Proposal would cut taxes for N.D. charity gambling

BISMARCK — A proposal to overhaul state taxes on North Dakota’s charitable gambling industry would reduce collections by about two-thirds while allowing organizations to increase spending on charitable work, analysts say.

More than 300 North Dakota charities run gambling operations, mostly in bars, that support causes ranging from art and historic preservation to youth hockey, public broadcasting and help for people with disabilities. The most popular games are bingo, blackjack and pull tabs, which a buyer opens to see whether he or she wins a cash prize.

The state now levies a 3 percent excise tax on pull tabs and bingo cards, along with a gambling profits tax that ranges from 5 percent of profits that are less than $200,000 to more than 20 percent of profits greater than $600,000.

A North Dakota legislative study committee is recommending a proposal to replace the tax structure with a single 1 percent tax on wagers, before prizes are paid. The 2011 Legislature will take up the proposal.

“This would be a giant step forward. It would save money for all the charities,” said Ron Gibbens, chief executive officer of the North Dakota Association for the Disabled, in Grand Forks.

Under the state’s present tax system, Gibbens said, “you can have sites that are actually losing money and still paying taxes to the state.”

Keith Lauer, the chief gaming regulator in the North Dakota attorney general’s office, said Monday the proposal would simplify charities’ paperwork while giving them a tax break. Many charities’ state tax bills equal the profits they keep for charitable work, he said.

North Dakota now collects about $15.8 million in taxes on the charitable gambling industry every two years, Lauer said. He estimated the proposed changes would reduce that sum to about $5 million.

Sen. Raymon Holmberg, R-Grand Forks, chairman of the Senate Appropriations Committee, said lawmakers would evaluate the request. Helped by high oil prices, North Dakota’s state treasury has been bulging in recent years, and analysts recently predicted the state will finish its current two-year budget with a surplus greater than $1 billion.

“It’s got to stack up against the other things that we do,” Holmberg said. “It’s good that they’ve come up with a plan, and now we’ll have to mull it over ... We’ll have to see what the big picture is.”

In the last state budget year, which ended June 30, North Dakota’s charitable gambling industry took almost $250 million in wagers and paid $198 million in prizes. Charities paid $7.9 million in state taxes and kept profits of $16.8 million once expenses were paid, financial reports say.

Lauer said the proposed legislation would return charities’ tax bills to what they were in the late 1970s and early 1980s, before the tax system became more complex and excise taxes were assessed against pull tabs.

The measure would not affect the more than $500,000 that local governments get every two years for enforcement of gambling rules and would increase slightly the percentage of revenues charities may deduct for expenses, Lauer said.

It would not apply to North Dakota’s taxation of pari-mutuel betting on horse races. Taxes on horse race wagering are divided among North Dakota’s general treasury and other funds that benefit the horse racing industry.

Charlie Bremseth, director of Listen Inc., of Grand Forks, which provides services for developmentally disabled North Dakotans, said the tax changes would be “the shot in the arm that we need, because gaming has been pretty flat for a while now.”

“It’s difficult enough for charities to raise money in this economic climate,” he said. “To have the North Dakota Legislature take a look at this as a way of helping charities ... is just a real blessing.”

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