Fiscal Note
Fiscal Services Division
SF 169 – Promotional Play (LSB1453SV)
Staff Contact: Angel Banks-Adams (515.281.6301) angel.banks-adams@legis.iowa.gov
Fiscal Note Version – New
Description
Senate File 169 amends the definition of adjusted gross receipts (AGR) to include all
promotional play receipts on gambling games from the beginning of FY 2022 to the end of
FY 2024. During this time period, the Bill imposes a new graduated tax rate on promotional play
receipts by multiplying an adjusted percentage by the State wagering tax applicable to the
licensed gaming entity, with a complete phaseout of the tax on promotional play receipts by
July 1, 2024 (FY 2025).
Additionally, the Bill amends application requirements for a license to operate a gambling game
operation on an excursion gambling boat by providing that promotional play receipts on sports
wagering are to be included in the calculation for the total annual purses for all horse racing.
Under current law, total annual purses for all horse racing include 4.0% of sports wagering net
receipts and no less than 11.0% of the first $200.0 million of net receipts, and 6.0% of net
receipts above $200.0 million.
The Bill also removes promotional receipts from the definition of sports wagering net receipts.
For horse agreements subject to Iowa Racing and Gaming Commission approval concerning
purses for horse racing beginning on or after January 1, 2006, the Bill provides that promotional
play receipts on sports wagering are included in the total annual purses for all horse racing.
Background
Current gambling revenues are taxed by the State based on AGR from gambling games. Under
current law, AGR includes promotional play receipts until the date in any fiscal year that the
wagering tax on promotional play receipts exceeds $25.8 million.
Iowa Code section 99F.1 defines promotional play receipts as the total sums wagered on
gambling games with tokens, chips, electronic credits, or other forms of cashless wagering
provided by the licensee without an exchange of money. From FY 2017 to FY 2019, total
promotional play receipts (both taxed and exempt from taxation after the $25.8 million tax
receipts threshold was met) comprised 8.4% of all AGR for Iowa casinos. In FY 2020, total
promotional play was at its lowest ($94.5 million and 8.1% of all AGR for Iowa casinos) due to
the two-month casino closures as a result of the COVID-19 pandemic. The first $1.0 million in
gross receipts is taxed at a rate of 5.0%, and the next $2.0 million in gross receipts is taxed at a
rate of 10.0%.
The tax rate imposed on AGR that exceed the first $3.0 million is calculated on an individual
fiscal year basis as follows:
• Licensees of a gambling entity with a racetrack enclosure claiming AGR of $100.0 million or
more are taxed at a rate of 24.0%.
• All other licensees (those without a racetrack enclosure or claiming less than $100.0 million
in AGR) are taxed at a rate of 22.0%.
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There are currently 19 State-licensed gambling entities operating in Iowa. Of these 19 entities,
2 are taxed at 24.0% and 17 are taxed at 22.0%.
Iowa Code section 8.57(5) distributes the majority of the State wagering tax to several State
funds in a prioritized order (Table 1). The first $139.8 million is allocated to the first five funds.
State wagering taxes that are in excess of $139.8 million are deposited into the Rebuild Iowa
Infrastructure Fund (RIIF).
Table 1
Distribution of State Wagering Taxes
in Accordance with Iowa Code section 8.57(5)
(Dollars in Millions)
Actual Actual Estimated Estimated
State Funds FY 2019 FY 2020 FY 2021 FY 2022
Revenue Bonds Debt Service Fund $ 55.0 $ 55.0 $ 55.0 $ 55.0
Federal Subsidy Holdback Fund 3.8 3.8 3.8 3.8
Vision Iowa Fund 15.0 15.0 0.0 0.0
Water Quality Infrastructure Fund 0.0 0.0 15.0 15.0
General Fund 0.0 2.3 2.3 2.3
Skilled Worker Job Creation Fund 66.0 63.8 63.8 63.8
Rebuild Iowa Infrastructure Fund 151.6 91.3 143.7 143.7
Total $ 291.4 $ 231.0 $ 283.4 $ 283.4
Note: Numbers may not equal totals due to rounding.
In addition to the allocation of State wagering taxes discussed above, Iowa Code section
99F.11(3) allocates a portion of State wagering taxes as follows (Table 2):
• 0.5% of AGR tax to the county where a casino is located.
• 0.5% of AGR tax to the city where a casino is located.
• 0.8% of AGR tax to the County Endowment Fund. The proceeds of this Fund are distributed
equally to counties that do not have a licensed casino for funding charitable organizations.
• 0.2% of AGR tax for several specified purposes: Of the amount collected, the first $520,000
is allocated to the Department of Cultural Affairs (DCA) for cultural grants and operations.
Of the amount remaining, 50.0% is allocated to the Iowa Economic Development Authority
(IEDA) for tourism marketing, and the other 50.0% is allocated to the RIIF. The wagering
taxes allocated to the DCA and IEDA are first deposited into the General Fund before being
appropriated back to those departments.
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 Table 2
Allocation of State Wagering Taxes
in Accordance with Iowa Code section 99F.11(3)
(Dollars in Millions)
Actual Actual Estimated Estimated
Allocations FY 2019 FY 2020 FY 2021 FY 2022
Cities and Counties $ 14.6 $ 11.6 $ 14.2 $ 14.2
County Endowment Fund 11.7 9.3 11.4 11.4
Cultural Grants and Tourism 1.7 1.4 1.7 1.7
Rebuild Iowa Infrastructure Fund 1.2 0.9 1.2 1.2
Total $ 29.2 $ 23.2 $ 28.5 $ 28.5
Note: Numbers may not equal totals due to rounding.
Iowa Code section 99F.5 requires an operating agreement between a licensee of a gambling
entity and a Qualified Sponsoring Organization (QSO), which is organized as a nonprofit
corporation. The statute requires that the agreement provide for a minimum distribution of funds
for educational, civic, public, charitable, patriotic, or religious uses that averages at least 3.0% of
the AGR per year. The terms of the agreements between the operators and the QSOs
throughout the State will vary.
The State taxes all sports wagering net receipts, including promotional play, at 6.75%. The tax
receipts are deposited into the Sports Wagering Receipts Fund and are estimated to total
$3.2 million in FY 2021. The proceeds of the Sports Wagering Receipts Fund are available for
appropriation by the General Assembly. For FY 2021, the General Assembly appropriated
$1.5 million from the Fund to the Department of Public Health for gambling and substance-
related disorder treatment.
Assumptions for Promotional Play on Gambling Games
• Annual AGR for FY 2021 and FY 2022 will total $1.420 billion and are based on the State
wagering tax estimates established by the Revenue Estimating Conference (REC) in
December 2020. Total AGR, including promotional play receipts, totaled $1.163 billion in
FY 2020. Adjusted gross receipts are projected to increase by 0.5% per year from FY 2022
to FY 2025.
• It is assumed that taxed promotional play receipts will average approximately 8.2% of AGR
for FY 2021 through FY 2025.
• Under current law, the State will continue to collect State wagering taxes on promotional
play receipts at the statutory maximum of $25.8 million annually.
• The base tax rate on promotional play receipts will be 22.0% for the projected years and will
be reduced by the adjusted percentage specified in SF 169 as follows:
• FY 2022: 16.5% (75.0% of the base tax rate)
• FY 2023: 11.0% (50.0% of the base tax rate)
• FY 2024: 5.5% (25.0% of the base tax rate)
• FY 2025: Repeal of promotional play taxation
Fiscal Impact
The phaseout of the tax on promotional play receipts as proposed in SF 169 would result in an
estimated reduction in State wagering taxes beginning in FY 2022 of $6.5 million and increasing
to $25.8 million by FY 2025. Table 3 shows the estimated revenue reduction by fiscal year to
State programs and cities and counties with domiciled casinos.
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 Table 3
Estimated Impact of SF 169 on State Wagering Taxes
FY 2022 FY 2023 FY 2024 FY 2025
Current Law
State Programs
RIIF $ 143,690,000 $ 145,145,000 $ 146,609,000 $ 148,079,000
County Endowment Fund 11,357,000 11,413,000 11,470,000 11,528,000
0.2% AGR - IEDA & DCA 1,680,000 1,687,000 1,694,000 1,701,000
0.2% AGR - RIIF 1,160,000 1,167,000 1,174,000 1,181,000
Cities and Counties 14,196,000 14,267,000 14,338,000 14,410,000
Total $ 172,083,000 $ 173,679,000 $ 175,285,000 $ 176,899,000
SF 169
State Programs
RIIF $ 137,821,000 $ 133,409,000 $ 129,004,000 $ 124,606,000
County Endowment Fund 11,122,000 10,944,000 10,766,000 10,589,000
0.2% AGR - IEDA & DCA 1,650,000 1,628,000 1,606,000 1,584,000
0.2% AGR - RIIF 1,130,000 1,108,000 1,086,000 1,064,000
Cities and Counties 13,902,000 13,680,000 13,458,000 13,236,000
Total $ 165,625,000 $ 160,769,000 $ 155,920,000 $ 151,079,000
Impact of SF 169
State Programs
RIIF $ -5,869,000 $ -11,736,000 $ -17,605,000 $ -23,473,000
County Endowment Fund -235,000 -469,000 -704,000 -939,000
0.2% AGR - IEDA & DCA -30,000 -59,000 -88,000 -117,000
0.2% AGR - RIIF -30,000 -59,000 -88,000 -117,000
Cities and Counties -294,000 -587,000 -880,000 -1,174,000
Total Impact of SF 169 $ -6,458,000 $ -12,910,000 $ -19,365,000 $ -25,820,000
Assumptions for Promotional Play on Sports Wagering
• The sports wagering tax rate of 6.75% applies to sports wagering promotional play.
• The sports wagering promotional play receipts as of January 24, 2021, total $8.0 million.
When annualized for FY 2021, sports wagering promotional play receipts are estimated to
be $13.7 million. The tax amount collected on sports wagering promotional play receipts for
FY 2021 is estimated to be approximately $925,000.
• Sports wagering promotional play receipts on sports wagering are estimated to grow at an
annual rate of 3.0% from FY 2022 to FY 2025.
Fiscal Impact
Senate File 169 is estimated to reduce tax revenue to the Sports Wagering Receipts Fund by
the following amounts:
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 Table 4
Estimated Impact of SF 169 on Sports
Wagering Promotional Play Receipts
Estimated Sports
Wagering Promotional Revenue
Play Receipts Reduction
FY 2021 $ 13,700,000 $ -924,750
FY 2022 14,111,000 -952,493
FY 2023 14,534,000 -981,045
FY 2024 14,970,000 -1,010,475
FY 2025 15,419,000 -1,040,783
Sources
Iowa Racing and Gaming Commission
LSA calculations
/s/ Holly M. Lyons
February 4, 2021
Doc ID 1210738
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in
developing this fiscal note is available from the Fiscal Services Division of the Legislative Services
Agency upon request.
www.legis.iowa.gov
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Statutes affected:
Introduced: 99F.1, 99F.6