Illinois Governor Signs Chicago Casino Tax Bill, Improves Odds of Downtown Resort

Posted on: July 1, 2020, 09:40h. 

Last updated on: July 1, 2020, 12:11h.

Devin O'Connor @CasinoorgDevinO Read More

Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

Illinois Governor J.B. Pritzker (D) has signed legislation into law that reduces taxes on gross gaming revenue (GGR) that will be generated by an integrated casino resort in downtown Chicago.

The Illinois General Assembly passed Senate Bill 516 during their special session in May. The bill provides for a lower tax schedule for the casino.

On slot machines, the city and state will collectively take 22.5 percent to 74.7 percent of the win generated by the terminals, the rate dependent on the casino’s total GGR. On table games, wins will be taxed between 15 percent and 35 percent.

Chicago Mayor Lori Lightfoot (D), who petitioned state lawmakers to reduce the tax obligations imposed on the Windy City casino in the original expansion of commercial gambling passed last year, said the integrated resort will create “a dynamic new entertainment district in our city.”

Lightfoot added that the casino will help strengthen the financial future of the city. Along with the downtown integrated resort casino, the 2019 gaming bill signed by Pritzker authorized five smaller land-based commercial casinos in five Chicago suburbs. The venues are earmarked for Waukegan, Rockford, South Suburbs, Williamson County, and Danville.

The Cost of Doing Business? 

The 2019 gaming expansion measure gained support among state lawmakers in response to the governor’s $45 billion “Rebuild Illinois” infrastructure plan. The six casinos — the first land-based gaming venues in Illinois — are designed to help offset some of the spending.

A feasibility study, however, concluded that the downtown Chicago casino would be taxed at an effective rate of 72 percent. That rate is much higher than what the suburban casinos would face due to a so-called 33.3 “privilege tax” for the integrated resort.

Las Vegas-based Union Gaming was brought in to review whether such a tax would render the license unattractive to potential casino operators.

“To the extent a casino operator could pare down expenses and realize modest revenue and profits from non-gaming amenities, total enterprise profit margin would, in a best-case scenario, likely equate to a few pennies on the dollar,” Union concluded.

In addition to the excessive tax, the winning casino company would be required to pay an upfront $15 million licensing fee. The state also charges a one-time payment of $30,000 per gaming position. With the Chicago casino permitted to have as many as 4,000 positions, that cost could reach $120 million.

Will Casinos Bite?

Pritzker’s signing of SB516 certainly makes the downtown Chicago casino more attractive. But it doesn’t necessarily mean a flood of casino operators will move to try and gain the gaming license.

Casinos will likely wait to see where the integrated resort is approved to be built. There are differing opinions as to whether it should be used to revitalize an economically distressed part of the city, or if it should be allowed in a more tourist-centric area, such as Millennium Park.

Tax Schedule

Slots

GGR               State Percent        City        Total

$0-$25M               12                   10.5        22.5

$25-$50M             16                   14           30

$50-75M               20.1                 17.4        37.5

$75-100M              21.4                18.6        40

$100-150M            22.7                19.8        42.5

$150-$225M         24.1                 20.9        45

$225-$1B              26.8                 23.2        50

$1B+                       40                   34.7        74.7

Table Games

GGR                State Percent         City       Total

$0-$25M               8.1                    6.9           15

$25-$75M             10.7                  8.4           19.1

$75-$175M            11.2                  9.8            21

$175-225M            13.5                 11.5           25

$225-$275M         15.1                  12.9          28

$275-$375M         16.2                 13.8          30

$375M+                 18.9                 16.1           35