net 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. 
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 
(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 the date 
on which subchapter V of chapter 53 of title 31, United 
States Code, first applies. 
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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; or 
‘‘(3) on any wager placed in a sweepstakes, wa-
gering pool, or lottery which is conducted by an 
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. 
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‘‘(b) ONLINE
GAMBLING
ACTIVITIES.—Notwith-
standing the exemption listed in subsection (a)(3), all on-
line gambling activities conducted pursuant to a Federal 
license shall be subject to the wagering tax set forth in 
section 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 
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 
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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 
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, 
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(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. 
(2) TRANSFER
TO
FUND.—There are appro-
priated to the American Heritage Block Grant Fund 
amounts equal to .5 percent of the taxes received by 
the Treasury after December 31, 2010, that the Sec-
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