Charities say e-pulltab tax deadline is a headache

A switch-over in the way the state collects e-gambling taxes to help fund the Vikings stadium may lead to losses for some charities.

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More than 200 bars and restaurants offer e-pulltabs, and odds are good that some games are in the red, said Al Lund, executive director of Allied Charities of Minnesota.

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Linda Brausen has no problem with the new, more timely way that Minnesota will collect taxes on e-pulltab games to help fund the Vikings stadium. Instead of paying taxes after every game is sold out — which can take months — charities must pay every month.

The trouble, said the gambling manager, is the switch could cost her charity $1,500. The state told charities to shut down all e-games May 31 and start a fresh reporting cycle in June. But Brausen has games that require her to pay out hundreds of dollars more in prizes than she has made in ticket sales.

“What gives them the authority to tell me to lose money for my organization?” said Brausen, gambling manager for the Blaine Festival. “Normally you wait until the game is finished [to close it down] so you can recoup your losses. It’s maddening.

“We’re all trying hard to support this new [Vikings funding] venture for the state,” she added. “But this is money they’re taking directly from charities.”

The Minnesota Department of Revenue acknowledged that the plan could be a financial hit for some charities. But there was some flexibility: Charities could close their games any time before May 31 if they became profitable, said Matt Massman, assistant commissioner at the department.

“There should be no surprise that this was a risk that would occur,” he said.

It’s unclear how many charities would suffer gambling losses, but the odds are good that some games in the more than 200 bars and restaurants offering e-pulltabs are in the red, said Al Lund, executive director of Allied Charities of Minnesota.

Lund said he had suggested several alternatives to the Revenue Department, such as giving charities a choice of dates for their closing deadline or imposing the deadline in March, when there were far fewer charities on board with the e-games.

“I asked, ‘Can you give special dispensation for charities under water?’ ” Lund said. “ ‘Can you give them more time?’ They said no, it was against policy.”

Under the new arrangements, charities will close out their games Friday and pay taxes on revenues from the tickets sold. Starting in June, they will pay taxes on monthly revenues at the end of every month. This will put cash in state coffers much more quickly.

Charities say they have no problem paying taxes each month. It’s the May 31 deadline that worries charities. Many said they didn’t fully understand the implications of the shutdown until recently.

Charities in the red

The charities hit hardest had games that paid out mega prizes early on. Brausen, for example, said one of her games cranked out a $1,000 prize and a $599 prize almost immediately. It was great publicity, she said, and winners were thrilled. But Brausen must pay those prizes from her charity’s budget, which normally would be replenished by other less-lucky players.

Jean Walz, executive director of the Lakes Area Youth Services Bureau in Forest Lake, has three games with a combined negative balance of about $1,400. She signed up for e-gambling in January to generate more funds for the children and families her nonprofit serves. “I’m not sure why it’s OK for them to tell us to close games,” she said. “According to statute, we’re supposed to make those decisions. As it is, they are determining that I’m losing money.”

Kim Reid, gambling manager for the Tamarack Snow Flyers snowmobile club, said she also is $1,400 in the red. “I understand a monthly closing for accounting purposes,” Reid said. “But closing everything on May 31? I’m holding my breath for the next 10 days.”

 

Jean Hopfensperger • 612-673-4511

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