Information Returns; Winnings From Bingo, Keno, and Slot Machines, 96374-96380 [2016-31575]
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96374
Federal Register / Vol. 81, No. 251 / Friday, December 30, 2016 / Rules and Regulations
(v) Labeling must include the
following:
(A) A clear description of the
technological features of the device
including identification of device
materials and the principles of device
operation;
(B) Intended use and indications for
use, including levels of fixation;
(C) Identification of magnetic
resonance (MR) compatibility status;
(D) Cleaning and sterilization
instructions for devices and instruments
that are provided non-sterile to the end
user; and
(E) Detailed instructions of each
surgical step, including device removal.
(3) Class II (special controls), when a
semi-rigid system is intended to provide
immobilization and stabilization of
spinal segments in the thoracic, lumbar,
and sacral spine as an adjunct to fusion
for any indication. In addition to
complying with the special controls in
paragraphs (b)(2)(i) through (v) of this
section, these pedicle screw systems
must comply with the following special
controls:
(i) Demonstration that clinical
performance characteristics of the
device support the intended use of the
product, including assessment of fusion
compared to a clinically acceptable
fusion rate.
(ii) Semi-rigid systems marketed prior
to the effective date of this
reclassification must submit an
amendment to their previously cleared
premarket notification (510(k))
demonstrating compliance with the
special controls in paragraphs (b)(2)(i)
through (v) and paragraph (b)(3)(i) of
this section.
Dated: December 22, 2016.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2016–31670 Filed 12–29–16; 8:45 am]
BILLING CODE 4164–01–P
DEPARTMENT OF TREASURY
Internal Revenue Service
26 CFR Parts 1, 7, and 31
[TD 9807]
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Information Returns; Winnings From
Bingo, Keno, and Slot Machines
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
This document contains final
regulations under section 6041
SUMMARY:
18:11 Dec 29, 2016
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 § 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
§ 1.6041–10 of the regulations. Because
the new requirements replace the
existing requirements, the regulations
under § 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
RIN 1545–BL68
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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:
Jkt 241001
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
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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 § 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 laborintensive. Based on these comments, the
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final regulations do not adopt the
proposed rules for electronically tracked
slot machine play.
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Payee Identification Requirements
The proposed regulations retain the
rule in § 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, § 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 § 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,
§ 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.
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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 § 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 § 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 § 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
§ 1.6041–10(g) of the final regulations
have been modified so that the period
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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 24hour 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
§ 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
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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 § 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, § 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.
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Reporting Thresholds
The proposed rules maintained the
reporting thresholds of $1,200 for bingo
and slot machine play and $1,500 for
keno in § 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.
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18:11 Dec 29, 2016
Jkt 241001
Netting Wagers
The proposed regulations retain the
rules in § 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, § 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 § 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 § 1.6041–
10(b)(4) is intended to be consistent
with the definition of slot machine in
§ 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
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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 multiway keno ticket are combined. In
addition, § 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
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Federal Register / Vol. 81, No. 251 / Friday, December 30, 2016 / Rules and Regulations
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
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6041–10 is added to
read as follows:
■
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§ 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
§ 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
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$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 multiway 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 24hour 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
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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
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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
§ 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;
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(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
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(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
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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;
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(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
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96379
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
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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
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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
§ 1.6041–4 regarding payments to
foreign persons. See § 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 § 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 § 31.3402(q)–1.
PART 7—TEMPORARY INCOME TAX
REGULATIONS UNDER THE TAX
REFORM ACT OF 1976
Par. 3. The authority citation for part
7 continues to read in part as follows:
■
Authority: 26 U.S.C. 7805 * * *
§ 7.6041–1
■
[Removed]
Par. 4. Section 7.6041–1 is removed.
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PART 31—EMPLOYMENT TAXES AND
COLLECTION OF INCOME TAX AT
SOURCE
Par. 5. The authority citation for part
31 continues to read in part as follows:
■
Authority: 26 U.S.C. 7805 * * *
§ 31.3406(g)–2
[Amended]
Par. 6. In § 31.3406(g)–2, paragraph
(d)(3) is amended by removing the
citation ‘‘§ 7.6041–1’’ and adding the
citation ‘‘§ 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
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 165
[Docket No. USCG–2016–0939]
Liberty Island Safety Zone; Fireworks
Display in Captain of the Port New
York Zone
Coast Guard, DHS.
Notice of enforcement of
regulation.
AGENCY:
ACTION:
The Coast Guard will enforce
a safety zone within the Captain of the
Port New York Zone on the specified
date and time. This action is necessary
to ensure the safety of vessels and
spectators from hazards associated with
fireworks displays. During the
enforcement period, no person or vessel
may enter the safety zone without
permission of the Captain of the Port
(COTP).
SUMMARY:
The regulation for the safety
zone described in 33 CFR 165.160 will
be enforced on the date and time listed
in the table below.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this notice, call
or email Petty Officer First Class Ronald
Sampert, U.S. Coast Guard; telephone
718–354–4154, email ronald.j.sampert@
uscg.mil.
SUPPLEMENTARY INFORMATION:
The Coast Guard will enforce the
safety zone listed in 33 CFR 165.160 on
the specified date and time as indicated
DATES:
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Agencies
[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]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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