Colorado targets phased end to sportsbook promo tax incentives
Centennial State tables legislation to reduce tax breaks and address falling tax revenue
Colorado could become the first US state to end tax deductions on promotions for sportsbook operators as a way of propping up ailing tax revenues in the Centennial State.
The measures come as part of House Bill 22-1402, which was passed through the Colorado legislature on May 10 and has been passed to Colorado Governor Jared Polis for signature into law.
Historically, Colorado allowed operators to write off the cost of bonuses from their respective gross gaming revenue (GGR) for taxable purposes, the effects of which combined with the state’s 10% sports betting tax rate have reduced the state’s revenue return from taxing operators.
The bill targets a phased end to this environment, beginning from January 2023 and reducing gradually all the way until 2026.
Between January 2023 and June 2024, operators can deduct 2.5% of their respective handle as free bets, falling to 2.25% between July 2024 through June 2025.
Later between July 2025 and June 2026, this deductible amount falls to 2%, before falling to just 1.75% from July 1, 2026 onwards.
From May 2020 to date, promotional tax write offs have accounted for 3.2% of Colorado’s sports betting handle and 51% of gross revenue.
In its first full year of sports betting the state generated just $6.6m in revenue, a figure which stands in stark contrast to New York, which garnered more than $216m in revenue in its first four months alone.
Governor Polis has 30 days to pass the legislation before it is postponed until the next legislative session.
Elsewhere, the Colorado Division of Gaming has published its report for April, noting a 60.5% year on year increase in sports betting handle, which rose to $392.3m.
However, April’s handle figure was down 22.4% month on month from March, when the state reported a handle of $505.6m, figures buoyed significantly by the impact of March Madness.
Fiscal year total wagers period July 2021 to April 2022 amounted to $4.1bn, an 83.2% increase on the total wagers made in the same period 2020-2021.
Colorado’s total gross gaming revenue (GGR) amounted to $22.5m in April, made up of $22.1m in online sportsbook GGR and retail revenue of $379,972.30.
Taxes taken from sportsbook wagering during April 2022 totalled just $1.2m, a month on month decrease of 6.19% on March’s figures.
However, fiscal year taxes between July 2021 and April 2022 rose 67.19% to $10.5m, from a prior 2020-21 period high of $6.2m.