BISMARCK, N.D. — Reducing North Dakota's taxes on charitable gambling would simplify paperwork and provide local organizations with more money to spend on projects, advocates said Tuesday.
Marvin Knutson, vice president of the Charitable Gaming Association of North Dakota, said small charities often pay a large chunk of their gambling profits in taxes.
The percentages would be considered excessive if they were levied against a private business, Knutson told the Senate Appropriations Committee during a hearing Tuesday.
Knutson is the bookkeeper for a school booster club in Milnor, a rural community in North Dakota's southeastern corner. During July, August and September of 2010, the club's gambling operations collected $126,067 in wagers, made $8,046 in profits and paid $4,920 in taxes, he said. The proposed legislation would have cut the tax bill by 74 percent, to $1,261, he said.
North Dakota charities that have gambling operations "aren't against paying taxes, but the ratio of taxes to money left for charitable requests is way out of line," Knutson said.
The Appropriations Committee is considering legislation that would eliminate an array of charitable gambling taxes in exchange for a 1 percent flat rate on wagers, and an increase in each charity's expense allowance.
The changes would save charities about $10.8 million in taxes every two years, according to estimates by the North Dakota attorney general's office, which regulates the industry. The portion of charitable gambling taxes that goes into the state treasury would drop from $15.8 million to $5 million.
Keith Lauer, director of the office's gaming division, said the smaller tax amount would still be enough to cover regulatory costs. Attorney General Wayne Stenehjem is neutral on the tax-cut legislation, Lauer said.
The taxation of North Dakota's charitable gambling industry was the focus of a legislative study last year, with lawmakers concluding it was overtaxed, Lauer said Tuesday.
"They saw that and said, 'Wait a minute, here. This is not why we had charitable gaming, so the state of North Dakota could make money off of this industry,'" he said.
The Appropriations Committee did not take action on the bill. Its chairman, Sen. Raymon Holmberg, R-Grand Forks, said legislative budget writers would have to determine where it fit among an assortment of tax-cut proposals the Legislature is considering.
Representatives of several charities said charitable gaming revenues have been declining generally.
Arlette Preston, a director of the Plains Art Museum in Fargo, said the museum has cut 10 staffers in the past four years. The tax reduction would help the museum survive, Preston said.
"We're really to the point where we're feeling like we can't cut any further, or we'll truly sacrifice the mission of the organization," Preston said.
The bill is SB2042.