Committee hears bill to lower charitable gaming taxes, sponsor says savings will stay local

The North Dakota House Finance and Tax Committee opened and closed a public hearing on House Bill 1465, a proposal to change the charitable gaming tax structure to a tiered system and reduce the state tax rate for many smaller operators, Representative Dorey Hough told the committee.

Proponents say the bill will keep more funds under local control. Hough, the bill sponsor, told members the measure would allow “local charitable organizations the ability to give more back to their communities,” and described how charities use gaming proceeds for volunteer fire equipment, youth sports, scholarships and day‑care construction.

Under current statute cited in testimony, the gaming tax is assessed on adjusted gross proceeds as defined in the North Dakota Century Code (cited in testimony as 53‑6.1‑01). Hough explained the bill creates three tiers: (1) adjusted gross proceeds up to $150,000 taxed at 1%, (2) $150,000 to $250,000 assessed a flat fee of $1,500 plus 6% on proceeds over $150,000, and (3) amounts over $250,000 assessed $7,500 for the first $250,000 plus 12% on proceeds above $250,000. Hough said the tiered approach “increases the amount of dollars that will stay under the control of smaller organizations participating in charitable gaming.”

Supporters described statewide impacts and offered examples. Scott Meske, representing the North Dakota Gaming Alliance, said the industry estimates about $53,000,000 in gaming tax revenue for the 2325 biennium and more than $182,000,000 in net proceeds distributed to communities in that period. Meske told the committee the alliance supports HB 1465 as a tax adjustment, not an expansion of gaming, and recommended the committee issue a “do pass” or otherwise advance the bill. “This minor tax adjustment based on a tiered system can help put more money back into our communities,” Meske said.

Committee members pressed on how savings would be used. Representative Olson asked whether charities would be required to direct the reduced tax payments to charitable purposes; Hough and Meske both said current practice and Century Code distribution rules result in a 60/40 split between administrative uses and charitable uses, and that the bill would reduce state tax remittance rather than change the 60/40 distribution rule. Hough told the committee, “40% of that savings would have to go into their charities,” reflecting how charities currently allocate net proceeds.

Members also asked about large reserve balances held by some charities and whether lowering the tax would increase charitable spending. Meske said reserve levels are business decisions by individual charities and declined to speculate on reasons some trusts hold larger balances. Committee members requested additional data about how many charities would be affected in each new tier and how many small towns would benefit.

Committee action: the committee opened the hearing, received testimony from the sponsor and industry representatives, and closed the hearing without taking a committee vote or adopting amendments.

Next steps: No committee vote was taken on HB 1465 during the hearing; the committee closed the record for this bill and moved on to other business.