Rep. Jim McDermott, D-Wash., has introduced legislation to amend the Tax Code to regulate and tax Internet gambling.

Jim McDermott

The bill, known as the Internet Gambling Regulation and Tax Enforcement Act of 2011 (H.R. 2230), was introduced last Thursday, but echoes legislation that McDermott introduced in the previous Congress. As with the previous bill, it is co-sponsored by Rep. John Campbell, R-Calif., and Barney Frank, D-Mass. Campbell introduced a companion bill earlier this year, known as the Internet Gambling Regulation, Consumer Protection, and Enforcement Act (H.R. 1174).

The bill includes language identical to what was overwhelmingly approved last year by the House Committee on Financial Services, and would implement enforceable standards to control Internet gambling activity (see House Committee Passes Internet Gambling Bill).

The bill would ensure that taxes and fees are collected from wagers placed over the Internet. While the bill would not make online gambling sites legal, it would require the sites to withhold taxes from online winnings, and provide the names, addresses and tax identification numbers of players to the federal government, according to The Hill.

Online gambling site operators would also need to send information to the Treasury Department on the gross wagers, gross winnings, and gross losses of each player every calendar year, the taxes withheld on their winnings, and how much had been deposited and withdrawn from their accounts during the year.

Online gambling sites would need to obtain an Internet gambling license and they would be taxed on 2 percent of the deposits they receive every month. States would also be able to tax the online gambling sites at a rate of 6 percent a month. A quarter of the taxes collected by the federal government would be directed toward programs for disadvantaged and foster children.