Taxes and Video Gambling

•    “Tax rollback day” approaches.  Under the terms of Illinois’ largest-ever tax increase law, P.A. 96-1496 (SB 2505) Illinois income taxes paid by individuals and corporations are scheduled to be partly (not completely) rolled back on January 1, 2015.  Under the terms of the tax-hike law, passed by legislative Democrats and signed by Gov. Quinn, the income tax paid by Illinois residents on their individual income is scheduled to be partly rolled back from 5.00% in calendar year 2014 to 3.75% in calendar year 2015 and following years.  The corporate income tax rate is scheduled to be partly rolled back from 7.00% to 5.25% at the same time.  The new rates created by this rollback are supposed to remain in place for 10 years, until December 31, 2024, when a second rollback cycle is supposed to take place.

Gambling – Video Gaming
•    Controversy as secondary-liquor-license applications pile up.  Under the Video Gaming Act, passed in 2009, many Illinois taverns with owners in legal good standing are eligible to apply for a license to install up to five video gaming machines.  Illinois-licensed video gaming machines must be owned and serviced by a licensed terminal operator; the tavern hosts the machines, and the terminal operator pays rent to the host for the right to operate the machines.  When the General Assembly enacted this law, they intended the new machines to provide entertainment for customers, raise tax money for State and local governments, and rescue many small businesses and community gathering-places from the economic challenges of the “Great Recession.”  

The law, in its current form, contains a loophole that has begun to encourage other businesses to apply for secondary liquor licenses, separate from the main focus of their business.  Once a successful applicant obtains a license from its local government to sell cans of beer from a cooler, the applicant can use this liquor license as a platform to apply for permission to install up to five video gaming machines.  The Illinois Gaming Board and local alcohol-zoning panels have noted increased video gaming applications from offices and businesses that have the alleged intent of selling alcohol as a sideline business, secondary to the underlying goal of hosting the machines.  An unverified accusation of this type against a local auto body shop, made in Springfield, has been covered by local radio station WMAY-AM and the State Journal-Register. More than 100 signatories have petitioned against granting a liquor license to the body shop.  

The Video Gaming Act authorizes local governments with zoning control over their jurisdictions to control the spread of video gaming within their boundaries.  Some municipalities and counties have even “opted out” of the Video Gaming Act altogether.  However, the share of video gaming tax revenues paid to local governments makes controls of this type a serious decision for a revenue-pressed county or municipality to make.