MGM Detroit Sues Michigan Over High Roller Gambling Debt Taxes

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The MGM Grand Detroit casino is seeking about $55k back from the state of Michigan, according to a pair of complaints filed late last month.

Crain’s Detroit Business reported that MGM is asking the Michigan Court of Claims to order the state Department of Treasury to refund the five-figure sum related to taxes on gambling win. The suit comes as the administration of Gov. Gretchen Whitmer and the Detroit casinos are at odds over online gambling.

The litigation involves the casino offering $3 mm in credit to a gambler, and $2 mm worth of credit to another gambler. The dates are unknown. MiBets was unable to obtain a copy of the lawsuit and the attorney for the casino did not respond to a press request Thursday.

The player with the $3 mm line of credit lost $677,500 playing table games, the report said. MGM Grand discounted that gambling loss by 10% ($67,750), according to the report. In the case involving the other gambler, MGM won $1.945 mm from him. The casino also gave him a 10% rebate on his losses ($194,500).

“In both instances, MGM Grand claimed the discounts as uncollectible gambling debts,” the report stated. “MGM Grand Detroit officials would not comment on whether there were other similar situations.”

MGM says the state charged it on the unpaid portion of the gambling debt, which it claims is against state gaming law. A resolution to the litigation doesn’t appear to be an easy one.

“The state, however, argued in letters sent earlier this year denying MGM Grand refunds of the taxes paid on the discounts that the casino ‘did not take any collection steps to recover the full amount owed to it’ and the casino could not meet its own requirements for a write-off of the losses,” the report said.

Friction between state and commercial casino industry?

The litigation involves a relatively small amount of money, but it comes at a time of serious consideration of expanding/reforming the state’s gambling industry, on both the commercial and tribal fronts. There’s pending legislation to allow online casino gambling — slots, table games, and poker.

The Michigan Department of Treasury is opposed to online slots, the most lucrative form of online casino gambling. Whitmer’s administration also wants higher taxes on online casino gambling than what was included in the legislation that was vetoed by the previous governor late last year.

At the center of this debate is the state’s School Aid Fund, which the Detroit casinos and the Michigan Lottery both contribute heavily to. Whitmer’s administration is arguing that online casino gambling could cannibalize iLottery revenues. In FY 2018, the Lottery contributed just under $941.3 million to the School Aid Fund. The three Detroit casinos paid about $117 mm to the state for public education in 2018.

The state lottery had $3.6 billion in total sales in FY 2018. In 2018, the Detroit casinos saw a modest record of $1.44 billion in gaming revenue, up 1.4% compared to the previous high set in 2011. The three commercial casinos also pay gaming taxes to Detroit, bringing the effective tax rate to nearly 20%.

Also in play is upcoming legislation to legalize sports betting, which the governor supports but wants a 15% tax rate. Sports betting proponents in Michigan would like a lower rate, but there appears to be much less of a political divide on sports betting than there is on online casino gambling.

Brian Pempus

Brian served as a senior reporter and online content manager for Card Player Magazine for nearly a decade before joining USBets in October 2018. He is currently focused on legal and regulated sports betting and online gaming. He's an avid jiu-jitsu practitioner in his free time.

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