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. 
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 2008’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment is expressed in terms of an amendment a section 
or other provision, the reference shall be considered to be 
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made to a section or other provision of the Internal Rev-
enue Code of 1986. 
SEC. 2. LICENSE FEE ON INTERNET GAMBLING OPERA-
TORS; LICENSEE INFORMATION REPORTING. 
(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 Operators 
‘‘Sec. 4491. Imposition of Internet gambling license fee. 
‘‘SEC. 4491. IMPOSITION OF INTERNET GAMBLING LICENSE 
FEE. 
‘‘(a) IN GENERAL.—Each Internet gambling operator 
licensed by the Director in accordance with subchapter V 
of chapter 53 of title 31, United States Code, shall be re-
quired to pay to the Director by the end of each month 
an Internet gambling license fee. 
‘‘(b) INTERNET GAMBLING LICENSE FEE.—For pur-
poses of this section, the Internet gambling license fee is 
an amount equal to 2 percent of all funds deposited during 
the preceding month with or on behalf of such Internet 
gambling operator into an account that can be used for 
the purpose of placing a bet or wager. Deposits made by 
or on behalf of any such operator of Internet gambling 
winnings shall not be treated as a deposit for purposes 
of this section. 
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‘‘(c) DISPOSITION.—Amounts paid to the Director as 
Internet gambling license fees under this section shall be 
deposited in the general fund of the Treasury and treated 
as revenue. 
‘‘(d) DIRECT AND EXCLUSIVE OBLIGATION OF LI-
CENSEE.—The Internet gambling license fee shall be the 
direct and exclusive obligation of the Internet gambling 
operator and may not be deducted from the amounts avail-
able as deposits to the person placing a bet. 
‘‘(e) DIRECTOR.—For purposes of this subchapter, 
the term ‘Director’ shall have the meaning given such 
term by section 5382 of chapter 53 of title 31, United 
States Code. 
‘‘(f) ADMINISTRATIVE PROVISIONS.—To the extent 
the Secretary shall by regulations prescribe, the Internet 
gambling license fee shall be treated as an excise tax for 
purposes of the administrative provisions of this title ap-
plicable to excise taxes imposed by chapter 35.’’. 
(b) INFORMATION RETURNS.—Subpart A of part III 
of subchapter A of chapter 61 (relating to information 
concerning persons subject to special provisions) is amend-
ed by adding at the end the following new section: 
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‘‘(6) 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 a written statement show-
ing— 
‘‘(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 such person. 
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.’’. 
(c) CLERICAL AMENDMENTS.— 
(1) The table of subchapters for chapter 36 is 
amended by adding at the end the following new 
item: 
‘‘SUBCHAPTER E. INTERNET GAMBLING OPERATORS.’’. 
(2) The table of sections for subpart A of part 
III of subchapter A of chapter 61 is amended by in-
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serting after the item relating to section 6039I the 
following new item: 
‘‘Sec. 6039J. Returns of Internet gambling operators.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to wagers made after December 
31, 2008. 
SEC. 
3. 
WITHHOLDING 
FROM 
CERTAIN 
GAMBLING 
WINNINGS. 
(a) NET INTERNET GAMBLING WINNINGS.—Para-
graph (3) of section 3402(q) (relating to extension of with-
holding to certain gambling winnings) is amended by add-
ing at the end thereof the following new subparagraph: 
‘‘(D) 
NET
INTERNET
GAMBLING 
WINNINGS.—Proceeds of net Internet gambling 
winnings of more than $5,000 in any one cal-
endar year.’’. 
(b) NO EXEMPTION
FOR CERTAIN WINNINGS.— 
Paragraph (5) of section 3402(q) is amended by inserting 
‘‘(other than winnings described in paragraph (3)(D)’’ 
after ‘‘winnings’’. 
(c) DEFINITIONS.—Subsection (q) of section 3402 is 
amended by redesignating paragraph (7) as paragraph (8) 
and by inserting after paragraph (6) the following new 
paragraph: 
‘‘(7) PROCEEDS OF NET INTERNET GAMBLING 
WINNINGS.—For purposes of this subsection— 
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‘‘(A) IN GENERAL.—The term ‘proceeds of 
net 
Internet 
gambling 
winnings’ 
means 
amounts of net Internet gambling winnings 
withdrawn from an account established for the 
purpose of Internet gambling. 
‘‘(B) 
NET
INTERNET
GAMBLING 
WINNINGS.—The term ‘net Internet gambling 
winnings’ means gross winnings from a wager 
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 amount 
wagered. 
‘‘(C) 
INTERNET; 
WAGER.—The 
terms 
‘Internet’ and ‘wager’ shall have the respective 
meanings given such terms by section 5382 of 
chapter 53 of title 31, United States Code.’’. 
(d) BACKUP WITHHOLDING.—Section 3406 (relating 
to backup withholding) is amended by redesignating sub-
section (i) as subsection (j) and by adding the following 
new subsection: 
‘‘(i) For purposes of this section, net Internet gam-
bling winnings shall be treated as other reportable pay-
ments, an Internet gambling operator shall be treated as 
payor, and the person placing a wager with an Internet 
gambling operator shall be treated as payee. For purposes 
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of the preceding sentence, terms used in such sentence 
which are also used in section 3402(q)(7) shall have the 
meanings given such terms by such section.’’. 
(e) EFFECTIVE DATE.—The amendment made by 
this section shall apply to wagers placed with a licensee 
after December 31, 2008. 
SEC. 4. WITHHOLDING OF TAX ON NONRESIDENT ALIENS. 
(a) TAX ON NONRESIDENT ALIEN INDIVIDUALS.— 
Subparagraph (A) of section 871(a)(1) (relating to income 
not connected with United States business—30 percent 
tax) is amended— 
(1) by striking ‘‘and other fixed’’ and inserting 
‘‘, other fixed’’, and 
(2) by adding ‘‘and net Internet gambling in-
come,’’ at the end. 
(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 wagers 
placed over the Internet (as such terms are defined in sec-
tion 3402(q)(7))’’. 
(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— 
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(1) by striking ‘‘and gains on transfers’’ and in-
serting ‘‘gains on transfers’’, and 
(2) by inserting before the period at the end the 
following: ‘‘, and proceeds of net Internet gambling 
winnings (as defined in section 3402(q)(7)) of more 
than $5,000 in any one calendar year’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to wagers placed with a licensee 
after December 31, 2008. 
SEC. 5. TAX ON WAGERS. 
(a) PERSONS LIABLE FOR TAX.—Subsection (c) of 
section 4401 (relating to persons liable for tax on wagers) 
is amended by adding at the end thereof the following sen-
tence: ‘‘Any person placing a wager with a person who 
is required to obtain a license within the meaning of sec-
tion 4491 but who has failed to obtain such license shall 
be liable for and pay the tax under this subchapter on 
all such wagers.’’. 
(b) TERRITORIAL EXTENT.—Paragraph (2) of sec-
tion 4404 is amended to read as follows: 
‘‘(2) placed within the United States or any 
Commonwealth, territory, or possession thereof by a 
United States citizen or resident.’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to wagers made after December 
31, 2008. 
Æ 
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