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Borgata Casino Faces $1.3 Million Penalty for Tax Underpayment
Borgata Challenges
Borgata Casino in Atlantic City is facing intense scrutiny from New Jersey gambling regulators following allegations that the casino underpaid its internet gambling taxes on two separate occasions. The New Jersey Division of Gaming Enforcement (NJDGE) claims that the casino improperly took advantage of a loophole, allowing it to claim excessive credits and resulting in a $1.1 million tax shortfall. The incident has raised alarms among regulators and industry observers, who are questioning the casino’s financial practices and its overall compliance with state laws.
Allegations of Excessive Tax Credits
According to the NJDGE, Borgata’s tax underpayment stems from an overclaim of $15 million in credits, leading to a significant shortfall in its tax obligations. While tax credits are a standard part of internet gambling operations, the NJDGE suggests Borgata manipulated the system to its advantage, thereby reducing its tax burden by $1.1 million.
The NJDGE, tasked with ensuring compliance with New Jersey's strict gaming regulations, views the incident as part of a larger pattern. Acting NJDGE Director Mary Jo Flaherty issued a strongly worded statement to Borgata, noting that this was not the casino’s first violation of this nature. Flaherty pointed out that Borgata had previously understated its gross revenue by nearly $10 million, with a subsequent violation involving another $4.5 million in unreported revenue.
“The Division views this matter as serious,” Flaherty said, stressing that repeated violations raise significant concerns about the casino's financial controls and reporting practices. Flaherty also hinted at a possible escalation of penalties should Borgata continue to flout tax rules.
History of Financial Missteps
In addition to its tax missteps, Borgata's parent company, MGM Resorts International, faced its own regulatory challenges. In July 2024, a software upgrade at MGM led to a glitch that wrongly allocated $4.5 million in credits for player bonuses that did not exist. The mistake resulted in $365,000 in lost taxes and cost the company over $33,000 in fines and interest. While MGM has since corrected the software issue, the incident contributed to growing regulatory concerns about Borgata’s and MGM’s overall financial operations.
Following its investigation into Borgata’s most recent tax underpayment, the NJDGE has ordered the casino to pay $1.3 million in back taxes, penalties, and interest. The directive includes a $75,000 civil penalty, signaling the NJDGE’s dissatisfaction with Borgata's repeated financial oversights.
In her communication with Borgata, Flaherty expressed dismay that the casino had not learned from its previous mistakes. “The fact that this conduct was repeated less than 18 months after the Division warned that an additional violation of this type could result in a civil penalty is also to be considered,” she said. Despite the penalties, Borgata quickly moved to settle the outstanding balance, seeking to bring the matter to a close.
Financial Success Amid Regulatory Scrutiny
Despite its recent regulatory challenges, Borgata continues to demonstrate strong financial performance. In July 2024, the casino posted a gaming win of $75.9 million, the highest among all Atlantic City casinos. This success underscores Borgata’s dominance in the market, even as it faces mounting scrutiny from regulators.
The broader New Jersey online gambling market also experienced a banner month in July 2024. Online casinos in the state recorded $195.4 million in revenue, marking the second-highest total for online gaming in New Jersey’s history. This robust performance highlights the growing importance of internet gambling for both casinos and the state’s economy, even as tax compliance remains a critical issue for regulators.
The NJDGE's crackdown on Borgata reflects the increasing importance of regulatory oversight in New Jersey’s thriving gaming industry. As the state's gambling market continues to grow, ensuring that casinos meet their tax obligations is critical to maintaining public trust and sustaining the state’s revenue streams. For Borgata, the recent penalties may serve as a wake-up call to tighten its financial controls and avoid further regulatory scrutiny. While the casino’s strong financial performance indicates resilience in the face of adversity, repeated violations could jeopardize its reputation and standing with regulators.
In the broader context, New Jersey’s gaming regulators are likely to keep a close eye on all casinos operating within the state, especially as internet gambling becomes an ever-larger share of the market. The NJDGE’s actions send a clear message: tax compliance is not optional, and violations will be met with swift and significant penalties.
“The fact that this conduct was repeated less than 18 months after the Division warned that an additional violation of this type could result in a civil penalty is also to be considered.”
Conclusion
Borgata Casino's recent tax underpayment has drawn the ire of New Jersey regulators, resulting in a $1.3 million penalty and raising concerns about the casino’s financial practices. While Borgata remains a top performer in Atlantic City’s gaming industry, its repeated regulatory violations suggest that more stringent internal controls may be necessary to prevent future issues. As New Jersey’s gaming industry continues to grow, the NJDGE is poised to ensure all casinos meet their tax obligations and operate within the bounds of state law.
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