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House Passes Law on Tax Cuts for Charitable Institutions

Posted on April 27th, 2011

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Lawmakers have finally signed off on a revised version of the bill that seeks to cut taxes for the charitable gambling industry in the state. Not more than a day earlier, strong opposition has relegated the bill to the sidelines in real danger of dying a legislative death only to be resurrected by concessions, amendments, and revisions that saw the bill finally materialize. In a nutshell, the bill calls for eliminating a myriad of taxes that are pushing charities to the edge while at the same time taxing wagers depending on the size of the business involved. According to estimates as publicly released by Rep. Mark Owens (R-Grand Forks), charity organizations could save as much as $6.7 million because of the new proposal. Owens calls the measure a “tax break” for charitable institutions and adds that “one small operation would $82 more.”

Less than 24 hours before, when the words of the bill was slightly different, the House voted to kill the measure. The original wording required a 1 percent flat rate tax on all wagers which amounted to a total of $10.8 million in “tax relief” for charitable organizations. The $10.8 million figure is estimated over a period of two years. While charitable institutions have rallied behind the bill in support, lawmakers were reluctant to vote for it. The reluctance was primarily due to North Dakota’s burgeoning state deficit which can ill afford to take any impacts from tax revenue reductions of whatever form, even for charitable institutions. Rep. Al Carlson (R-Fargo), the House majority leader, defended the opposition saying that revenues were necessary so the state can continue paying for addiction and counseling as well as the other perceived costs of problem gambling. Discussions led to a compromise version with three House members and three senators headed by Sen. Joe Miller (R-Park River) finally drafting the final version that was approved yesterday.

In the new measure, a four part taxation scheme was proposed for the situation. Charitable organizations with less than $500,000 revenues over a three month period are required to pay 1 percent in tax on wagers while those that are making between $500,000 to $1 million for the same period would be asked to pay 1.5 percent. Those that earn between $1 million and $1.5 million will pay 2 percent in tax for wagers while those taking more than $1.5 million in three months are charged up to 2.5 percent in tax on wagers. The final outcome has left supporters of the bill wanting. Owens recognizes that some groups are dissatisfied with the final numbers agreed on because they were expecting more reduction to help fund their causes but he thinks the approved numbers were fair enough to all parties concerned. “I’ve been getting emails left and right and every one of them is the same: ‘Whatever you do to her is fine, but keep me at this,’” remarked Owen.

The practice for allowing charitable organizations in North Dakota to raise money through gambling revenues began in 1976 and currently affects more than 300 different organizations of various natures and target populations such as fraternal clubs and groups that support wildlife, public broadcasting, youth hockey, art museums, people with disabilities, and others. These organizations can offer blackjack, bingo, pull-tab tickets and other games to raise revenues. The system in place before the approval of the latest proposal imposes taxes based on the game types; the approved system eliminates this and goes with the taxation based on the wagers made.

“The fact that this is in such a simple form will mean a great savings in their accounting,” said Rep. Bette Grande (R-Fargo) who supported the bill during the House discussions. “They’ll be saving more than just the tax reduction.” Rep. Grande also praised the efforts of Rep. Owens to streamline what is proving to be a very complicated and messy tax system that is causing burden instead of helping tax groups take care of their taxation responsibilities. The House voted 74-17 in favor of the bill while the Senate has already endorsed the bill. It is not expected to go to Gov. Jack Dalrymple’s table for ratification or a veto.