New Colorado Sports Betting Bill Set To Reduce Bonus Write-Offs For Sportsbooks

A new House bill, HB 22-1402, would reduce the amount of bonus credits Colorado sportsbooks could write off for tax purposes.  Sportsbook operators often offer bonuses to entice customers to sign up. While the wagers bettors make with bonus credit are accounted for in handle, some states allow operators to deduct them from their taxable revenue.

Colorado lawmakers are eying bonuses as a way to increase sports betting tax revenue as the industry reaches maturity. Reducing bonus credit write-offs could reduce the number and size of sportsbook bonuses, which sportsbooks use to attract new customers. Many industry observers believe sportsbooks will eventually have to stop relying on large bonuses over time anyway, as they are eating into potential profits.

A Boost To Problem Gambling Programs 

HB 22-1402’s fiscal note estimates that 3.6% of sportsbook handle comes from site credits. Currently, sportsbooks can write all of those promotional credits off, reducing the tax they have to pay. Once signed into law by Gov. Jared Polis, HB 22-1402 would decrease the amount of bonus credits sportsbooks are allowed to write off following this schedule: 

Reducing bonus write-offs would increase tax revenue for the state as sportsbook handle growth slows. The fiscal note estimates a $2.6 million increase in tax revenue in FY 2022-23 and a $6 million increase in tax revenue in FY 2023-24. That’s extra money that will go to the hold harmless fund and Colorado’s water implementation fund.  

Starting in FY 2022-23, HB 22-1402 dedicates at least $2.5 million per year to a new problem gambling grant program. That’s 18 times more than the $130,000 currently allocated to problem gambling programs. This money would come from the Limited Gaming Fund. This fund is where all the other gaming revenue goes, from license fees to casino taxes. 

Other Attempts To Tap Into Bonus Credits 

There is similar movement in Louisiana, where SB 290 was enrolled on May 26. This bill would cap the promotional credits eligible for tax write-offs at $5 million per operator per year, closing a loophole sportsbook operators have been taking advantage of. The last step before that bill becomes law is the governor’s signature.

Ohio also hopes to tap into the bonus credits written off by its gambling companies. Ohio’s sports betting bill legalizes sports betting, but also eliminates the tax exemption for Ohio casino promotional credits. That bill’s fiscal note found that promotional credits at casinos “regularly exceeded $100 million annually.” At a 33% tax rate, that extra taxable revenue is an attractive target for Ohio lawmakers seeking new revenue. 

Colorado, Louisiana, and Ohio rethinking their approaches to bonus write-offs could be the beginning of a trend. It’s another way to boost gambling tax revenue, which for many states means education funding. But Colorado’s version of this bill shows that reducing tax write-offs is also an opportunity to fix mistakes in early rollouts of gambling expansion.