Gaming
Background
The gaming tax was first levied in 1991 when casino gambling became legal in the municipalities of Black Hawk, Central City, and Cripple Creek.1 The gaming tax is levied on casinos’ adjusted gross proceeds, defined as the amount of money collected from gamblers in wagers minus the amount paid to gamblers in winnings. For each month of operation, casinos remit gaming taxes to the Division of Gaming in the Department of Revenue by the 15th day of the following month.
Most gaming tax revenue is subject to the TABOR limit on state revenue and spending. Of revenue attributable to limited gaming initially authorized in 1991, only the portion constitutionally required to be allocated to counties and municipalities is exempt from TABOR as a collection for another government.
In 2008, Colorado voters approved Amendment 50, which allows additional casino games, higher bet limits, and longer hours of operation. In 2020, Colorado voters approved Amendment 77, which allowed the three local gaming cities to approve new casino bet limits and games. During the same election, the three cities approved local measures to eliminate casino bet limits and give their respective city councils the authority to approve new casino games. Expanded gaming in each community began May 1, 2021. Gaming tax revenue attributed to Amendment 50 and Amendment 77 is not subject to the TABOR limit.
Tax Rates
Tax rates are set by the Colorado Limited Gaming Control Commission, a five-member regulatory body appointed by the Governor. The commission reviews tax rates annually and may raise or lower rates so long as they do not exceed 40 percent. Beginning July 1, 2012, adjusted gross proceeds are taxed at accelerating rates following the stepwise schedule shown below. For example, a casino must pay a 0.25 percent tax on its first $2 million in adjusted gross proceeds, and a 2 percent tax on its next $3 million. Casinos’ adjusted gross proceeds reset to zero on July 1, the first day of the state fiscal year.
|
Casino Adjusted Gross Proceeds
|
Tax Rate
|
|---|---|
|
Up to $2,000,000
|
0.25%
|
|
$2,000,001 to $5,000,000
|
2%
|
|
$5,000,001 to $8,000,000
|
9%
|
|
$8,000,001 to $10,000,000
|
11%
|
|
$10,000,001 to $13,000,000
|
16%
|
|
$13,000,001 and over
|
20%
|
Gaming Tax Exemptions
Casinos operating on the Ute Mountain Ute and Southern Ute Reservations in Archuleta, La Plata, and Montezuma counties are not subject to the gaming tax.
Distribution
The gaming tax revenue distribution is shown below. After administrative expenses are paid, gaming tax revenue subject to TABOR is deposited in the Limited Gaming Fund, and TABOR-exempt revenue attributable to Amendments 50 and 77 is credited to the Extended Limited Gaming Fund.
Limited Gaming Fund. The Colorado Constitution requires that 12 percent of limited gaming revenue be distributed to gaming counties, 10 percent to gaming cities, and 28 percent to the State Historical Fund for preservation of historical sites in gaming cities and statewide.2 The remaining half of the Limited Gaming Fund is allocated to state programs at the discretion of the General Assembly.3 House Bill 20-1399 modified the transfers made from the Limited Gaming Fund to Cash Funds during FY 2019-20 and FY 2020-21, which are reflected in the Gaming Revenue Distribution chart below.
Extended Limited Gaming Fund. In response to the steep decrease and stronger- than-anticipated increase in gaming tax revenues during and after the pandemic, which coincided with changes from Amendment 77, Senate Bill 22-216 adjusted the allocation of limited and extended gaming revenue for FY 2021-22. The bill also creates a mechanism to temporarily modify this allocation if there are significant future decreases in gaming tax revenues.
The Colorado Constitution requires that Amendment 50 and Amendment 77 revenue credited to the Extended Limited Gaming Fund be distributed as follows:
-
78 percent for financial aid and classroom instruction at Colorado community, junior, and district colleges based on each school's enrollment;
-
12 percent to Gilpin and Teller Counties, in proportion to the tax revenues generated within each county, to help address the impacts of gaming; and
-
10 percent to Central City, Black Hawk, and Cripple Creek, in proportion to the tax revenue generated within each town, to help address the impacts of gaming.4
State Comparisons
As of 2023, including Colorado, 34 states and Washington D.C. allow gaming at casinos according to the American Gaming Association (AGA). Comparatively, 28 states and Washington D.C. host casinos on Indian reservations as of FY 2021-22, as reported by the National Indian Gaming Commission (NIGC).
____________________