Short title; amendment of 1986 Code

(a)

Short title

This Act may be cited as the

Internet Gambling Regulation and Tax Enforcement Act of 2008

. (b)

Amendment of 1986 Code

Except as otherwise expressly provided, whenever in this Act an amendment is expressed in terms of an amendment a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

License fee on Internet gambling operators; licensee information reporting

(a)

In general

Chapter 36 (relating to certain other excise taxes) is amended by adding at the end the following new subchapter:

Internet Gambling Operators

Sec. 4491. Imposition of Internet gambling license fee.

4491.

Imposition of Internet gambling license fee

(a)

In general

Each Internet gambling operator licensed by the Director in accordance with subchapter V of chapter 53 of title 31, United States Code, shall be required to pay to the Director by the end of each month an Internet gambling license fee. (b)

Internet gambling license fee

For purposes of this section, the Internet gambling license fee is an amount equal to 2 percent of all funds deposited during the preceding month with or on behalf of such Internet gambling operator into an account that can be used for the purpose of placing a bet or wager. Deposits made by or on behalf of any such operator of Internet gambling winnings shall not be treated as a deposit for purposes of this section. (c)

Disposition

Amounts paid to the Director as Internet gambling license fees under this section shall be deposited in the general fund of the Treasury and treated as revenue. (d)

Direct and exclusive obligation of licensee

The Internet gambling license fee shall be the direct and exclusive obligation of the Internet gambling operator and may not be deducted from the amounts available as deposits to the person placing a bet. (e)

Director

For purposes of this subchapter, the term Director shall have the meaning given such term by section 5382 of chapter 53 of title 31, United States Code. (f)

Administrative provisions

To the extent the Secretary shall by regulations prescribe, the Internet gambling license fee shall be treated as an excise tax for purposes of the administrative provisions of this title applicable to excise taxes imposed by chapter 35.

(b)

Information returns

Subpart A of part III of subchapter A of chapter 61 (relating to information concerning persons subject to special provisions) is amended by adding at the end the following new section:

6039J.

Returns of Internet gambling operators

(a)

Requirement

Every person who is an Internet gambling operator subject to section 4491 during a taxable year shall furnish, at such time and in such manner as the Secretary shall by regulations prescribe, the information described in subsection (b), and such person shall maintain (in the location, in the manner, and to the extent prescribed in regulations) such records as may be appropriate to the information described in subsection (b). (b)

Required information

For purposes of subsection (a), the information described in this subsection is such information as the Secretary may prescribe by regulations relating to— (1)the Internet gambling operator’s name, address, and tax information number, (2)the name, address, and tax information number of each person placing a wager with the Internet gambling operator during the calendar year, (3)the gross winnings, gross wagers, and gross losses of each such person during the year, (4)the amount of tax withheld with respect to each such person, (5)beginning and end-of-year account balances for each such person, and (6)amounts deposited and withdrawn by each such person during the calendar year. (c)

Statement To be furnished to persons with respect to whom information is required

Every person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return a written statement showing— (1)the name, address, and phone number of the information contact of the person required to make such return, and (2)the information required to be shown on such return with respect to such person.

The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made.

(c)

Clerical amendments

(1)The table of subchapters for chapter 36 is amended by adding at the end the following new item:

Subchapter E. Internet Gambling Operators.

(2)The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6039I the following new item:

Sec. 6039J. Returns of Internet gambling operators.

(d)

Effective date

The amendments made by this section shall apply to wagers made after December 31, 2008.

Withholding from certain gambling winnings

(a)

Net internet gambling winnings

Paragraph (3) of section 3402(q) (relating to extension of withholding to certain gambling winnings) is amended by adding at the end thereof the following new subparagraph:

(D)

Net internet gambling winnings

Proceeds of net Internet gambling winnings of more than $5,000 in any one calendar year.

(b)

No exemption for certain winnings

Paragraph (5) of section 3402(q) is amended by inserting (other than winnings described in paragraph (3)(D) after winnings . (c)

Definitions

Subsection (q) of section 3402 is amended by redesignating paragraph (7) as paragraph (8) and by inserting after paragraph (6) the following new paragraph:

(7)

Proceeds of net Internet gambling winnings

For purposes of this subsection— (A)

In general

The term proceeds of net Internet gambling winnings means amounts of net Internet gambling winnings withdrawn from an account established for the purpose of Internet gambling. (B)

Net Internet gambling winnings

The term net Internet gambling winnings means gross winnings from a wager placed over the Internet with a person required to be licensed under section 5382 of chapter 53 of title 31, United States Code, less the amount wagered. (C)

Internet; wager

The terms Internet and wager shall have the respective meanings given such terms by section 5382 of chapter 53 of title 31, United States Code.

(d)

Backup withholding

Section 3406 (relating to backup withholding) is amended by redesignating subsection (i) as subsection (j) and by adding the following new subsection:

(i)For purposes of this section, net Internet gambling winnings shall be treated as other reportable payments, an Internet gambling operator shall be treated as payor, and the person placing a wager with an Internet gambling operator shall be treated as payee. For purposes of the preceding sentence, terms used in such sentence which are also used in section 3402(q)(7) shall have the meanings given such terms by such section.

(e)

Effective date

The amendment made by this section shall apply to wagers placed with a licensee after December 31, 2008.

Withholding of tax on nonresident aliens

(a)

Tax on nonresident alien individuals

Subparagraph (A) of section 871(a)(1) (relating to income not connected with United States business—30 percent tax) is amended— (1)by striking and other fixed and inserting , other fixed, and (2)by adding and net Internet gambling income, at the end. (b)

Exemption for certain gambling winnings

Section 871(j) (relating to exemption for certain gambling winnings) is amended by inserting before the period at the end the following: or to any wagers placed over the Internet (as such terms are defined in section 3402(q)(7)). (c)

Withholding of tax on nonresident alien individuals

The first sentence of subsection (b) of section 1441 (relating to withholding of tax on nonresident aliens) is amended— (1)by striking and gains on transfers and inserting gains on transfers, and (2)by inserting before the period at the end the following: , and proceeds of net Internet gambling winnings (as defined in section 3402(q)(7)) of more than $5,000 in any one calendar year . (d)

Effective date

The amendments made by this section shall apply to wagers placed with a licensee after December 31, 2008.

Tax on wagers

(a)

Persons liable for tax

Subsection (c) of section 4401 (relating to persons liable for tax on wagers) is amended by adding at the end thereof the following sentence: Any person placing a wager with a person who is required to obtain a license within the meaning of section 4491 but who has failed to obtain such license shall be liable for and pay the tax under this subchapter on all such wagers.. (b)

Territorial extent

Paragraph (2) of section 4404 is amended to read as follows:

(2)placed within the United States or any Commonwealth, territory, or possession thereof by a United States citizen or resident.

(c)

Effective date

The amendments made by this section shall apply to wagers made after December 31, 2008.