Fantasy Sports Contests Proposal Pursuant To . - Vermont Legislature

10m ago
627.27 KB
8 Pages
Last View : 3m ago
Last Download : 6m ago
Upload by : Farrah Jaffe

.\.VERMONTState ofVermontAgency of AdministrationOffice of the Secretary[phone] 8oz-828-3322lfaxl 8oz-828-332oSusanne R. Young, SecretaryPavilion Office Building1o9 State StreetMontpelier, VT ntative Janet Ancel, chair, House committee on ways and MeansSenator Ann Cummings, Chair, Senate Committee on FinanceFROM:Susanne R. Young, Secretary, Agency ofKaj Samsom, Commissioner, Department of TaxesDATE:December 15,2017RE:Fantasy Sports contests Proposal Pursuant to Section 4 of Act 70 (2017)This proposal is submitted in accordance with Section 4 of Act 70 (2017). Act 70 allowsfantasy sports contests to be operated legally in Vermont and creates a regulatory structure forfantasy sports operators who do business in vermont.l Section 4 reads:4. FANTASY.SPORZS CONTESTS; PROPOSALSOn or before December 15, 2017, the Secretary of Administration shall submit to theHouse Committee on Ways and Means and the Senate Committee on Finance a proposalfor fantasy sports contests concerning:(I) any amendments to the registration requirements or registrationfee imposed inSec. 5 of this act; and(2) an appropriate percentage tax on an appropriate measure ofrevenue.Sec.RecommendationsThe Secretary of Administration, after consultation with the Secretary of State,recommends maintaining the registration requirements and 5,000 fee established in Section 5 ofAct 70 (adding 9 V.S.A 4189). These are essentially the same registration requirementsimposed on other business entities doing business in Vermont. The current anrual fee covers theSecretary of State's administrative costs related to registration. The Secretary furtherrecommends consulting with the Office of the Attorney General to determine whether additionalstatutory authority is required to bill back its costs related to the enforcement provisions of thefantasy sports contests chapter.2' 9 v.s.A. ch. I16.2Id.

The Secretary does not recommend that a new tax structure be created for fantasy sportsoperators. Operators are currently subject to Vermont's income tax laws like any other businessin Vermont, and may have a tax liability according to their individual circumstances. Individualswho participate in fantasy sports contests may also be liable to pay personal income tax onfantasy sports contest earnings under current Vermont law.Registration Requirements and Fee ConsiderationsAct 70 requires fantasy sports operators to register annually on or before October 15 withthe Secretary of State, and to pay anannual 5,000 fee.3 The general registration requirementsare the same as those imposed on any entity doing business in Vermont under titles l1-l lC.4and as stringent as those imposed on any other entity required to register with the Secretary ofState. The current 5,000 annual registration fee is adequate to cover the Secretary ofState'scosts of administration, maintenance, and other expenses due to performing the regulatoryfunction of registering fantasy sports operators. The current fee meets the Vermont statutoryrequirement that fees be 'oreasonably related to the cost of providing the associated service orproduct or performing the regulatory function." ooCosts" for this purpose are to be "narrowlyconstrued, but may include reasonable and directly related costs of administration, maintenance,and other expenses due to providing the service or product or performing the regulatoryfunction."5Some states have created a fee exemption, or a tiered, discounted, or percentage-ofrevenue-based fee structure for smaller operators to help level the playing field with largeroperators so that small operators pay a smaller portion of their revenues than they would under aflat fee structure. The drawback to this more complex fee structure is the increasedadministrative burden, and related costs, inherent in its implementation and ongoingadministration. The fee for larger operators would need to be above 5,000 to Cover theadditional costs if the fees for smaller operators were lowered under a tiered structure. To avoidadded complexity and increased costs for both the State and operators, it is recommended thatthe registration fee be maintained at its current level.Vermont's fantasy sports registration fee is comparable to other states that regulatefantasy sports operators, except that states that charge a 5,000 fee also impose a tax onoperators. In states that impose only a fee, the fee is typically a 50,000 one-time fee. Delawareand Missouri are exceptions, and charge both taxes and high annual fees. Delaware charges a 50,000 annual fee. Missouri charges an annual application fee that is the lower of 10,0i00 or10% of net revenue from the previous calendar year. On the other end of the spectrum, states likeMaine and Colorado only charge fees for operators who have over 100,000 in gross revenues(Maine) or more than 7,500 players in the state (Colorado). Please refer to the chart in theAppendix that compares the tax and fee structures imposed on fantasy sports operators in otherstates.39v.s.A. 4189.4Id.s32 V.S.A. g 603(2); see atso:32 V.S.A. g 605(d)(2)2/8

Act 70 requires fantasy sports operators to comply with several business practicesintended to provide protections to consumers who choose to participate in fantasy sport contests,and are enforceable by the Offrce of the Attorney General. The Attorney Generai rnay also adoptrules to implement the fantasy sports contests chapter, and may conduci civil investigations,enter into assurances of discontinuance, and bring civil actions.6 At this early stage o1operationsin Vermont, the Secretary recommends consulting with the Office of the Attorney Geneial toamend its authority as necessary to provide bill back authority or some other mechanism to coverthe cost of any investigations or enforcement activities taken under chapter 1 16, in a manner thatwould not limit the authority to actions filed in court. Initially, this would ensure that the State,scosts are covered by the operator investigated and offset the burdens of a flat fee on smalleroperators. Similar "bill back" authority exists for other departments, such as the Department ofPublic ServiceT and the Department of Financial Regulation.sTax ConsiderationsAct70 did not impose any additional taxes on fantasy sports operators in Vermont. TheSecretary does not recommend imposing any taxes in addition to thosi applicable to both fantasysports operators and players under current Vermont law.e Vermont's business income tax lawswill apply to fantasy sports operators in the same way that they apply to other business entities.Regardless of the fantasy sports operator's legal structure (e.g., as a C corporation, S corporation,limited liability company, or partnership), it will likely be required to file and pay at leasi theminimum tax.10 Additionally, the earnings made by individuul pluy.r, will be iaxed under thesame personal income tax sections applicable to any other individual with Vermont taxableincome. The consumer protection sections in the Act reinforce this by requiring fantasy sportsoperators to notify players that winnings of a certain amount may be subject to incometaxation.llImposing a tax with the limited information currently available about annual revenuelikely to be generated in Vermont from fantasy sports op".uioru raises many concerns regardingcomplexity, administrative costs, regressivity, and market impact. The Vermont Department oiTaxes estimates that implementing and administering a new tax on fantasy sports operatorswould cost a minimum of 80,000 per year for the first several years. These costs arise fromhuman resources and information system investments. Said another way, the minimum annualrevenue that the tax would have to generate to pay for itself is 80,000. In order to generate 80,000, the tax rate on operators would have to be at least 1 1% of annual net revenlues.1269v.s.A. 4190(b).7See,e.g.,30 V.S.A. g 20-21.I See, e.g,,8 V.S.A. 3563.e32 v.S.A. ch. l5t.r032 v.s.A. 58n(15XB), rmont Legislative Joint Fiscal Office, Fiscal Note(March 23,2} l),available online 18/workGroup scal%20Note-3-24-2017.pdF. ThisSenate bill S.136 (the bill that became Act 70).11o/o-saravo2taxrate was based on the tax rate proposed at the time in3/8

Other states have structured their fantasy sports tax as a percentage between 60/o and155% of operators' revenues, occasionally tiered depending on the amount of revenue earned.The base taxed in other states varies from net revenues, adjusted revenues, net-adjusted revenues,or gross revenues from contests within the State. A tax based on net revenue rather than grossrevenue is preferential for operators because net revenue represents actual proht. A tax based ongross revenues does not take into account contest winnings paid out to players and reduces theproht operators actually receive.Another concern is the impact of a tax on an operator's decision to do business inVermont. The fantasy sports market seems to have a few large operators, and many smalloperators. Legislative testimony from ihdustry representatives in Vermont and other states hashighlighted that atax and a fee are more easily absorbed by large operators, which could givethem a competitive edge, and potentially stifle competition from smaller operators. Some stateshave mitigated the regressive impact of taxes on smaller operators by exempting operatorsmaking below a certain threshold of revenue, such as Maine's model that sets the threshold fortax liability at 100,000 in annual gross revenue. While this may help make a new tax moreequitable, this approach again increases complexity for taxpayers, which in tum increasescompliance costs. A complex tax structure could have a negative impact on a new market.ConclusionThe registration requirements and annual 5,000 fee created by Act 70 are sufficient tocover the costs of registering fantasy sports operators. It may be useful to create, as necessa.ry,bill back authority or another mechanism for the Office of the Attorney General to cover itsenforcement expenses. There is no need to impose an additional tax, because operators andindividual players will be subject to Vermont income tax laws. Moreover, the cost ofadministering the tax during the first few years would absorb most, if not all, revenues generatedaccording to current information and estimates. As a new industry with potential for growth, itwould be worthwhile to revisit the question of whether the cost of regulating the industry is metthrough the current fees, revenues, and enforcement mechanisms included in Act 70 after theindustry has operated in Vermont over a period of years allowing for better information and dataregarding Vermont's fantasy sports contest market.4/8

OrnnR Srarns'T,lxns mvo FnBs oN Faxusy SpoRrs18 states have taken legislative action to legalize daily fantasy sports.13 The majority of states regulate operators in some way, with theconsumer13 statesseaaorwhich arein the chart below.Tax, Feen orRegulatoryState & BillTax RateTax BaseFlat FeeRevenueBothBodvGross paid fantasyDepartmentofArkansas (AqITax8%sports gameUnknownFinance and1075 of20l7)revenuesAdministrationAllColorado (HB1404 of2016)operators mustregister, but only fantasycontestoperators with more than7,500 fantasy contestparticipants in Coloradoare required to pay alicensing fee.FeeFee to be determinedbyDivision ofProjectionsFYl6-17: 125,7909; FYlT-18: 2t0,790Division of Professionsand Occupations (not setin statute or rule. C.R.S.12-15.5. I 0s; C.C.R. 75 1-Professions andOccupations,Department ofRegulatoryAgencies1.).Initial registration fee:Connecticut (SB1502 of2017\13Both tax & feet0.5%Gross receipts offantasy contestoperator 15,000Annual registrationrenewal fee: 15,000ProiectionFYl9 500,000CommissionerConsumerProtectionofOhio's legislature passed HB I 32 of 2017 , but at the time of writing this report, the bilt had not yet been signed by the Governor. The following I 8 states have enactedHampshire, New Jersey, New York, Pennsylvania, Tennessee, Vermont, and Virginia. Out of those states, four did not include fees or taxes: Kansas, Maryland, Massachusettsand New Hampshire. Three other states have not taken legislative action because fantasy sports were determined to already be legal under state law: Nevada (interactivegaming license required for 500,000 initial application fee, 250,000 annual renewal fee), Rhode Island, and West Virginia. Although the Massachusetts' Attorney Generalquestioned whether the state's 2012 garrbling statute applied to daily fantasy sports, although no clariffing legislation has been enacted.

State& BillTax, Fee, orBothTax RateTax BaseFlat FeeRevenueRegulatoryBodvFees will be reduced toas not exceed 10Yo ofoperator's gross receiptsfor registration period.Commission toDelaware (ILB.249 of2017\Both tax & fee15.5%Net-adjustedrevenues 50,000 annual licensingfeeProjections 100,000 annually,based only on fees(2 operators)be designated byGovernor (maybe currentagency or dept)within 30 daysof signing.l.Indiana (A9!339of2016)Fee2.Maine (SPl49,LD 1320 of2017\Both tax & feer0%Gross fantasycontest revenues;only applies tooperators with over 100,000 in revenue 50,000 one-timelicensing fee thatmay be increased upto 75,000 if divisionneeds to coveroperation costs 5,000 annualrenewal feeBoth tax & fee8%revenueTax is called a feeFY20l8: 25,000 250,000Indiana GamingCommission,PaidFantasy SportsDivisionS2,500 initial and annualrenewal licensing feeonly for operators withover 100,000 inrevenue during 12months precedingapplication. l l0-000 annuallvDepartment ofPublic Safety 5,000licenseapplication feeNo projectionsconducted by MisslegislatureMississippiGamingCommissionNet MississippiMississippi (H.B.967 of20l7\Projections1. Initial licensefee in FY20l7: 250,000 3.75M2. Renewal feestarting

State& BitlTaxo Fee,orBothTax RateTax BaseFlat FeeRevenuefor "privilege ofconducting fantasysports contestsRegulatoryBodyinMississippi"Missouri (H.B.941 of20lNew Jersey Q\32 of201New York(s.8153/A.10736of2016)Net revenue fromprevious calendaryear.Both tax & fee1r.5%Tax is called"annual operationfee"Tax1.l0.sYo2.Annual applicationfee that is lower of: 10,000 or 10%o ofnet revenue fromprevious calendaryearInvestigation fee nomore than 50,000Proiections 500,000 750,000Fantasy sports grossTax (prqipqled)revenue 6.6millionl5Yo on interactivefantasy sports grossrevenue generated inTaxI5Yo 0.5YoMissouriGamingCommissionDept. of Law &Public Safety,Div. ConsumerAffairsNYstate 4,000,000StateGamingCommission0.5o/o capped at s0,000 50,000 application feefor 5-year licenseMonthly fantasyPennsylvania (Act42 of20l7)Both tax & feest5%contest adjustedrevenues (fromprevious month).nonrefundableapplication feecannot exceedamount necessary toreimburse board forall costs incurred inapplication process.ProiectionsFirst year: 250,000application fees( 50,000 initialapplication fee)Annual taxrevenues:PA GamingControl Board

State& BillTax, Fee, orBothTax RateTax BaseFlat FeeRegulatoryBodyRevenue 2,100,0000,000 license renewalfeeTo be established bySOS:1. Nonrefundableapplication fee;2. Nonrefundable feefor licensure;3. Annual licensurerenewal fee;4. Late fees;5. Correction ofinformation fee;6. Change ofinformation fee;7. Online transaction ITennessee (S.B.2109. Pub. Ch.Both tax & feesNo. 978 of2016)6%Adjusted revenuesof a fantasy sportscontest offered by afantasy sportsoperator toTennesseeconsumersNo projectionsconducted byTenn. legislatureSecretary ofState, Divisionof CharitableSolicitations,Fantasy Sportsand Gamingfee.Vermont (As! 20of2017)Virginia (S-646 qf20r6)FeeFeeSecretary ofState; Office 5,000 annualregistration feeProjected 80.0001.As of l0ll2ll7:companies areresistered in VA(total actualrevenue : at least 400,000).2. 50,000 initialregistration feeSubsequent fee to beset by regulatingagency (qaagapparently charged)ofthe AttorneyGeneral!Department ofAgriculture andConsumerServices

fantasy sports operators who do business in vermont.l Section 4 reads: Sec. 4. FANTASY.SPORZS CONTESTS; PROPOSALS On or before December 15, 2017, the Secretary of Administration shall submit to the House Committee on Ways and Means and the Senate Committee on Finance a proposal for fantasy sports contests concerning:

Related Documents:

FANTASY SPORTS AT A GLANCE THE AVERAGE FANTASY SPORTS PLAYER 2 out of 3 fantasy sports players are men. 50% have a college degree or higher Football (66%) is the favorite fantasy sport among players. 61% say they are watching more live sports because of fantasy. is the average age 32 59,300,000 people played fantasy sports in 2017 in the USA .

Fantasy Sports Cratin a irtuous y o sports dopmnt 7. 8 Fantasy Sports: India's New Sunshine Sector Fantasy sports Indian Fantasy Sports Market The FS industry's economic impact reveals itself through several metrics[1] The Fantasy Sports user base grew at a CAGR of 130% between 2016 and 2021 Market size* INR 34,600 Cr There are

Warhammer 40k (3) Warhammer Fantasy Bretonnians (2) Warhammer Fantasy Chaos (6) Warhammer Fantasy Chaos Dwarfs (2) Warhammer Fantasy Dark Elves (5) Warhammer Fantasy Empire (43) Warhammer Fantasy Lizardmen (73) Warhammer Fantasy Orcs (4) Warhammer Fantasy Tomb Kings (108) Warhammer Fantasy Vampire Counts (11) Warrior

Predictive Golf Analytics Versus the Daily Fantasy Sports Market submitted to Professor Eric Hughson by John H. O'Malley for Senior Thesis in Economics Fall-Spring 2018 . Fantasy Football Leagues had become public and the idea of fantasy sports had spread to baseball as well. With the internet boom in the 1990's, fantasy sports went .

Fantasy sports have become increasingly more popular amongst avid sports fans over the past couple of decades. In fact, it is estimated that the fantasy sports industry currently earns 3-4 billion in annual revenue (ESPN, 2010), which is remarkable considering that fantasy sports

Fantasy Sports Contests and protect Fantasy Sports Contest Players. A.R.S. §5-1202(G) You are advised that this application is an official document and false or incomplete answers could result in criminal prosecution and the denial, or subsequent revocation, of State Licensing. You are

the MLS, NASCAR, as well as college sports such as NCAA football and basketball. Fantasy sports can be divided into two types: (1) traditional fantasy sports, which track player performance over the majority of a season, and (2) daily fantasy sports, which track player performance over a

locked AutoCAD .DWG format electronically with a relevant index/issue sheet. Estates and Facilities currently use AutoCAD 2016. Drawings supplied on CD should be clearly labelled with the Project details, date and version of AutoCAD used. Drawings produced using BIM software (such as Revit) must be exported into AutoCAD DWG format before issue. The University will also require any original BIM .