MGM’s Borgata Casino Owes New Jersey Over $1 Million in Taxes

Article by : Erik Gibbs Sep 9, 2024

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MGM’s Borgata Casino in Atlantic City is facing a substantial tax issue after New Jersey regulators determined that the casino underpaid its internet gambling taxes. According to the New Jersey Division of Gaming Enforcement (DGE), Borgata mistakenly took $15 million more in tax credits than it was entitled to, resulting in a tax shortfall of $1.1 million. The DGE has since ordered Borgata to pay back the full amount owed, along with penalties and interest, bringing the total to $1.3 million.

The DGE noted that Borgata had previously been warned about this issue. Acting Director Mary Jo Flaherty stated in a letter to the casino that this wasn’t the first instance of Borgata understating its gross revenue. In March 2023, the casino incorrectly included nearly $10 million in bonuses for table games in deductions that were meant only for slot games. That mistake led to a tax underpayment of $787,000, for which Borgata was assessed $88,000 in interest and $40,000 in penalties.

Then, in July 2024, a software upgrade at MGM, Borgata’s parent company, caused the casino to deduct more credits than it had actually awarded to players. This error added another $4.5 million in credits beyond what the casino was entitled to, leading to a tax underpayment of $365,000. Borgata was hit with an additional $15,000 in interest and over $18,000 in penalties for this violation.

The credits in question are part of a tax relief system that allows casinos to avoid paying taxes on some free play given to customers once a certain bonus threshold is met. The first $90 million in promotional credits in the Garden State is taxed as part of gross revenue, but any amount above that threshold is not. Borgata’s issues stemmed from miscalculations in these promotional credits, ultimately leading to significant tax underpayments.

Despite these issues, Borgata remains the top-performing casino in Atlantic City. For the first seven months of 2024, the casino has won over $771 million from gamblers, putting it more than $300 million ahead of its nearest competitor. Borgata has already paid the required amount, including a $75,000 civil penalty, and has reportedly made software changes to prevent future errors.

MGM Resorts International has not commented on the situation, and Borgata itself has also declined to provide any statements. However, the DGE emphasized the seriousness of the violation, particularly since it occurred after Borgata had been previously warned about similar mistakes. Borgata continues to lead the Atlantic City market, but it will likely face increased scrutiny from regulators to ensure compliance with New Jersey’s strict gambling laws.