Casino employees get tax hit
A casino employee currently receiving a $4 per day food credit for free meals could end up with nearly $1,000 per year in additional taxable income due to a ruling by the U.S. Tax court.
The Sept. 30 decision against the Boyd Gaming Corp. states that casinos can no longer take deductions for providing free meals to all their employees.
Previously, casino workers received tax-free meals under the provision that allows employer deductions for “meals provided for the convenience of the employer.”
If employers don’t get the deductions, employees don’t get the tax-free benefit either.
“This will impact a lot of people,” said Kirk Ledbetter, Harvey Resort Hotel/Casino’s director of community services and governmental affairs.
Harveys and other gaming companies are now looking at whether the ruling can be appealed.
“We require employees to be here for their whole shifts in uniform. It’s hard for them to leave and go elsewhere,” Ledbetter said. “It is for the convenience of the employers.”
Not all casino employees will be impacted by the change.
Food service workers and dealers can still receive free meals without tax consequences, according to the ruling.
Bartenders, cocktail servers, bar backs, maids, valets, bell workers, accountants and marketing staffers are among those whose meals would become taxable benefits.
Implementing the change, and keeping track of which employees fit which category, will require casinos to revise their accounting procedures.
“We have now until (April 1) to look at all the different options we might implement,” said John Packer, director of communications at Harrah’s. “We’re still looking at the ruling and waiting for a decision from our legal staff and how to handle it corporatewide … (Employees should) only be taxed if they avail themselves of the free meal,” Packer said.
Currently, the court ruling only applies to the gaming industry. Bartenders, cocktail servers and other employees receiving free meals from employers in California can rest easy, at least for now.
“The tax court position only applies to that one specific case,” said John Dearing, the assistant public affairs officer for the IRS Northern California office. “However, it could be used by an auditor for background when doing an audit in another industry. (To be applied in general) the IRS would have to request that the tax court ruling be applied as a revenue ruling.”
With casinos the target of the ruling, Nevada’s congressmen in Washington have asked for delays in implementation.
“The Boyd Gaming decision has raised a great deal of uncertainty in the industry,” reads a Dec. 16 letter to IRS Commissioner Charles Rossotti, signed by Senators Richard Bryan and Harry Reid and Representatives John Ensign and Jim Gibbons.
“We’ve raised the issue with the IRS of how significant this is to the gaming industry and the state of Nevada,” said Karen Kirchgasser, the press secretary for Sen. Bryan. “We’re waiting to see what they decide.”
Rick Darnold, vice president of tax and financial administration for Boyd Gaming, said the ruling is inherently unfair because it will require casinos to treat employees differently.
”It’s a messy proposition we have to deal with,” he said. ”People who really get hurt in this situation are the maids. They get paid hourly, not like executives. I’ll get taxed a couple of dollars and can handle that better than a maid. That is the unfortunate aspect of this case.”
While Boyd has until next month to decide whether to appeal the ruling, Darnold is doubtful that an appeal will be pursued, saying the company has ”done almost all we can do in the courts.”
The American Gaming Association, the industry’s chief lobbyist in Washington, D.C., has asked for opinions from three law firms about the chances for appeal, and say no one is optimistic the ruling will be overturned.
The Associated Press contributed to this story.
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