North Carolina can expect less than $3 million in tax revenue from mobile sports wagering in the first six months with operators able to deduct an unlimited amount of bonus or promotional credits, according to the legislature's fiscal research analysis.
Under the proposed legislation, people in North Carolina could wager on professional, college, Olympic and electronic sports on their mobile phone or other electronic device by early January. Sports betting is currently legal at three tribal casinos in the state.
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HB 347 imposes a 14% privilege tax on operators' adjusted gross revenue and calls for between 10 and 12 operators in the state.
The bill allows unlimited deductions of the bonuses and promotional credits used to attract new customers through Jan. 1, 2025. Those deductions are phased out completely by Jan. 1, 2027.
Revenue from the privilege tax climbs in subsequent years to a projected $42.6 million in fiscal year 2027-28. That figure would be below the $49.8 million that Virginia raised in from sports wagering in 2022, its second year, with a 15% tax rate as it phased out deductions.
"I'm gonna call this the 'hook' money because this is the money that lures people to begin gambling in the first place," said Rep. Deb Butler, a New Hanover County Democrat, during Wednesday morning's House Finance Committee meeting.
An amendment to eliminate the deductions for promotions and credits was defeated in the committee. The committee approved the bill with slight changes from the version that advanced through the House Finance Committee on Tuesday.
The bill also advanced through House Judiciary 1 Committee on Tuesday.
"It's not money, it's a credit," said Rep. Jason Saine, a Lincoln County Republican and the bill's chief sponsor. "Like a coupon. No one taxes businesses on that. It's the same here."
In 2021, operators in Virginia claimed more than $122 million in bonus spending, including more than $17 million in two separate months.
An amendment to raise the tax rate from 14% to 51%, as it is in New York and New Hampshire, also failed.
Centennial Authority board chairman Philip Isley, Carolina Hurricanes general manager and president Don Waddell and Hurricanes general counsel Nigel Wheeler were in attendance at the hearing. North Carolina's professional teams, including the Hurricanes, are supporters of the legislation.
Representatives from MGM Resorts and Fantatics, which have mobile sports gaming apps, spoke in favor of the legislation at the House Judiciary 1 Committee. Lawmakers also heard from opponents in public testimony, including representatives from the NC Family Policy Council and Stop Predatory Gambling, a DC-based organization that seeks to end government-sponsored casinos and lotteries.
"With this passage of this bill, gambling would become the centerpiece of sports in North Carolina, not the sports themselves," said John Rustin, president and executive director of the NC Family Policy Council. "Anybody who knows gambling understands the house is going to take a share and practically everybody else is going to lose. North Carolina should seek ways to mkae our citizens winners instead of losers."
A similar bill to legalize mobile sports gambling failed in the House in 2022 by a single vote, but proponents are optimistic about the changes for legalization this year. More than 50 House members are sponsors of the bill.
Among the changes to the bill made Tuesday were the additions of the athletic departments at UNC-Wilmington, UNC-Greensboro and Western Carolina to seven other public UNC System schools that would receive annual money from tax revenue generated by mobile sports wagering.
The bill calls for those 10 schools' athletic departments to receive $300,000 annually, plus 10 percent of remaining revenue after specific programs are funded. Schools in the UNC System that sponsor Football Bowl Subdivision football are not eligible for the money.
But in fiscal year 2023-24, which begins July 1, there would no revenue for them, according to fiscal research. After the Department of Health and Human Services received $2 million for gambling addiction and treatment programs, the remaining $400,000 would go to the NC Division of Parks and Recreation for grants to counties for youth sports development.
In fiscal year 2023-24, sports wagering is projected to bring in 13.2 million in taxes and fees and cost $5.8 million in expenditures. The Lottery Commission, which is tasked with regulating sports betting in the state under the bill, would receive $2.9 million for its expenses. Each operators license costs $1 million.
By fiscal year 2027-28, as revenues from the tax rise, each of the athletic departments are projected to receive $800,000.
Fiscal research projects $22.2 million in tax revenue from mobile sports wagering in fiscal year 2024-25, $31.4 in 2025-26; $31.4 million in 2026-27 and $45.6 million in 2026-27.
"The train's on the track," said Rep. Abe Jones, a Wake County Democrat and opponent of the legislation, during the judiciary committee hearing. "People want the money, and I get it. But we desert values for money. What a shame. What a darn shame."
Under the bill, the privilege tax revenues are distributed this way:
- $500,000 to Department of Revenue to offset the cost of collecting the tax
- Lottery Commission reimbursed for expenses not covered by fee revenue
- $2 million to DHHS for gambling addiction education and treatment programs
- $1 million to North Carolina Division of Parks and Recreation for $10,000 grants to each county for youth sports development
- $300,000 to 10 UNC System institutions to support college athletic departments
- $1 million to North Carolina Outdoor Heritage Advisory Council for grants to assist sports teams with travel expenses
- Of remaining amount: 10% to the UNC System institutions; 30% to the new North Carolina Major Events, Games, and Attractions Fund; and 60% to the General Fund.