‘‘SEC. 4494. REGULATIONS. 
‘‘The Secretary shall prescribe such regulations as 
may be necessary or appropriate to carry out this sub-
chapter.’’. 
(b) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 36 is amended by adding at the end 
the following new item: 
‘‘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. 
SEC. 3. INTERNET GAMBLING LICENSEE INFORMATION RE-
PORTING. 
(a) IN GENERAL.—Subpart A of part III of sub-
chapter A of chapter 61 (relating to information con-
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cerning persons subject to special provisions) is amended 
by adding at the end the following new section: 
‘‘SEC. 6050X. RETURNS RELATING TO INTERNET GAMBLING. 
‘‘(a) REQUIREMENT.—Every person who is an Inter-
net gambling licensee or who otherwise is engaged in the 
business of accepting any bet or wager within the meaning 
of section 5362(1) of title 31, United States Code, during 
a taxable year shall furnish, at such time and in such man-
ner as the Secretary shall by regulations prescribe, the in-
formation described in subsection (b), and such person 
shall maintain (in the location, in the manner, and to the 
extent prescribed in regulations) such records as may be 
appropriate to the information described in subsection (b). 
‘‘(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 Inter-
net gambling licensee or other person engaged in the 
business of accepting any bet or wager, 
‘‘(2) the name, address, and TIN of each per-
son placing a bet or wager with the Internet gam-
bling licensee or other person engaged in the busi-
ness of accepting any bet or wager during the cal-
endar year, 
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‘‘(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 bal-
ances 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 
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‘‘(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 sen-
tence shall be furnished to the person on or before Janu-
ary 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’ has the meaning 
given such term by section 4491(d)(1). 
‘‘(2) NET INTERNET GAMBLING WINNINGS.— 
The term ‘net Internet gambling winnings’ means 
gross winnings from wagers placed over the Internet 
with a person required to be licensed under section 
5382 of chapter 53 of title 31, United States Code, 
less the amounts wagered. 
‘‘(3) INTERNET; WAGER.—The terms ‘Internet’ 
and ‘wager’ shall have the respective meanings given 
such terms by section 5362 of chapter 53 of title 31, 
United States Code.’’. 
(b) The table of sections for subpart B of part III 
of subchapter A of chapter 61 is amended by inserting 
after the item relating to section 6050W the following new 
item: 
‘‘Sec. 6050X. Returns relating to internet gambling.’’. 
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SEC. 
4. 
WITHHOLDING 
FROM 
CERTAIN 
GAMBLING 
WINNINGS. 
(a) NET INTERNET GAMBLING WINNINGS.—Para-
graph (3) of section 3406(b) (relating to other reportable 
payments for purposes of backup withholding) is amend-
ed— 
(1) by striking ‘‘or’’ in subparagraph (E); 
(2) by striking ‘‘.’’ and inserting ‘‘, or’’ at the 
end of subparagraph (F); and 
(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. 
SEC. 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’’ at the end of subpara-
graph (C), 
(2) by inserting ‘‘and’’ at the end of subpara-
graph (D), and 
(3) by inserting after subparagraph (D) the fol-
lowing new subparagraph: 
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‘‘(E) the gross amount of winnings from 
each wager placed over the Internet with a per-
son required to be licensed under section 5382 
of chapter 53 of title 31, United States Code 
(as 
such 
terms 
are 
defined 
in 
section 
6050X(d)(2)),’’. 
(b) 
EXEMPTION
FOR
CERTAIN
GAMBLING 
WINNINGS.—Section 871(j) (relating to exemption for cer-
tain 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 sec-
tion 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 following: ‘‘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 Inter-
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