Atlantic City’s premier casino, the Borgata, has recently made headlines for underpaying its internet gambling taxes twice, according to a recent Associated Press (AP) report. New Jersey regulators identified that the casino claimed nearly $15 million in excess credits, leading to a tax shortfall of $1.1 million. This discrepancy emerged from an improper allocation of credits intended for slot game bonuses to other types of games.
The New Jersey Division of Gaming Enforcement (NJDGE) took firm action by ordering the Atlantic City casino, owned by Vici Properties and operated by MGM Resorts International, to settle the full tax amount, which included taxes, penalties, and interest, totaling $1.3 million. The casino has since complied, covering the outstanding amounts and a civil penalty of $75,000.
Regulatory response and penalties:
Mary Jo Flaherty, the acting director of the Division, emphasized the severity of these oversights in her communication to the Borgata. She highlighted that the casino had previously understated its gross revenue by almost $10 million and noted a repeat offense with an additional $4.5 million understatement. “The fact that this conduct was repeated less than 18 months after the Division warned an additional violation of this type could result in a civil penalty is also to be considered,” Flaherty expressed in her letter dated August 15, as reported by the Associated Press.
The origins of these financial discrepancies reportedly date back to March 2023 when Borgata incorrectly included $9.8 million worth of table game bonuses in deductions usually reserved for slot games. This error resulted in a tax underpayment of $787,000, for which the casino was fined nearly $128,000, combining interest and penalties.
In a more recent instance from July 2024, a software upgrade at MGM Resorts International, the parent company of Borgata, led to another significant error. The system mistakenly allocated an additional $4.5 million in credits for player bonuses that were never awarded. This oversight caused a $365,000 shortfall in tax payments, with the casino facing over $33,000 in fines and interest for this violation.
Ongoing compliance and casino performance:
These tax credits are part of a broader scheme designed to alleviate the tax burden on casinos from free play offered to customers. In New Jersey, the first $90 million in promotional credits is taxable as part of the gross revenue. Any credits beyond this threshold do not contribute to taxable income, a rule that Borgata misapplied in these instances.
Despite these financial missteps, the Borgata has maintained a strong performance over the year. For the first seven months of this year, the casino garnered over $771 million from gamblers, positioning itself significantly ahead of its nearest competitor by more than $300 million.
The Division of Gaming Enforcement has since confirmed that Borgata and MGM have made the necessary software adjustments to prevent future discrepancies. Nonetheless, the incidents have cast a spotlight on the need for stringent compliance and oversight in the casino industry’s financial practices.
