I 
111TH CONGRESS 
1ST SESSION H. R. 2268 
To amend the Internal Revenue Code of 1986 to regulate and tax Internet 
gambling. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 6, 2009 
Mr. MCDERMOTT (for himself and Mr. FRANK of Massachusetts) 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 2009’’. 
(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 of 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. TAX ON INTERNET GAMBLING; LICENSEE INFORMA-
TION 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 
‘‘Sec. 4491. Imposition of Internet gambling license fee. 
‘‘Sec. 4492. Record requirements. 
‘‘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, 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 
customer shall not be treated as a deposit for purposes 
of this section. 
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‘‘(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 
this section shall be deposited in the general fund of the 
Treasury and treated as revenue. 
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‘‘(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).’’. 
(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: 
‘‘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 
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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). 
‘‘(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, 
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‘‘(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 
‘‘(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 
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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 
such terms by section 5362 of chapter 53 of title 31, 
United States Code.’’. 
(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.’’. 
(2) The table of sections for subpart B of part 
III of subchapter A of chapter 61 is amended by in-
serting after the item relating to section 6050W the 
following new item: 
‘‘Sec. 6050X. Returns relating to Internet gambling.’’. 
(d) 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. 
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— 
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(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. 4. 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 
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