BASIS AND PURPOSE FOR RULE 14
The purpose of Rule 14 is to establish the rate of the gaming tax on adjusted gross proceeds of gaming in compliance with section 12-47.1-601, C.R.S., to provide for security for the payment of gaming taxes to the Department, and to provide for the payment of gaming taxes by electronic fund transfer and to change the method of filing monthly gaming tax returns to electronically transmitted. The statutory basis for purpose for Rule 14 is found in sections 12-47.1-201, C.R.S, 12-47.1-203, C.R.S, 12-47.1-302, C.R.S, 12-47.1-602, C.R.S, and 12-47.1-604, C.R.S.
RULE 14	GAMING TAX

47.1-1403	Taxation of free play - adjustments to gaming tax rates based on casino free play.  Effective 7/1/18

(1)	Notwithstanding any procedural limitations in rule 47.1-1401, which are expressly directory rather than mandatory, and as specified in this rule and beginning in fiscal year 2018-2019, the Commission will modify gaming tax rates to reflect free play offered by licensees to players, which practice is consistent with the Commission's constitutional authority to require that each licensee pay up to forty percent (40%) of its adjusted gross proceeds to the state of Colorado. 

(A)	Definitions.

(I)	"Base year used for calculating free play tax rate adjustment eligibility" means the fiscal year ending June 30, 2018.

(II)	"Free play" for slot machines means electronic downloadable credits and for table games means non-negotiable chips or match play coupons, provided by a licensee to specific players, enabling the play of a form of limited gaming by such players without the payment of consideration.  "Free play" amounts have no actual monetary value that would allow them to be negotiated for cash, independent of the conduct of limited gaming.

(B)	Reporting.

(I)	By December 31, 2018, retail licensees must prepare and retain a summary of free play (delineating separately free play amounts from slot machines and free play amounts from table games) provided to players between July 1, 2017 and June 30, 2018, by calendar quarter, that was taxed.  Such summary must be timely provided to the Division.

(II)	After the software used for gaming tax reporting and payment has been updated to permit gaming tax reporting of free play on a monthly basis, each retail licensee must disclose as part of its gaming tax filing that month's free play amount (detailing separately slot machine free play and table games free play). At least annually, the Division shall aggregate licensees' reports of monthly free play amounts.

(C)	Eligibility for yearly tax rate adjustments. Annually, the Commission will adjust gaming tax rates to reflect gaming taxes paid on that amount of adjusted gross proceeds which is directly attributable to free play by any retail licensees who reported free play to the Division only if:

(I)	The resulting gaming tax revenue paid by all retail licensees during a fiscal year is at least the amount of gaming tax revenue in the base year used for calculating free play tax rate adjustment eligibility, plus a growth factor of 3.5 percent applied to gaming tax revenue in the base year used for calculating free play tax rate adjustment eligibility and compounded annually as of July 1 of that year; and 

(II)	A retail licensee's reduction in applicable gaming tax rates is limited to its percentage of the gaming taxes paid on free play that exceeds the minimum required threshold, set forth in rule 47.1-1403(1)(c)(i).

(D)	Extension of free play tax rate adjustment: conditions. The practice of annually adjusting gaming tax rates will be extended after the end of fiscal year 2020-2021 only if the following two conditions are satisfied:

(I)	Total reported free play, at the end of the third year during which retail licensees are eligible for tax rate adjustments, has grown by at least 10.87 percent over the free play usage in the base year used for calculating free play tax rate adjustment eligibility; and 

(II)	Total gaming tax revenue has grown by at least 10.87 percent, over the gaming tax revenue collected in the base year used for calculating free play tax rate adjustment eligibility.

(2)	At its August meeting each year, consistent with Rule 24, the Commission will issue a final decision to approve tax rate adjustments authorized by this rule to adjust qualifying licensees' gaming tax rates from the preceding fiscal year and thereupon refund overpayments of gaming taxes to qualifying licensees.

(A)	At least fifteen (15) days prior to the Commission's August hearing each year, the Division will transmit to all licensees its findings concerning the eligibility calculations set forth in subsections (1)(c)(i) and (ii) of this rule as well as a list of proposed tax rate adjustments  for each of the qualifying  licensees. Any licensee and any other interested person may address the Commission in public or executive session, depending on the nature of the information to be transmitted, concerning the proposed tax rate adjustments before the Commission issues its final decision as to such adjustments.

(B)	Within five (5) business days of qualified licensees’ receipt of proposed tax rate adjustments, any dispute shall be submitted in writing to the Division for review.  The Division shall submit a response to such licensee(s) within three (3) business days from receipt of the dispute.  If an agreement is reached between the Division and the licensee(s), the matter shall be considered settled, and the dispute will not be brought before the Commission.  Notice of any such dispute and settlement, to the extent it alters the amount of the proposed tax rate adjustments before the Commission, shall be sent to all qualified licensees within two (2) business days of resolution.  Licensees may request, and are encouraged to participate in, an in-person meeting with the division in order to reach such an agreement.

(C)	Such determination of the amounts of qualifying licensees’ tax rate adjustments must be concluded before the commission certifies that fiscal year’s distributions from the limited gaming fund and the extended limited gaming fund.