I 
111TH CONGRESS 
2D SESSION 
H. R. 4976 
To amend the Internal Revenue Code of 1986 to regulate and tax Internet 
gambling. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 25, 2010 
Mr. MCDERMOTT (for himself, Mr. LARSON of Connecticut, Mr. FRANK of 
Massachusetts, and Mr. BLUMENAUER) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committee on Education and Labor, for a period to be subse-
quently determined by the Speaker, in each case for consideration of such 
provisions as fall within the jurisdiction 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 2010’’. 
(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 fee. 
‘‘Sec. 4492. Record requirements. 
‘‘Sec. 4493. Elective State and Indian tribal government online gambling fee. 
‘‘SEC. 4491. IMPOSITION OF INTERNET GAMBLING LICENSE 
FEE. 
‘‘(a) FEDERAL FEE.—Each licensee within the mean-
ing of section 5382 of title 31, United States Code, (here-
after in this subchapter referred to as ‘licensee’) shall be 
required to pay an Internet gambling license fee by the 
end of each calendar month in an amount equal to two 
percent of all funds deposited by customers during the 
preceding month into an account maintained by that li-
censee 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) of title 31, United States Code. 
‘‘(b) DEPOSITS.—Deposits made by or on behalf of 
a licensee of Internet gambling winnings or returns of 
funds by or on behalf of a licensee to the account of a 
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customer shall not be treated as a deposit for purposes 
of this section. 
‘‘(c) PERSONS LIABLE FOR FEE.—The Internet gam-
bling license fee shall be the direct and exclusive obligation 
of the Internet gambling operator and may not be de-
ducted from the amounts available as deposits to the per-
son placing a bet. Notwithstanding the foregoing, any per-
son 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 fee under this subchapter on all such deposits, but 
such liability shall not excuse any failure to pay the fee 
on the part of the person who is required but has failed 
to obtain such license. 
‘‘(d) UNAUTHORIZED BETS OR WAGERS.—There is 
hereby imposed a fee in an amount 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) of title 31, United States Code, with any person 
that is not authorized pursuant to section 5382 of that 
title. Such tax is due by the end of each calendar month 
with respect to deposits during the preceding month. 
‘‘(e) DISPOSITION.—Amounts paid as Internet gam-
bling license fees or on unauthorized bets or wagers under 
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this section shall be deposited in the general fund of the 
Treasury and treated as revenue. 
‘‘(f) ADMINISTRATIVE PROVISIONS.—Except to the 
extent the Secretary shall by regulations prescribe, the 
fees imposed by this section shall be subject to the admin-
istrative provisions of this title applicable to excise taxes 
imposed by chapter 35. 
‘‘SEC. 4492. RECORD REQUIREMENTS. 
‘‘Each person liable for fees under this subchapter, 
except for a person making a deposit who is liable for fees 
pursuant to section 4491(e), shall keep a daily record 
showing deposits as defined in this subchapter, in addition 
to all other records required pursuant to section 6001(a). 
‘‘SEC. 4493. ELECTIVE STATE AND INDIAN TRIBAL GOVERN-
MENT ONLINE GAMBLING FEE. 
‘‘(a) IN GENERAL.— 
‘‘(1) PAYMENT OF STATE AND INDIAN TRIBAL 
GOVERNMENT FEE.—On a monthly basis, each li-
censee shall pay to each qualified State and each 
qualified Indian tribal government an amount equal 
to the monthly pro rata State and Indian tribal gov-
ernment online gambling fee amount. 
‘‘(2) MONTHLY PRO RATA ONLINE GAMBLING 
FEE AMOUNT.—For purposes of this section, with 
respect to a qualified State and a qualified Indian 
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tribal government for any calendar month, the 
monthly pro rata online gambling fee amount is the 
amount of the fees described in subsection (b) re-
ceived with respect to such calendar month that are 
attributable to deposits for online wagers made by 
persons residing within the jurisdiction of such State 
or Indian tribal government. 
‘‘(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, that 
has not elected (by notice provided by the Gov-
ernor, principal chief, or other chief executive 
officer and in such form and manner as the 
Secretary may prescribe) to be excluded from 
the receipt of funds under this section. 
‘‘(B) STATE
ELECTION
NOT
TO
AFFECT 
TRIBAL
ELECTION.—An election by a State 
under subparagraph (A) to be excluded from 
the receipt of funds under this section shall not 
constitute an election to be so excluded on be-
half of any Indian tribe located within or par-
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tially within the geographic boundaries of such 
State. 
‘‘(C) APPLICABILITY
OF
ELECTION.—An 
election made under subparagraph (A) shall be 
effective— 
‘‘(i) upon receipt by the Secretary, if 
such election is received within 90 days of 
the date of the enactment of the section; 
and 
‘‘(ii) in any other case, on the first 
January 1 that occurs at least 60 days 
after the later of— 
‘‘(I) the receipt of such election 
by the Secretary; or 
‘‘(II) the effective date specified 
in such election. 
‘‘(D) STATE.—The term ‘State’ means any 
State, the District of Columbia, or any com-
monwealth, territory or other possession of the 
United States. 
‘‘(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). 
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‘‘(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. 
‘‘(b) STATE AND INDIAN TRIBAL GOVERNMENT ON-
LINE GAMBLING FEE.—The State and Indian tribal gov-
ernment online gambling fee shall be an amount equal to 
6 percent of all deposited funds deposited by customers 
residing in each State or area subject to the jurisdiction 
of an Indian tribal government. 
‘‘(c) EFFECT OF ACCEPTANCE OF FEE.—Acceptance 
by a State or Indian tribal government of the State and 
Indian tribal government online gambling fee shall relieve 
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 elec-
tion, and 
‘‘(2) any fees associated with a licensee’s choice 
to rely on a State or Indian tribal regulatory body 
certification of suitability in connection with a Fed-
eral online gambling licensing application.’’. 
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(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 
‘‘Sec. 4491. Imposition of Internet gambling license fee. 
‘‘Sec. 4492. Record requirements. 
‘‘Sec. 4493. Elective State and Indian tribal government online gambling fee.’’. 
(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. LICENSEE INFORMATION REPORTING. 
(a) IN GENERAL.—Subpart A of part III of sub-
chapter A of chapter 61 (relating to information con-
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 a licensee 
(within the meaning of section 5382(3) of title 31, United 
States Code) or who otherwise is engaged in the business 
of accepting any bet or wager within the meaning of sec-
tion 5362(1) of title 31, United States Code, during a tax-
able year shall furnish, at such time and in such manner 
as the Secretary shall by regulations prescribe, the infor-
mation 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 appro-
priate to the information described in subsection (b). 
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‘‘(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 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 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 licensee or other per-
son 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. 
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‘‘(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 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) 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. 
‘‘(2) INTERNET; WAGER.—The terms ‘Internet’ 
and ‘wager’ shall have the respective meanings given 
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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.’’. 
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. 
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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: 
‘‘(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 
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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: 
‘‘(9) INTERNET
GAMBLING
WINNINGS.—Any 
Internet gambling winnings received from a licensee 
within the meaning of section 5382(3) of title 31, 
United States Code.’’. 
(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. 
SEC. 6. WAGER TAX APPLICABLE TO FEDERAL ONLINE 
GAMBLING ACTIVITIES. 
(a) IN GENERAL.—Subsection (a) of section 4401 is 
amended to read as follows: 
‘‘(a) WAGERS.— 
‘‘(1) AUTHORIZED
WAGERS.—There shall be 
imposed on any wager authorized under Federal law 
or the law of the State in which accepted an excise 
tax equal to 0.25 percent of the amount of such 
wager. 
‘‘(2) UNAUTHORIZED WAGERS.—There shall be 
imposed on any wager not described in paragraph 
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(1) an excise tax equal to 2 percent of the amount 
of such wager.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to wagers made after December 
31, 2010. 
SEC. 7. NO EXCLUSIONS UNDER FEDERAL WAGER TAX FOR 
ONLINE GAMBLING ACTIVITIES. 
(a) IN GENERAL.—Section 4402 is amended to read 
as follows: 
‘‘SEC. 4402. EXEMPTIONS. 
‘‘(a) IN GENERAL.—No tax shall be imposed by this 
subchapter— 
‘‘(1) on any wager placed with, or on any wager 
placed in a wagering pool conducted by, a pari-
mutuel wagering enterprise licensed under State law 
and that is not carried out online; 
‘‘(2) on any wager placed in a coin-operated de-
vice (as defined in section 4462 as in effect for years 
beginning before July 1, 1980), or on any amount 
paid, in lieu of inserting a coin, token, or similar ob-
ject, to operate a device described in section 4462 
(a)(2) (as so in effect), and that is not carried out 
online; and 
‘‘(3) on any wager placed in a sweepstakes, wa-
gering pool, or lottery which is conducted by an 
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agency of a State acting under authority of State 
law, but only if such wager is placed with the State 
agency conducting such sweepstakes, wagering pool, 
or lottery, or with its authorized employees or 
agents, and is not carried out online. 
‘‘(b) ONLINE GAMBLING ACTIVITIES.—All online 
gambling activities conducted pursuant to a Federal li-
cense shall be subject to the wagering tax set forth in sec-
tion 4401.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to wagers made after December 
31, 2010. 
SEC. 8. TERRITORIAL EXTENT. 
(a) IN GENERAL.—Paragraph (2) of section 4404 is 
amended to read as follows: 
‘‘(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, 2010. 
SEC. 9. 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 
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grants to eligible States to carry out an American Herit-
age 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 eligi-
ble 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 assur-
ances, as the Secretary may require by rule, including as-
surances 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’’ 
means a program carried out by a State that pro-
vides qualified activities directly, or by contract with 
nonprofit organizations (including community-based 
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organizations) or units of local government, for all 
the people and communities in the State, 
(2) the term ‘‘Secretary’’ means the Secretary 
of the Treasury, 
(3) the term ‘‘State’’ has the meaning given 
such term in section 4 of the National Foundation 
on the Arts and the Humanities Act of 1965 (20 
U.S.C. 953), 
(4) the term ‘‘State arts agency’’ has the same 
meaning given such term as used in the National 
Foundation on the Arts and the Humanities Act of 
1965 (20 U.S.C. 951 et seq.), and 
(5) the term ‘‘qualified activities’’ means activi-
ties that develop projects, productions, workshops, or 
programs that will encourage public knowledge, edu-
cation, understanding, and appreciation of American 
heritage and the arts. 
(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’’, consisting of such amounts as may be appro-
priated or credited to the American Heritage Block 
Grant Fund as provided in this subsection. 
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