[Federal Register Volume 81, Number 251 (Friday, December 30, 2016)]
[Rules and Regulations]
[Pages 96374-96380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31575]


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DEPARTMENT OF TREASURY

Internal Revenue Service

26 CFR Parts 1, 7, and 31

[TD 9807]
RIN 1545-BL68


Information Returns; Winnings From Bingo, Keno, and Slot Machines

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations under section 6041 
regarding the filing of information returns to report winnings from 
bingo, keno, and slot machine play. The rules update the existing 
requirements regarding the filing, form, and content of such 
information returns; allow for an additional form of payee 
identification; and provide an optional aggregate reporting method. The 
final regulations affect persons who pay winnings of $1,200 or more 
from bingo and slot machine play, $1,500 or more from keno, and 
recipients of such payments.

DATES: These regulations are effective on December 30, 2016.

FOR FURTHER INFORMATION CONTACT: David Bergman, (202) 317-6845 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains final regulations in Title 26 of the Code of 
Federal Regulations under section 6041 of the Internal Revenue Code. 
The final regulations replace the existing information reporting 
requirements under Sec.  7.6041-1 of the Temporary Income Tax 
Regulations under the Tax Reform Act of 1976 for persons who make 
reportable payments of bingo, keno, or slot machine winnings. The new 
requirements are set forth in a new Sec.  1.6041-10 of the regulations. 
Because the new requirements replace the existing requirements, the 
regulations under Sec.  7.6041-1 are being removed.
    On March 4, 2015, the Treasury Department and the IRS published a 
notice of proposed rulemaking (REG-132253-11) in the Federal Register, 
80 FR 11600, containing proposed regulations that would update the 
existing rules and add rules for electronically tracked slot machine 
play, payee identification, and an optional aggregate reporting method.
    A public hearing was held on June 17, 2015, and five speakers 
provided testimony. In addition, over 14,000 written public comments 
were received. After careful consideration of the written comments and 
statements made during the hearing, the proposed regulations are 
adopted as modified by this Treasury Decision.

Explanation and Summary of Comments

    All of the 14,000 written comments on the notice of proposed 
rulemaking were considered and are available at regulations.gov or upon 
request. Many of these comments addressed similar issues and expressed 
similar points of view. These comments are summarized in this preamble. 
Comments pertaining to parimutuel gambling in the case of horse races, 
dog races, and jai alai are being considered in a separate regulations 
project under section 3402(q).

Filing Requirement, Form, and Content of the Information Return

    Commentators supported the proposed rules regarding filing 
requirements and the form and content of the information returns 
required to be filed. Accordingly, the Treasury Department and the IRS 
conclude that the final regulations should adopt the filing 
requirements without modification.

Electronically Tracked Slot Machine Play

    The proposed regulations created rules for electronically tracked 
slot machine play, which was defined in proposed Sec.  1.6041-10(b)(1) 
as slot machine play where an electronic player system controlled by 
the gaming establishment (such as through the use of a player's card or 
similar system) records the amount a specific individual wins and 
wagers on slot machine play. Section 1.6041-10(b)(2)(i)(D) of the 
proposed regulations provided that gambling winnings for electronically 
tracked slot machine play are required to be reported if (1) the total 
amount of winnings netted against the total amount of wagers during the 
same session of play was $1,200 or more, and (2) at least one single 
win during the session was $1,200 or more without regard to the wager. 
A ``session'' of play was determined with reference to a calendar day. 
The changes were intended to facilitate reporting by payees on their 
individual income tax returns under the proposed safe harbor in Notice 
2015-21, 2015-12 I.R.B. 765.
    Some commentators expressed concern regarding the feasibility of 
the proposed rules given existing technology and recommended that the 
proposed rules not be adopted. Commentators stated that one of the 
purposes of electronic player systems was for marketing and customer 
loyalty and that current systems should not be used as a mandatory 
method for tracking winnings and wagers for purposes of tax reporting. 
Moreover, commentators stated that the use of electronic player systems 
for tax reporting may chill customer use and have a negative effect on 
customer relations. In addition, some commentators stated that their 
electronic player systems lack the necessary controls to be used for 
tax reporting, and that implementing such controls may be costly and 
labor-intensive. Based on these comments, the

[[Page 96375]]

final regulations do not adopt the proposed rules for electronically 
tracked slot machine play.

Payee Identification Requirements

    The proposed regulations retain the rule in Sec.  7.6041-1(c)(3) of 
the Temporary Income Tax Regulations that the payor must obtain two 
forms of identification from the payee to verify the payee's identity. 
However, Sec.  1.6041-10(f) of the proposed regulations modifies the 
rules for acceptable identification by requiring that one of the forms 
of identification include the payee's photograph and by providing that 
the payor may accept a properly completed Form W-9 in lieu of 
identification that includes the payee's social security number. The 
proposed regulations provide that payors may rely on this provision 
prior to publication of final regulations in the Federal Register.
    Most commentators supported the proposed rules regarding the types 
of identification that can be relied on to verify a payee's identity. 
In particular, commentators supported the provision that allows a Form 
W-9 to be used as an acceptable means of verifying a payee's identity 
in lieu of identification that includes the payee's social security 
number. This rule is consistent with procedures currently used by many 
payors to address the fact that, today, most forms of identification 
that payees carry with them do not contain a social security number.
    Other commentators suggested that the list of examples of 
acceptable forms of government-issued identification be expanded to 
include tribal member identification cards issued by a federally 
recognized Indian tribe. Some commentators also suggested that an 
exception from the photo identification requirement be provided for 
tribal identification cards presented at tribal government gaming 
facilities because many tribal identification cards do not contain 
photographs.
    In response to the comments received, the list of examples of 
acceptable government-issued identification has been expanded in Sec.  
1.6041-10(e)(1) of the final regulations to include tribal member 
identification cards issued by a federally recognized Indian tribe. In 
addition, in response to comments, Sec.  1.6041-10(d)(2) of the final 
regulations provides an exception to the photo identification 
requirement if one of the forms of identification is a tribal 
identification card presented at a gaming establishment owned or 
licensed by the tribal government that issued the tribal member 
identification card.

Optional Aggregate Reporting Method and Session

    Section 1.6041-10(h) of the proposed regulations provides a new 
rule for an optional aggregate reporting method. Under Sec.  7.6041-
1(a), reporting of gambling winnings from bingo, keno, and slot machine 
play is required each time a payor makes a payment of reportable 
gambling winnings (i.e., a payment that meets the reporting threshold). 
The aggregate reporting method allows a payor who makes more than one 
payment of reportable gambling winnings to the same payee from the same 
type of game during a ``session'' to report the aggregate amount of 
such reportable gambling winnings on one Form W-2G, provided the payor 
satisfies certain recordkeeping requirements set forth in the 
regulations. Under Sec.  1.6041-10(b)(3) of the proposed regulations, a 
``session'' is generally defined as a period of play that begins when a 
patron places the first wager on a particular type of game at a gaming 
establishment and ends when the patron places his or her last wager on 
the same type of game before the end of the same calendar day at the 
same gaming establishment. This aggregate reporting method may be used 
at the payor's option. The proposed regulations provide that payors may 
rely on this provision prior to publication of final regulations in the 
Federal Register.
    Commentators were generally supportive of the proposed optional 
aggregate reporting method but did suggest some changes. Accordingly, 
the final regulations adopt the proposed optional aggregate reporting 
method with some modifications.
    First, the period for purposes of the aggregate reporting method in 
the final regulations is not referred to as a ``session.'' Rather, in 
Sec.  1.6041-10(g) of the final regulations, the period used for 
purposes of the aggregate reporting method is now referred to as an 
``information reporting period.'' The proposed regulations' definition 
of a ``session'' was intended to mirror the concept of ``session'' set 
forth in the safe harbor for the determination of wagering gains and 
losses from electronically tracked slot machine play that was published 
in a Notice and draft Revenue Procedure on the same date as the 
proposed regulations. Notice 2015-21. The Treasury Department and the 
IRS are still considering the income tax reporting rules in this area, 
and the draft Revenue Procedure has not been finalized. Therefore, to 
avoid confusion, the aggregate reporting method rules in Sec.  1.6041-
10(g) of the final regulations have been modified so that the period 
during which reporting may be aggregated is referred to as the 
``information reporting period'' rather than as a ``session.''
    Second, commentators suggested that rather than a calendar day, 
payors should have the option of using the 24-hour period known 
commonly in the industry as the ``gaming day'' for purposes of the 
aggregate reporting method. The comments explained that the period of a 
``gaming day'' is used by gaming establishments for financial 
accounting, gaming control board, and other regulatory purposes, and 
allows each establishment the flexibility to define a day for these 
purposes by taking into account peak gaming times. The ``gaming day'' 
period is also utilized in complying with anti-money laundering 
reporting obligations. According to the comments, a gaming day is a 24-
hour period that ends at a time during which the gaming establishment 
is closed or when business is slowest, typically between 3 a.m. and 6 
a.m. The comments indicate that allowing payors to use the same period 
for purposes of information reporting as for other regulatory purposes 
will enhance the benefits of aggregate reporting for payors by not 
having a different reporting period for tax reporting, and by allowing 
aggregate reports to be generated during non-peak gaming times.
    To give payors more flexibility, the final regulations adopt these 
suggestions and provide a flexible ``information reporting period'' as 
the period to be used for aggregate reporting. Under Sec.  1.6041-
10(b)(2) of the final regulations, an ``information reporting period'' 
is either a ``calendar day'' or a ``gaming day,'' so long as that 
period is applied uniformly by the payor to all payees during the 
calendar year. A payor may adopt a different ``information reporting 
period'' from one calendar year to the next, but may not change the 
``information reporting period'' in the middle of a calendar year. 
Changes to a payor's ``information reporting period'' from one calendar 
year to the next must be implemented on January 1. In addition, the 
final regulations provide that on December 31st, all open information 
reporting periods must end at 11:59 p.m. in order to end by the end of 
the calendar year. This rule is necessary to maintain calendar year 
federal income tax reporting that is the bedrock of the information 
reporting regime and that is required by section 6041. Section 1.6041-
10(b)(2)(iii) of the final regulations provides that if a ``gaming 
day'' is adopted for a calendar year, the information reporting period 
for

[[Page 96376]]

December 31st ends at 11:59 p.m. on December 31, and the information 
reporting period for January 1st begins at 12 a.m. on January 1, 
regardless of the number of hours of the December 31st and January 1st 
information reporting periods.
    Third, commentators noted that the proposed regulations did not 
specifically define ``gaming establishment,'' and how to deal with 
common ownership between various casinos. Section 1.6041-10(b)(2)(iv) 
of the final regulations defines the term ``gaming establishment'' as a 
business entity of a payor of reportable gambling winnings with respect 
to bingo, keno, or slot machine play, and includes all gaming 
establishments owned by the payor using the same employer 
identification number (EIN) issued to such payor in accordance with 
section 6109.
    Finally, commentators requested that the proposed recordkeeping 
requirements with respect to aggregate reporting be updated to reflect 
the actual credentials held by various casino representatives. These 
recordkeeping requirements require that payors maintain a record of 
every payment that will be reported using the aggregate reporting 
method and that each entry in the record be verified by a designated 
casino representative. Section Sec.  1.6041-10(g)(3)(vii) of the 
proposed regulations requires that the designated individual provide a 
gaming license number. The final regulations do not require that a 
gaming license number be provided. Instead, Sec.  1.6041-10(g)(3)(vii) 
of the final regulations requires that the person authorized by the 
applicable gaming regulatory control authority to ensure accuracy in 
reporting provide his or her unique identification number.

Reporting Thresholds

    The proposed rules maintained the reporting thresholds of $1,200 
for bingo and slot machine play and $1,500 for keno in Sec.  7.6041-
1(a), but invited comments on the feasibility of reducing these 
thresholds. Commentators overwhelmingly opposed the idea of reducing 
these reporting thresholds. Payors opposed lowering the thresholds 
because it would result in more reporting, which would increase 
compliance burdens for the industry. In fact, many commentators 
suggested that rather than reducing the current thresholds, they should 
be increased to account for inflation. These final regulations do not 
change the existing reporting thresholds for bingo, keno, and slot 
machine play.

Netting Wagers

    The proposed regulations retain the rules in Sec.  7.6041-1(b) 
that, in determining whether the reporting threshold is satisfied, the 
amount of winnings from bingo and slot machine play is not reduced by 
the amount of the wager, but the amount of winnings from one keno game 
is reduced by the amount of the wager in that one game. Commentators 
were divided as to whether uniform application of netting the wager 
against the winnings was feasible, citing compliance cost and labor 
concerns. In light of these concerns, the Treasury Department and the 
IRS conclude that the existing approach, as described in the proposed 
regulations, should be retained. Accordingly, Sec.  1.6041-10(b)(1)(i) 
of the final regulations provides that reportable gambling winnings in 
the case of bingo and slot machine play are not determined by netting 
the wager against the winnings, but reportable gambling winnings in the 
case of keno are determined by netting the wager in that one game 
against the winnings from that game.

Definition of Slot Machine and Reportable Gambling Winnings

    For purposes of information reporting, proposed Sec.  1.6041-
10(b)(4) defines a slot machine as a device that, by application of the 
element of chance, may deliver or entitle the person playing or 
operating the device to receive cash, premiums, merchandise, or tokens, 
whether or not the device is operated by inserting a coin, token, or 
similar object. One commentator suggested that the definition of slot 
machines be changed to adopt either of the definitions that has been 
adopted by the states of New Jersey or Nevada, both of which define 
slot machines more broadly. Other commentators suggested that the 
definition of slot machine in the proposed regulations is too broad 
because it could include technologic aids to Class II gaming as defined 
under the Indian Gaming Regulatory Act, 25 U.S.C. 2701-2721, such as 
electronic bingo or electronic pull-tabs.
    As discussed in the preamble of the proposed regulations, the 
definition of slot machine in proposed Sec.  1.6041-10(b)(4) is 
intended to be consistent with the definition of slot machine in Sec.  
44.4402-1(b)(1) of the Wagering Tax Regulations. Having consistent 
definitions benefits tax administration and may prevent unintended 
confusion that could arise from having different definitions for 
federal tax purposes. Because the Treasury Department and the IRS 
conclude that, on balance, the proposed definition of slot machine is 
the most appropriate definition, the final regulations adopt the 
proposed definition of the term ``slot machine'' without modification.
    Section 1.6041-10(b)(2)(i) of the proposed regulations provides 
that all winnings from all cards played during one bingo game are 
combined and that all winnings from all ``ways'' on a multi-way keno 
ticket are combined. In addition, Sec.  1.6041-10(b)(2)(ii) of the 
proposed regulations provides that winnings from different types of 
games are not combined to determine whether the reporting thresholds 
are satisfied, and that bingo, keno, and slot machine play are all 
different types of games. Commentators did not oppose inclusion of 
these rules in the definition of reportable gambling winnings in the 
proposed regulations. Accordingly, the final regulations adopt these 
aspects of the definition of reportable gambling winnings without 
modification.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented by Executive 
Order 13563. Therefore, a regulatory assessment is not required.
    It is hereby certified that this rule will not have a significant 
economic impact on a substantial number of small entities. This 
certification is based on the fact that this rule merely provides 
guidance as to the filing of information reporting returns for payors 
who make reportable payments of bingo, keno, or slot machine winnings 
and who are required by section 6041 to make returns reporting those 
payments. The requirement for payors to make information returns is 
imposed by statute and not these regulations. In addition, this rule 
reduces the existing burden on payors to comply with the statutory 
requirement by simplifying the process for payors to verify payees' 
identities with a broader range of documents that are more readily 
available, and also by allowing payors to reduce the number of 
information returns they issue if they adopt the new aggregate 
reporting methodology. Therefore, a regulatory flexibility analysis 
under the Regulatory Flexibility Act (5 U.S.C. Chapter 6) is not 
required.
    Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking preceding these regulations was submitted 
to the Chief Counsel for Advocacy of the Small Business Administration 
for comment on the regulations' impact on small

[[Page 96377]]

businesses, and no comments were received.

Drafting Information

    The principal author of these regulations is David Bergman of the 
Office of Associate Chief Counsel (Procedure & Administration).

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 7

    Temporary income tax regulations under the Tax Reform Act of 1976.

26 CFR Part 31

    Employment Taxes and Collection of Income Tax at Source.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1, 7, and 31 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

0
Par. 2. Section 1.6041-10 is added to read as follows:


Sec.  1.6041-10   Return of information as to payments of winnings from 
bingo, keno, and slot machine play.

    (a) In general. Every person engaged in a trade or business (as 
defined in Sec.  1.6041-1(b)) and who, in the course of such trade or 
business, makes a payment of reportable gambling winnings (defined in 
paragraph (b)(1) of this section) must make an information return with 
respect to such payment. Unless the provisions of paragraph (g) of this 
section (regarding aggregate reporting) apply, a separate information 
return is required with respect to each payment of reportable gambling 
winnings.
    (b) Definitions--(1) Reportable gambling winnings. (i) For purposes 
of this section, the term reportable gambling winnings is defined as 
follows:
    (A) For bingo, the term ``reportable gambling winnings'' means 
winnings of $1,200 or more from one bingo game, without reduction for 
the amount wagered. All winnings received from all wagers made during 
one bingo game are combined (for example, all winnings from all cards 
played during one bingo game are combined).
    (B) For keno, the term ``reportable gambling winnings'' means 
winnings of $1,500 or more from one keno game reduced by the amount 
wagered on the same keno game. All winnings received from all wagers 
made during one keno game are combined (for example, all winnings from 
all ``ways'' on a multi-way keno ticket are combined).
    (C) For slot machine play, the term ``reportable gambling 
winnings'' means winnings of $1,200 or more from one slot machine play, 
without reduction for the amount wagered.
    (ii) Winnings and wagers from different types of games are not 
combined to determine if the reporting threshold is satisfied. Bingo, 
keno, and slot machine play are different types of games.
    (iii) Winnings include the fair market value of a payment in any 
medium other than cash.
    (iv) The amount wagered in the case of a free play is zero.
    (2) Information reporting period--(i) In general. For purposes of 
paragraph (g) of this section, the ``information reporting period'' 
begins when a patron places the first wager on a particular type of 
game at a gaming establishment, as defined in paragraph (b)(2)(iv) of 
this section, and ends when the patron places his or her last wager on 
the same type of game at the same gaming establishment before the end 
of the ``information reporting period.'' An information reporting 
period is a 24-hour period. A payor may select a calendar day (as 
defined in paragraph (b)(2)(ii) of this section) or a gaming day (as 
defined in paragraph (b)(2)(iii) of this section) as the information 
reporting period for purposes of the aggregate reporting method in 
paragraph (g) of this section. For purposes of this paragraph (b)(2), 
time is determined by the time zone of the location where the patron 
places the wager. A payor must use the same information reporting 
period (a calendar day or gaming day) to report all ``reportable 
gambling winnings'' paid during the calendar year. Once selected, a 
payor may not change its information reporting period during a calendar 
year. Any changes to a payor's information reporting period from one 
calendar year to another must be implemented on January 1.
    (ii) Calendar day. A calendar day is determined with reference to a 
period beginning at 12 a.m. and ending no later than 11:59 p.m. of the 
same calendar day.
    (iii) Gaming day--(A) In general. A gaming day is a 24-hour period 
other than a calendar day (as defined in paragraph (b)(2)(ii) of this 
section) selected by the payor, subject to the special rules for 
December 31 and January 1 in paragraphs (b)(2)(iii)(B) and (C) of this 
section.
    (B) Special rule for December 31. For purposes of paragraph 
(b)(2)(iii) of this section, the gaming day that begins on December 31 
of any calendar year ends at 11:59 p.m. on December 31, regardless of 
the time on December 31 on which that gaming day began.
    (C) Special rule for January 1. For purposes of paragraph 
(b)(2)(iii) of this section, the gaming day of January 1 begins at 
12:00 a.m. on January 1, regardless of the time and calendar day on 
which that gaming day ends, and may extend beyond 24 hours.
    (iv) Gaming establishment. For purposes of this section, a gaming 
establishment is a business entity of a payor of reportable gambling 
winnings with respect to bingo, keno, or slot machine play, and 
includes all gaming establishments owned by such payor using the same 
employer identification number (EIN) issued to such payor in accordance 
with section 6109.
    (v) Examples. The following examples illustrate the provisions of 
paragraph (b)(2) of this section.

    Example 1.  Casino R uses the aggregate reporting method under 
paragraph (g) of this section to report certain reportable gambling 
winnings. For other regulatory purposes, Casino R uses a gaming day 
that begins at 3 a.m. and ends at 2:59 a.m. the following calendar 
day. Casino R chooses to use its gaming day as its information 
reporting period for purposes of paragraph (b)(2) of this section 
during Year 1. Accordingly, the information reporting period for 
purposes of paragraph (g) of this section for each day during Year 1 
begins at 3 a.m. and ends at 2:59 a.m. the following day. The 
information reporting period for December 31 of Year 1 begins at 3 
a.m. on December 31 of Year 1 and ends at 11:59 p.m. on December 31 
of Year 1. The information reporting period for January 1 of Year 2 
begins at 12 a.m. on January 1 of Year 2 and ends at 2:59 a.m. on 
January 2 of Year 2.
    Example 2.  The facts are the same as Example 1, except Casino R 
uses a calendar day as its information reporting period for purposes 
of paragraph (b)(2) of this section during Year 1. Accordingly, the 
information reporting period for purpose of paragraph (g) of this 
section for each day during Year 1 begins at 12 a.m. and ends at 
11:59 p.m. on the same day.
    Example 3.  Casino R uses the aggregate reporting method under 
paragraph (g) of this section to report certain reportable gambling 
winnings. For other regulatory purposes, Casino R uses a gaming day 
that begins at 9:00 p.m. and ends at 8:59 p.m. the following 
calendar day. Casino R chooses to use its gaming day as its 
information reporting period for purposes of paragraph (b)(2) of 
this section during Year 1. Accordingly, the information reporting 
period for purposes of paragraph (g) of this section for each day 
during Year 1 begins at 9:00 p.m. and ends at 8:59 p.m. the 
following day. The

[[Page 96378]]

information reporting period for December 31 of Year 1 begins at 
9:00 p.m. on December 30 and ends at 8:59 p.m. on December 31. A 
second information reporting period for December 31 then begins at 
9:00 p.m. on December 31 and ends at 11:59 p.m. on December 31. The 
information reporting period for January 1 of Year 2 begins at 12:00 
a.m. on January 1 and ends at 8:59 p.m. on January 1 of Year 2.
    Example 4.  Casino R uses the aggregate reporting method under 
paragraph (g) of this section to report certain reportable gambling 
winnings. In Year 1, Casino R chooses to use a ``gaming day'' that 
begins at 3 a.m. and ends at 2:59 a.m. the following day as its 
information reporting period. During the course of Year 1, Casino R 
decides that it would like to change its information reporting 
period to instead begin at 5 a.m. and end at 4:59 a.m. the following 
day. Casino R must wait until January 1 of Year 2 to implement such 
a change. On January 1 of Year 2, Casino R's information reporting 
period will begin at 12 a.m. and end at 4:59 a.m. on January 2. On 
December 31 of Year 2, Casino R's information reporting period will 
begin at 5 a.m. and end at 11:59 p.m.

    (3) Slot machine. The term ``slot machine'' means a device that, by 
application of the element of chance, may deliver, or entitle the 
person playing or operating the device to receive cash, premiums, 
merchandise, or tokens whether or not the device is operated by 
insertion of a coin, token, or similar object.
    (c) Prescribed form; time and place for filing the return. The 
return described in paragraph (a) of this section is a Form W-2G, 
``Certain Gambling Winnings.'' The Form W-2G must be filed with the 
appropriate Internal Revenue Service location designated in the 
instructions to the form on or before February 28 (March 31, if filed 
electronically) of the year following the calendar year in which the 
reportable gambling winnings were paid. See section 6011 and Sec.  
1.6011-2 for requirements to file electronically.
    (d) Information included on the return--(1) In general. Each return 
required by paragraph (a) of this section must contain:
    (i) The name, address, and taxpayer identification number of the 
payor;
    (ii) The name, address, and taxpayer identification number of the 
payee;
    (iii) A general description of the two types of identification (as 
described in paragraph (e) of this section), one of which must have the 
payee's photograph on it (except in the case of tribal member 
identification cards in certain circumstances as described in paragraph 
(d)(2) of this section) that the payor relied on to verify the payee's 
name, address, and taxpayer identification number;
    (iv) The date and amount of payment;
    (v) The type of wagering transaction (bingo, keno, or slot machine 
play);
    (vi) In the case of a bingo or keno game, any number, color, or 
other designation assigned to the game for which the payment is made;
    (vii) In the case of slot machine play, the identification number 
of the slot machine(s) (for example, location and asset number);
    (viii) Any other information required by the forms, instructions, 
revenue procedures, or other applicable guidance published in the 
Internal Revenue Bulletin.
    (2) Special rule for tribal member identification cards. A tribal 
member identification card need not contain the payee's photograph to 
meet the identification requirement described in paragraph (d)(1)(iii) 
of this section if:
    (i) The payee is a member of a federally recognized Indian tribe;
    (ii) The payee presents the payor with a tribal member 
identification card issued by a federally recognized Indian tribe 
stating that the payee is a member of such tribe; and
    (iii) The payor is a gaming establishment (as described in 
paragraph (b)(2)(iv) of this section) owned or licensed (in accordance 
with 25 U.S.C. 2710) by the tribal government that issued the tribal 
member identification card referred to in (d)(2)(ii).
    (3) Special rule for optional aggregate reporting method. In the 
case of aggregate reporting under paragraph (g) of this section, the 
amount of the payment in paragraph (d)(1)(iv) of this section is the 
aggregate amount of payments of reportable gambling winnings from the 
same type of game (bingo, keno, or slot machine play) made to the same 
payee during the same information reporting period (as defined in 
paragraph (b)(2) of this section). Unless otherwise provided in forms, 
instructions, or other guidance, in the case of aggregate reporting 
under paragraph (g) of this section, the information required by 
paragraphs (d)(1)(v) through (viii) of this section must be maintained 
by the payor as described in paragraph (g)(3) of this section.
    (e) Identification. The following items are treated as 
identification for purposes of paragraph (d)(1)(iii) of this section--
    (1) Government-issued identification (for example, a driver's 
license, passport, social security card, military identification card, 
tribal member identification card issued by a federally recognized 
Indian tribe, or voter registration card) in the name of the payee; and
    (2) A Form W-9, ``Request for Taxpayer Identification Number and 
Certification,'' signed by the payee, that includes the payee's name, 
address, taxpayer identification number, and other information required 
by the form. A Form W-9 is not acceptable for this purpose if the payee 
has modified the form (other than pursuant to instructions to the form) 
or if the payee has deleted the jurat or other similar provisions by 
which the payee certifies or affirms the correctness of the statements 
contained on the form.
    (f) Furnishing a statement to the payee. Every payor required to 
make a return under paragraph (a) of this section must also make and 
furnish to each payee, with respect to each payment of reportable 
gambling winnings, a written statement that contains the information 
that is required to be included on the return under paragraph (d) of 
this section. The payor must furnish the statement to the payee on or 
before January 31st of the year following the calendar year in which 
payment of the reportable gambling winnings is made. The statement will 
be considered furnished to the payee if it is provided to the payee at 
the time of payment or if it is mailed to the payee on or before 
January 31st of the year following the calendar year in which payment 
was made.
    (g) Aggregate reporting of bingo, keno, and slot machine winnings--
(1) In general. In lieu of filing a separate information return for 
each payment of reportable gambling winnings as required by paragraph 
(a) of this section, a payor may use the aggregate reporting method 
(defined in paragraph (g)(2) of this section) to report reportable 
gambling winnings from bingo, keno, or slot machine play. A payor using 
the aggregate reporting method to file information returns under 
paragraph (a) of this section must also furnish statements to the payee 
under paragraph (f) of this section using the aggregate reporting 
method.
    (2) Aggregate reporting method defined. (i) The aggregate reporting 
method is a method of reporting more than one payment of reportable 
gambling winnings from the same type of game (bingo, keno, or slot 
machine play) made to the same payee during the same information 
reporting period (as defined in this paragraph (b)(2) of this section) 
on one information return or statement.
    (ii) A payor may use the aggregate reporting method for payments to 
some payees and not others, at its own discretion. In addition, with 
respect to a single payee, the payor may use the aggregate reporting 
method to report

[[Page 96379]]

winnings from one type of game, but not for winnings from another type 
of game.
    (iii) Failure to report some reportable gambling winnings from a 
particular type of game during one information reporting period to a 
particular payee under the aggregate reporting method (for whatever 
reason, including because the winnings are not permitted to be reported 
using the aggregate reporting method under paragraph (g)(4) of this 
section) will not disqualify the payor from using the aggregate 
reporting method to report other reportable gambling winnings from that 
type of game during that information reporting period to that payee. 
The payor may stop using the aggregate reporting method for a 
particular payee or for all payees before the end of the payor's 
information reporting period for any reason.
    (3) Recordkeeping under the aggregate reporting method. A payor 
using the aggregate reporting method must maintain a record of every 
payment of reportable gambling winnings from the same type of game made 
to the same payee during the information reporting period that will be 
reported using the aggregate reporting method. Every individual that 
the payor has determined is responsible for an entry in the record must 
confirm the information in the entry by signing the record in a manner 
that will enable the signature to be associated with the relevant 
entry. Each payment of a reportable gambling winning made to the same 
payee and reported under the aggregate reporting method must have its 
own entry in the record, however, the information required by 
paragraphs (d)(1)(i) through (iii) of this section is not required to 
be recorded more than one time per information reporting period. A 
payor that uses the aggregate reporting method must retain a copy of 
the record in its files. The record (which may be electronic provided 
the requirements set forth in forms, instructions, or guidance 
published in the Internal Revenue Bulletin are met) must include the 
following information about each payment:
    (i) The payee's signature confirming the information in the record;
    (ii) The information required under paragraph (d) of this section;
    (iii) The time of the win resulting in the reportable gambling 
winnings;
    (iv) The total amount of reportable gambling winnings with respect 
to all payments to the payee during the information reporting period;
    (v) The amount of reportable gambling winnings with respect to each 
particular payment;
    (vi) The method of payment to the payee (for example, cash, check, 
voucher, credit, token, or chips); and
    (vii) The name and unique identification number of the individual 
who the payor has determined is responsible for ensuring that the entry 
with respect to the reportable gambling winnings (including the general 
description of two types of identification used to verify the payee's 
name, address, and taxpayer identification number) is complete and 
accurate and who is authorized to perform that function by the 
applicable gaming regulatory control authority. Such individual may or 
may not be the same individual who prepared the entry.
    (4) When the aggregate reporting method may not be used. A payor 
cannot use the aggregate reporting method if--
    (i) The payment is to a foreign person, as described in section 
1.6041-10(h);
    (ii) The payor knows or has reason to know that the person making 
the wager is not the person entitled to the winnings or is not the only 
person entitled to the winnings (regardless of whether the person 
making the wager furnishes a Form 5754, ``Statement by Person(s) 
Receiving Gambling Winnings''); or
    (iii) Backup withholding under section 3406(a) applies to the 
payment.
    (5) Examples. The following examples illustrate the provisions of 
this section. For each example, assume that for purposes of the 
aggregate reporting method in paragraph (g) of this section, Casino R's 
``information reporting period'' for all calendar years is a gaming day 
that begins at 3 a.m. and ends at 2:59 a.m. the following day (except 
for January 1 and December 31) and that individuals C, D, and E are 
U.S. persons.

    Example 1.  On Day 1, between 7 a.m. and 4 p.m., C places five 
wagers at casino R on five different slot machines. The first two 
wagers result in no win. The third wager results in a $1,500 win. 
The fourth wager results in a $2,500 win. The fifth wager results in 
an $800 win:
    (i) Under paragraph (b)(1)(i)(C) of this section, there are 
reportable gambling winnings from the slot machine play of $4,000 
($1,500 + $2,500). The $800 win is not a reportable gambling winning 
from slot machine play because it does not equal or exceed the 
$1,200 threshold.
    (ii) Because all of the amounts were won on the same type of 
game (even though each of the winnings occurred on different 
machines) during the same information reporting period, R is 
permitted to use the aggregate reporting method under this paragraph 
(g). If R decides not to use the aggregate reporting method, a 
separate Form W-2G would have to be filed and furnished for the 
payment of reportable gambling winnings of $1,500 and for the 
payment of reportable gambling winnings of $2,500. However, if R 
decides to use the aggregate reporting method, R may report total 
reportable gambling winnings from slot machine play of $4,000 
($1,500 + $2,500) on one Form W-2G.
    Example 2.  Assume the same facts as Example 1, except that in 
addition to the winnings described in Example 1, at 5 a.m. on Day 2, 
C wins $3,250 from one slot machine play at casino R. Even though C 
played the same type of game (slot machine play) on Day 1 and Day 2, 
under paragraph (b)(2) of this section, the win at 5 a.m. on Day 2 
is a win during a separate information reporting period. Under 
paragraph (g)(2)(i) of this section, the $3,250 of reportable 
gambling winnings on Day 2 cannot be aggregated with the reportable 
gambling winnings of $4,000 from Day 1 on a single Form W-2G. 
Accordingly, if R uses the aggregate reporting method, R must file 
two Forms W-2G with respect to C's reportable gambling winnings on 
Day 1 and Day 2. R must report $4,000 of reportable gambling 
winnings from slot machine play paid to C on Day 1 on the first Form 
W-2G, and $3,250 of reportable gambling winnings from slot machine 
play paid to C on Day 2 on the second Form W-2G.
    Example 3.  On December 31 of Year 1 at 4:00 p.m., C wins 
$10,000 from one slot machine play at casino R. At 12:30 a.m. on 
January 1 of Year 2, C wins $4,000 from one slot machine play at 
casino R. Under paragraphs (b)(2)(iii)(B) and (C) of this section, 
the win at 4 p.m. on December 31 of Year 1 and the win at 12:30 a.m. 
on January 1 of Year 2 are wins during different information 
reporting periods. Under paragraph (g)(2)(i) of this section, the 
$4,000 of reportable gambling winnings on January 1 cannot be 
aggregated with the reportable gambling winnings of $10,000 from 
December 31 on a single Form W-2G. Accordingly, if R uses the 
aggregate reporting method, R must file two Forms W-2G with respect 
to C's reportable gambling winnings on Day 1 and Day 2. R must 
report $10,000 of reportable gambling winnings from slot machine 
play paid to C on December 31 on the first Form W-2G and $4,000 of 
reportable gambling winnings from slot machine play paid to C on 
January 1 on the second Form W-2G.
    Example 4.  Assume the same facts as example 3, except that C 
also wins $5,000 from one slot machine play at 3:30 p.m. on January 
1 and $7,000 from one slot machine play at 1:30 a.m. on January 2. 
Under the special rule of paragraph (b)(2)(iii) of this section, the 
``information reporting period'' begins at 12:00 a.m. on January 1 
and extends until the start of the next information reporting 
period, in this case 2:59 a.m. on January 2. Under paragraph 
(b)(1)(C) of this section, Casino R will pay C a total of $26,000 
($10,000 + $4,000 + $5,000 + $7,000) in reportable gambling 
winnings; however, $10,000 must be reported in Year 1, and $16,000 
must be reported in Year 2. Because all of the amounts won in Year 2 
were won on the same type of game and during the

[[Page 96380]]

same information reporting period, R is permitted to use the 
aggregate reporting method under this paragraph (g). If R decides to 
use the aggregate reporting method, R may report $10,000 of 
reportable gambling winnings from slot machine play paid to C on 
December 31 on the first Form W-2G and $16,000 of total reportable 
gambling winnings from slot machine play paid to C on January 1 on 
the second Form W-2G.
    Example 5.  At 2 p.m. on Day 1, D won $2,000 (after reducing the 
amount of the win by the amount wagered) playing one keno game at 
casino R. D provides R with his driver's license. The driver's 
license has D's photograph on it, as well as D's name and address. 
The driver's license does not include D's social security number. D 
cannot remember his social security number and has no other 
identification at the time with his social security number on it. D 
does not provide R with his social security number before R pays the 
winnings to D. Because D cannot remember his social security number, 
D cannot complete and sign a Form W-9. R deducts and withholds $560 
(28 percent of $2,000) under the backup withholding provisions of 
section 3406(a) and pays the remaining $1,440 in winnings to D. D 
returns to casino R and at 6 p.m. on Day 1 wins $1,500 (after 
reducing the amount of the win by the amount wagered) in one keno 
game. D provides R with his driver's license as well as D's social 
security card. R generally uses the aggregate reporting method and 
in all cases where it is used, R complies with the requirements of 
this paragraph (g). At 8 p.m. and 10 p.m. on Day 1, D wins an 
additional $1,800 and $1,700 (after reducing the amount of the win 
by the amount wagered), respectively, from two different keno games. 
For each of these two wins, an employee of R obtains the information 
from D required by this paragraph (g):
    (i) Under paragraph (b)(1)(i)(B) of this section, each of D's 
wins from the four games of keno on Day 1 ($2,000, $1,500, $1,800, 
and $1,700) are reportable gambling winnings. Because D's first win 
on Day 1 was at 2 p.m. and D's last win on Day 1 was at 10 p.m., all 
of D's reportable gambling winnings from keno are won during the 
same information reporting period. Because R satisfies the 
requirements of paragraph (g)(2)(i), R may use the aggregate 
reporting method to report D's reportable gambling winnings from 
keno. However, pursuant to paragraph (g)(4)(iii) of this section, 
the $2,000 payment made to D at 2 p.m. cannot be reported under the 
aggregate reporting method because that payment was subject to 
backup withholding. Accordingly, if R uses the aggregate reporting 
method under this paragraph (g), R will have to file two Forms W-2G 
with respect to D's reportable gambling winnings from keno on Day 1. 
On the first Form W-2G, R will report $2,000 of reportable gambling 
winnings and $560 of backup withholding with respect to the 2 p.m. 
win from keno, and, on the second Form W-2G, R will report $5,000 of 
reportable gambling winnings from keno (representing the three 
payments of $1,500, $1,800, and $1,700 that D won between 6 p.m. and 
10 p.m. on Day 1).
    Example 6.  In one information reporting period on Day 1, E won 
five reportable gambling winnings from five different bingo games at 
a casino R. R generally uses the aggregate reporting method and in 
all cases where it is used, R complies with the requirements of this 
paragraph (g). Although E signed the entry in the record R maintains 
for payment of the first four reportable gambling winnings, E 
refuses to sign the entry in the record for the fifth payment of 
reportable gambling winnings. R may use the aggregate reporting 
method for the first four payments of reportable gambling winnings 
to E. However, because the entry in the record for the fifth payment 
of reportable gambling winnings does not include E's signature, as 
required by paragraph (g)(3)(i) of this section, that payment may 
not be reported under the aggregate reporting method. Accordingly, 
if R uses the aggregate reporting method under paragraph (g) of this 
section, R must prepare two Forms W-2G as follows: On the first Form 
W-2G, R must report the first four payments of reportable gambling 
winnings from bingo made to E on Day 1. On the second Form W-2G, R 
must report the fifth payment of reportable gambling winnings from 
bingo made to E on Day 1.

    (h) Payments to foreign persons. See Sec.  1.6041-4 regarding 
payments to foreign persons. See Sec.  1.6049-5(d) for determining 
whether the payee is a foreign person.
    (i) Effective/applicability date. Section 1.6041-10(b)(2), 
concerning payor-selected ``information reporting periods,'' applies to 
payments of reportable gambling winnings from bingo, keno, or slot 
machine play made on or after January 1 of the year following the date 
these regulations are published in the Federal Register. All other 
sections contained herein apply to payments of reportable gambling 
winnings from bingo, keno, or slot machine play made on or after 
December 30, 2016.
    (j) Cross-references for certain gambling winnings. For provisions 
relating to backup withholding for winnings from bingo, keno, and slot 
machine play and other reportable gambling winnings, see Sec.  
31.3406(g)-2(d). For provisions relating to withholding and reporting 
for gambling winnings from lotteries, sweepstakes, wagering pools, and 
other wagering transactions, including a wagering transaction in a 
parimutuel pool with respect to horse races, dog races, or jai alai, 
see Sec.  31.3402(q)-1.

PART 7--TEMPORARY INCOME TAX REGULATIONS UNDER THE TAX REFORM ACT 
OF 1976

0
Par. 3. The authority citation for part 7 continues to read in part as 
follows:

    Authority: 26 U.S.C. 7805 * * *


Sec.  7.6041-1   [Removed]

0
Par. 4. Section 7.6041-1 is removed.

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

0
Par. 5. The authority citation for part 31 continues to read in part as 
follows:


    Authority: 26 U.S.C. 7805 * * *


Sec.  31.3406(g)-2   [Amended]

0
Par. 6. In Sec.  31.3406(g)-2, paragraph (d)(3) is amended by removing 
the citation ``Sec.  7.6041-1'' and adding the citation ``Sec.  1.6041-
10'' in its place.
* * * * *

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: December 13, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-31575 Filed 12-29-16; 8:45 am]
 BILLING CODE 4830-01-P