Wednesday, Oct. 21, 1998 | 5:37 a.m.
The provision, authored by Sen. Richard Bryan, D-Nev., on behalf of Nevada slot machine maker International Game Technology, was tucked into the mammoth budget bill signed by President Clinton shortly after Congress approved it.
It will give big winners the option of taking all their money up front instead of accepting a series of payments over several years. Past winners also are covered. The provision does cover the Megabucks jackpot, which is now close to $25 million.
By paying jackpots immediately, casinos and lotteries will be able to claim tax deductions sooner and eliminate bookkeeping chores associated with annual payments, proponents say.
The Joint Committee on Taxation projects the federal government will receive $1.3 billion in tax revenues over the next four years from the jackpot plan.
"In love and politics, timing is everything, and the timing is perfect for this provision," Bryan said.
Current law triggers severe tax penalties for winners who receive a lump-sum payment instead of installments. Under a doctrine known as "constructive receipt," winners can be taxed on the full amount of the jackpot even if they refuse a lump-sum payment that is offered.
Earlier this year IGT went to Bryan, who sits on the Senate Finance Committee, and asked him to propose changing the tax code on jackpots. IGT said the change would benefit its customers.
"This gives our winners the flexibility to make the choice on how they should be paid," said Charles Mathewson, IGT chief executive officer.
"Someone who is 75 years old probably would rather have the money now and enjoy it," he said. "Someone younger might be happier taking it over a longer period of time."
Mathewson said the provisions would have no effect on how IGT pays taxes or reports earnings.
Bryan said he began working on the provision with the idea that it would help Nevada casinos, but once he got the $1.3 billion revenue estimate, he knew the provision would have broad appeal.
archive
