MGM Grand Detroit Says Uncollected Gaming Debt Should Be Tax-Free

Posted on: August 9, 2019, 02:00h. 

Last updated on: August 9, 2019, 04:31h.

MGM Grand Detroit company officials say in legal filings that uncollected player gaming debts shouldn’t be taxed by the state government.

MGM Grand Detroit casino tax
Company officials at MGM Grand Detroit are under the legal impression that the casino shouldn’t pay taxes on uncollected gambling winnings. (Image: MGM Grand Detroit)

The casino operator filed two cases in the Michigan Court of Claims recently arguing that such losses incurred by the resort should be free of taxes.

Crain’s Detroit Business says the cases stem from one player being issued a $3 million credit line who lost $677,500 playing at MGM Grand Detroit tables. In the second instance, an individual was issued a $2 million line of credit, and lost nearly it all ($1.945 million).

In both cases, the casino issued a ten percent credit to the indebted players. MGM says it shouldn’t have to pay tax on the 10 percent forgiveness.

Both cases were filed on July 30. MGM is requesting that the Michigan Department of Treasury refund the taxes it paid on the forgiven debts, which totals $55,000.

Forgive and Forget

The Michigan Gaming Control and Revenue Act – passed in 1996 – allows casinos to deduct uncollectible losses against their gross gaming revenue (GGR) wins.

The law states, “Gross receipts’ means the total of all sums including valid or invalid checks, currency, tokens, coupons, vouchers, or instruments of monetary value, whether collected or uncollected, received by a casino licensee from gaming, including all entry fees assessed for tournaments or other contests, less a deduction for uncollectible gaming receivables.”

The statute mandates that the deduction can only be made after the casino notifies the Treasury department that certain winnings were uncollected due to indebted players.

Michigan taxes GGRs at its three commercial casinos in Detroit at an effective rate of 19 percent. Fifty-five percent of the tax goes to the city, and the rest the state, which is used to fund K-12 education programs.

In an initial response to MGM Grand Detroit’s legal filings regarding the uncollected gaming money, the state said no tax forgiveness is warranted because the casino “did not take any collection steps to recover the full amount owed to it.”

Detroit Casinos Rocking

2018 was again a record year in terms of casino win for Detroit’s thee gaming venues. GGR totaled $1.44 billion, a $20 million premium on the city gaming industry’s previous high set back in 2011.

Along with MGM Grand Detroit, MotorCity and Greektown benefited from a strong economy and cheap gas prices. That’s according to gaming analyst Alex Calderone.

“This is a business that is entirely dependent on the health of the consumer. Gas prices were cheap, the local and national economy were relatively healthy,” Calderone said.

The MGM casino was responsible for the largest win, at $619.2 million – which gives the Grand a 43 percent market share.

Greektown recently changed hands from billionaire Dan Gilbert to Penn National Gaming and Caesars’ real estate investment trust VICI Properties. MotorCity is owned by Marian Ilitch, who, along with her late husband Mike, created the Little Caesars pizza chain. Mike Ilitch owned the NHL’s Detroit Red Wings as well as MLB’s Detroit Tigers before he passed away in 2017. Since his passing, Marian’s company, Illitch Holdings, has owned the teams under the Olympia Entertainment umbrella.