NJ Lawmakers Approve Multiple Tax Breaks To Atlantic City Casinos

(UPDATE: Dec. 22, 2021, 8:45 a.m. – New Jersey Gov. Phil Murphy signed S4007/A5587 and S3994/A5943 into law Tuesday night.)

Atlantic City casinos must be on Santa’s nice list because New Jersey lawmakers gifted multiple tax breaks to the gambling parlors on Monday.

The largest of the cuts — and most controversial — is an amendment to the payment-in-lieu-of-taxes (PILOT) law which will change how much Atlantic City casinos owe over the next five years.

The state Senate voted 21-16. The state Assembly voted 46-19-2.

NJ lawmakers also passed one- and two-year expanded tax deductions on promotional gaming credit (PGC) while permanently redefining what is considered a PGC.

Another passed bill allows Atlantic City casinos and racetracks to deduct PGC from retail sports wagering revenue.

The bills now head to Gov. Phil Murphy’s desk for his signature.

Last but not least, the Senate supported a bill to include an additional $3 room charge at casino hotels to fund Atlantic City public safety measures.

Could four Atlantic City casinos close without changing the PILOT?

Amending the PILOT law will provide millions of dollars in tax relief through 2026 for Atlantic City casinos.

Outgoing Senate President Steve Sweeney, D-Gloucester, Cumberland, Salem, recently told colleagues as many as four of the nine Atlantic City casinos could close without amending the PILOT.

With triple-digit percentage increases for internet gambling revenues and declining land-based revenues at seven of the nine casinos, proponents claim the changes will more accurately reflect the current state of the gaming market. Atlantic City casinos say most revenue from internet gambling segments goes to third-party operators.

The bill passed Monday, S4007/A5587, removes internet casino and online sports wagering from the calculation used to determine the casinos’ annual payments-in-lieu-of-taxes. The legislation also extends an aggregate base payment and outlines new uses for investment alternative taxes, or IATs.

Click here for a comprehensive explainer on the PILOT law.

Opposition to PILOT changes

That tax relief comes at the expense of Atlantic County taxpayers, according to the county’s three state legislators.

State Sen. Vince Polistina, R-Atlantic, voted against the measure Monday, saying the county would lose almost $5 million. Polistina said changing the 2016 law violates a court settlement between the county and the state.

“We’re changing (the terms of the settlement) with this legislation,” Polistina said. “And I think it’s just not fair to Atlantic County.”

Outgoing Assemblyman Vince Mazzeo, D-Atlantic, told The Press of Atlantic City he would vote “No” because of lost tax revenue for Atlantic County. He did not vote Monday night.

“We need to have a long-term solution for assessing property taxes of casinos,” Mazzeo said early Monday. “This bill comes up a little short for all the residents of Atlantic County.”

Mazzeo’s district mate, Assemblyman John Armato, D, was an original sponsor of the bill before losing reelection in November. He voted against the bill.

Atlantic City casinos respond

On Tuesday, the industry’s lobby, the Casino Association of New Jersey, issued a statement.

“The Casino Association of New Jersey is pleased legislators passed the amended PILOT program, which will protect thousands of jobs and provide certainty and stability to the market,” the statement reads, in part.

The CANJ went on to say the revised PILOT law would provide more tax revenue to Atlantic City and Atlantic County.

Atlantic City casinos are on pace to pay approximately $152.6 million in 2021, according to state data. Should S4007 become law, the projected payment for next year is $154.6 million.

At the moment, future payments are unknown.

Other tax breaks for Atlantic City casinos also passed

While the PILOT bill got most of the attention, the other pieces of legislation also provide millions of dollars in relief for Atlantic City casinos.

One of the bills, S3994/A5943, has multiple aspects.

The first permanently redefines PGCs to include match play coupons and table game wager coupons. The bill also expands the cap on PGCs for 12 months and allows a full deduction for 24 months.

The non-partisan Office of Legislative Services estimates this bill will result in $34.4 million less in tax revenue to the state over the next two years.

The other legislation related to PGCs involves both casinos and racetracks that offer sports wagering.

That bill, S2257/A4002, allows PGC deduction from gross sports betting revenues.

The OLS could not determine the fiscal impact of the proposal.

Good idea going nowhere fast

The Senate voted in favor of S4157 on Monday. This bill would add a $3 charge to hotel room fees at AC casinos until February 2024.

The temporary proposal would fund public safety services in Atlantic City.

Since the state takeover of Atlantic City in 2016, the city’s police and fire departments have been drastically reduced.

According to the OLS, the room fee would generate $10.725 million in 2022, $11.7 million in 2023 and $975,000 in 2024.

There is no companion bill in the state Assembly. So it is unlikely this proposal will go into effect this year.

AP Photo/Wayne Parry