IRS Advisory Council backs Nevada reps’ push to raise outdated slot tax reporting threshold on jackpots

Congressional leaders Rep. Guy Reschenthaler (R-PA) and Rep. Dina Titus (D-NV), who have been asking the IRS to raise the tax reporting threshold on slot machine jackpots, have now received support from the agency’s advisory council.

Reschenthaler and Titus, co-chairs of the bipartisan Congressional Gaming Caucus, introduced the Shifting Limits on Thresholds (SLOT) Act last year, which would raise the tax threshold for slot winnings from $1,200 to $5,000. The Internal Revenue Service Advisory Council (IRSAC) has now shown support for this recommendation.

The IRSAC has recommended increasing the reporting threshold for slot machine jackpot winnings to $5,800, $800 more than what members of the Congressional Gaming Caucus have been suggesting, to account for inflation. The proposed change also has the support from the gaming industry.

We urge you to follow the IRSAC’s recommendation and exercise your authority to raise the threshold for slot machine jackpot winnings to $5,000 and to consider periodic increases to the threshold based on inflation. Taking this action will align with the IRS initiative to strategically use data to improve tax administration and modernize tax reporting for our constituents,” the lawmakers wrote in a letter dated February 5th to IRS Commissioner Danny Werfel.

Rep. Guy Reschenthaler (R-PA) and Rep. Dina Titus (D-NV)

The letter was signed by 24 members of Congress including Titus’ three Nevada counterparts in the House. “Due to inflation, this outdated standard has significantly increased compliance burdens on taxpayers and operating costs for casinos across the country,” they added.

The $1,200 jackpot threshold was first established in 1977 when Nevada was the only state with legalized gambling. There are currently 44 states with either commercial casinos or casinos operated by Indian tribes. Titus first requested the IRS commissioner to raise the slot jackpot reporting threshold in 2015.

Exceeding the threshold is increasingly frequent on slot floors, and proponents of the change claim that the current rate causes the slot machine to shut down until IRS paperwork requirements, such as filling out a W-2G tax form, are fulfilled. The council wrote that the revision should be implemented by regulatory action because that is how the threshold was originally set.

Titus explained that the legislation the caucus proposed last year to increase the threshold figure is not needed based on the advisory council’s decision. In an interview, Titus said IRS Commissioner Danny Werfel should follow the advisory council’s ruling and accept the change through the regulatory process. 

“That way, we wouldn’t have to get the bill passed,” Titus said. “I feel like having the bill out there has been part of the reason he hasn’t made the change. But now, the commission has encouraged him to [increase the reporting threshold].”

The American Gaming Association has supported Titus’ efforts to change the reporting threshold for a long time, and CEO Bill Miller on Tuesday said the IRS commissioner should accept the advisory council’s recommendation. “The antiquated slot tax threshold creates unnecessary burdens for consumers, casino operators and the IRS,” Miller said.

In its report, the council suggested the current jackpot reporting threshold should be $5,800 when accounting for inflation, but could be increased again based on inflation cost-of-living adjustments each year.