Atlantic City Casino Faces Scrutiny for Tax Underpayment

Atlantic City, N.J. — Atlantic City's top-performing casino, the Borgata, has come under intense scrutiny from New Jersey gambling regulators for allegedly underpaying its internet gambling taxes by nearly $1.1 million. The case highlights a troubling trend in the casino's financial practices and raises questions about regulatory oversight and corporate accountability in the gambling industry.

 

The Allegations: What Happened?

According to the New Jersey Division of Gaming Enforcement (DGE), the Borgata—operated by MGM Resorts International—repeatedly mishandled its tax obligations, leading to significant underpayments. The crux of the issue lies in the casino's misuse of promotional credits, which are designed to offset taxes on free play given to customers.

In March 2023, an audit revealed that the Borgata erroneously included $9.8 million in table game bonuses in deductions meant only for slot games. This accounting error resulted in an underpayment of $787,000 in taxes, compounded by nearly $88,000 in interest and over $40,000 in penalties.

The situation worsened in July 2024 when a software upgrade inadvertently led the casino to claim $4.5 million in excess credits. This mistake resulted in a $365,000 tax underpayment, alongside over $15,000 in interest and more than $18,000 in penalties.

The DGE has mandated that the Borgata pay the full amount of taxes due, totaling $1.3 million, which includes a $75,000 civil penalty. Acting DGE Director Mary Jo Flaherty emphasized the seriousness of the infractions in an August 15 letter, noting the repeated nature of the violations. Flaherty also pointed out that these transgressions occurred less than 18 months after the casino was warned of potential civil penalties for similar issues. The casino has reportedly made the required payments, including interest and penalties. Additionally, the Borgata has corrected the software issue that contributed to the second violation.

 

Industry Impact: A Broader Context

The Borgata’s tax issues are significant not only because of the financial discrepancies but also due to their implications for regulatory practices and industry standards. As the highest-grossing casino in Atlantic City, the Borgata's financial missteps have drawn attention to the potential vulnerabilities in the state's gambling oversight mechanisms.

The case also underscores the broader challenges faced by regulatory bodies in ensuring compliance among major gaming operators. Despite the DGE’s efforts, the repeated nature of the violations suggests a need for more stringent oversight and perhaps a reevaluation of the regulatory framework governing internet gambling.

The Borgata declined to comment on the situation, and MGM Resorts International, its parent company, has not responded to requests for comment. This reticence raises questions about transparency and accountability, especially given the magnitude of the alleged violations.

As the casino industry continues to thrive, the Borgata scandal serves as a crucial reminder of the importance of robust regulatory oversight and the need for companies to adhere strictly to tax regulations. The financial stakes are high, and the implications of such lapses extend beyond mere dollars and cents, affecting public trust and the integrity of the industry as a whole.

 

“The original violation was an understatement of gross revenue by almost $10 million. This second understatement of gross revenue was in an amount of over $4.5 million.”

 

The Future

The Borgata’s case could prompt a review of regulatory practices and enforcement strategies, potentially leading to stricter compliance measures and more frequent audits. For the casino industry, it serves as a stark reminder of the importance of accurate accounting and the severe consequences of regulatory non-compliance.

As Atlantic City continues to be a major player in the gambling industry, stakeholders will be closely watching to see how the Borgata’s situation unfolds and whether it prompts broader changes in the regulatory landscape.