Tribal Gaming & Class II Slots - Part 4

Whenever a new game appears in one of my local SoCal Native American casinos, like most of you, I try it a time or two. You never know when they’ll put in a good one. Recently both Harrah’s Resort Southern California (Rincon) and Pala have added some banks of Cadillac Jack slots to their floor. The games are colorful, the music is loud, some might say annoyingly so, and because you can’t stop the reels and go to the next spin when you have a win, it takes a long time to collect your credits. That makes the machines seem to be paying often and paying more. These new games are very popular with the casino patrons, and their seats are always full. The players are all watching the reels that pay both right to left and left to right to see if they have a hit. They generally pay no attention at all to the tiny bingo cards at the bottom of the screens. 

That little bingo card is what tells informed players that the machine is not really a slot machine at all. It is really a bingo game disguised to look like a slot machine. it’s a Class II slot.  Another annoying clue that these Cadillac Jack machines are Class II games is this. When you have a win, you can’t just push the button and go right to the next spin. You are forced to wait and listen to the music signaling your win play while virtual coins rain down onto your screen. You can’t play on until all the winners of the linked games are paid and the server is ready for the next game to start. 

If you’ve never played a Class II slot, a good way to get a feel for their characteristics is to watch one of the YouTube videos filmed by players such as Random $$ Slots. There’s a link to one of his channel devoted exclusively  to Class II Slots HERE. The channel originally had examples of Class II games by WMS, IGT, and Cadillac Jack. Games by other manufacturers are being added to the site as they are played and filmed. Nearly all the major slot manufacturers it seems are devoting much of their resources to developing these bingo games. There are Class II games shown on the internet manufactured by slot giants such as Bally and Multimedia in addition to WMS, IGT, and Cadillac Jack. There are some smaller companies developing games as well. I suspect more and more manufacturers will be focusing on these Indian Casino Class II slots in the future. 

People who play Class II slots often complain that they can tell by looking at the tiny bingo card on their screen whether they are going to have a winning spin. I guess they like to be surprised. Under IGRA (the Indian Regulatory Gaming Act), the games are required to have a draw of bingo balls that must result in a game winning pattern. When the machine draws the bingo balls, the first 30 numbers drawn are daubed red - you can watch them appear on your bingo card when you spin the reels. If there is no winner in the first 30 numbers generated, the machine will continue adding yellow balls to the display until it arrives at a game ending pattern. These yellow balls, however, do not contribute any pays. 

In the early days, if you had a win, you had to daub your card by pushing the spin button a second time; now cards are auto-daubed. You can even change your card before the next game if you don’t like it, just as you can trade your card in for a new one when you’re playing a paper bingo game. On the Class II machines, you change your card by touching the display until you get one you like. It won’t matter what card you pick because there are too many possibilities to predict the one that will have the random numbers you’ll need for a good win. You might as well keep the first one they gave you, but if it makes you feel like you have some control over the game, even though you don’t, go ahead. Change your card if you like.

Take a look at the first video Ishtar’s Oasis by WMS on this slot channel CLASS II SLOTS and see if you can predict whether a spin is a good one by looking at the red daubs on the bingo card. Often you can. Sometimes you can’t because there are many more arrays that award credits in the electronic game than there are winning arrays in a regular paper bingo game. 

When you play in the casino, you might also want to take a quick look at the pay-table equivalent for the bingo games that your information screen can show you. There’s no way to study it really. In fact the machine I tried looking at refused to go to the bingo information screens after a time, wanting me to play instead I guess. Nor can you learn anything from it to improve your wins as you sometimes can with slot pay tables. There is too much information. It will give you a feel for how complicated the mathematics behind the game is, however. 

While you are watching this game on the internet, pause the action and take time to read the comments by the creator. You can learn a lot from the comments he posts with his videos. Reading them and watching the games, I relearned a lot I had forgotten about Class II Bingo Slots from years ago, and I saw some things that have changed. Today’s games are much different and much better than the ones we played a decade ago when they first appeared in our NA casinos. Today it’s hard to tell them from Vegas-style slots. 

If you think you can predict how big your win might be from the tiny bingo card that usually comes up before the slot reel screen does, and you don’t like knowing, you are not alone. Many players don’t want an early display of the bingo card spoiling their surprise. Cadillac Jack has a new innovation, called by John Groshowski the “unscripted bonus event. “ (Mr. Grochowski writes about such things in the Chicago Sun Times as the Gaming Guru). Cadillac Jack’s unscripted bonus, he says, adds bingo draws within the bonus events. These draws have varied enough outcomes that players can’t predict what will happen. 

There are also machines where the bingo card is revealed after the slot screen rather than in advance. IGT does this. One place you can see this in Random $$ Slots’ video of 2x3x4x5x by IGT.  A comment there also tells us that MultiMedia is now manufacturing Class II machines that don’t show the bingo card when the machine is idle. There will be more and cleverer way to address the bingo-card issue in the months to come. One easy fix might be to design the display so that the bingo card was not shown on the computer screen at all unless you pushed a button to reveal it.

As you watch these games and others, focus on the tiny bingo card when a bonus comes up. Ask yourself if there is still a card to watch during the bonus spins. If the bingo card in the corner during the game is no longer there when you play your bonus, perhaps it’s because your bonus is predetermined by the arrangement that brought it up. If so there is nothing you can do to change your bonus. If your bonus begins with your making a choice of some kind, such as picking one of four cards, your bonus total will be dependent on your choice.

If you watched Ishtar’s Oasis by WMS, you saw there was no bingo card on the screen during the bonus spins - the bonus spins were all for show, If you watch Spider Queen by Cadillac Jack, there is a small bingo card during the bonus rounds as well as during the base game so the amount of your bonus is not predictable from the triggering bingo card. The Cadillac Jack Power Stream series of games are the ones appearing recently in our California Casinos that used to have only Class III slot games. There are several films of these Power Stream games you could view. If you watch the Spider Queen video, you can see many of the Class II game characteristics illustrated: right to left and left to right pay, stacked symbols (that hardly ever seem to be part of your win), high volatility games, long waits while your credits pour into your bank if you have a hit, encouraging “messages” to read, and loud music to listen to while waiting for the payout to end. A lot of Razzle-Dazzle to entertain you while you wait for the next game to start - and no way to speed through it.

Class II game payouts are funded by other players. There is no random number generator in your individual machine, and you are not betting against the house. You are wagering for a share of the money other players are betting. For this reason there must be at least two players playing each game - though they can be on different themed machines. If there are not at least two players, the machine will cycle through the display waiting for the server to have a quorum. An excellent illustration of this is in the film of Queen of Wonderland by Cadillac Jack. Watch the start of this video and see how long it takes for the first spin to register. This is because there are not at least two active players to play the game. The hit frequency is always 50%, but the payout percentage is determined by how many prizes of various amounts are loaded into the program. This is a difficult concept to wrap my head around, and I have not been able to find in print if there are any restrictions on how low an indian casino can set this percentage. Logically you would expect a Class II casino to pay out about the same percentage as the one required for casinos having Class III games. Otherwise they could not remain competitive.

If you have a comment or know of a link to an explanation that could help us all better understand Class II pays, feel free to comment below - or better yet, send me an email to spin2win.jen@gmail.com.

HERE’S A LINK to an article written by Frank Legato who was discussing Class II slots with Casino Operations Senior VP, Charles Lombardo, formerly slot operations VP at Caesar’s Palace. Mr. Legato has worked with major slot manufacturers who have refined Class II technology to provide games that look and play like the Class III Vegas-type slots. The information in the paragraph above above comes from this article. It still leaves me with unanswered questions, perhaps the answers are trade secrets, but you may find the article helpful. 

The article also has some information on hit frequency on three reel slots which I have not seen anywhere else at this time, but which I want to share with you. I think it may explain an anomaly that appears on the film of the IGT three reel slot Double Diamond Stars. 

At around the 30 second mark of the video, a single credit is added to the total without any explanation. But Lombardo gives us a plausible one.

Lombardo says this: “Because traditional [three reel] games like Blazing 7’s or Red, White, & Blue generally have a hit frequency around 14% for the seven or eight winning combination in the pay schedule, a 50% hit frequency would be impossible and still have the game make money for the casino. To remedy this, Lombardo explains, we came up with a bonus feature. 14% of results in the pool will be actual reel combinations, and the other 36% will yield a bonus symbol on the reels that will accumulate. When you accumulate 25 of these symbols, you will win 1 bonus credit. Therefore you still have the 50% hit frequency, but your frequency of reel wins is similar to what it is in the traditional Class III versions of those games.” Did you watch this happen in the film of Double Diamond Stars?  Watch it HERE.

So, where are we going with all this? Nowhere I want to be! 

I think what we are going to see over the next few years is that a lot of our Native American casinos, and maybe even some of the traditional non-Indian casinos we play at, will be putting more and more of these Class II bingo-slots on the casino floors. The games will become increasingly harder to distinguish from the traditional Vegas Class III slots as the technology gets better and better.  Most people playing the games will not even realize there is a difference. 

I also suspect that, when this happens, State revenue from the tribes will drop. That revenue now comes from payments required by the compacts. If the Native American casinos have Class II rather than Class III machines, the tribes will not have to pay the State the large per-machine fees the compacts demand. When that happens, the State lawyers will undoubtedly find a new way to define Bingo that excludes these Class II slots from that definition. And then the State will once again force the Native American residents of California to give up what is rightly theirs to fill the State coffers. There is a term I would use here to describe this ravaging of other peoples if I were not a lady!  I’ll leave it to your imagination. You know how I feel about past atrocities and future fears. 

I will probably follow this with an article on Class II video poker in a few days.  We’ll see.

Special thanks once again to Random$$Slots for all his help with this and for permission to use his slot videos in preparing these four articles.  Please continue to visit his site as he makes more films of games from more manufacturers available to help us all understand how to play our favorite games.  And don’t forget to view, like, and subscribe.

CA Tribal Casinos and Class II Slots - Part 3

When my husband and I moved to California in 2002, we didn’t know much about playing slots and neither did the Indians running the casinos. Valley View was our favorite place to play at that time. Valley View had opened the previous year in 2001 with only 750 slot machines. The casino was in a tent and the Native Americans running it played all sorts of fun games with their visitors in addition to the ones on their Vegas-style machines. None of the SoCal casinos had penny machines yet, but it didn’t take too much money to play the old coin-fed machines since the choices on the nickel machines were 1,3,5,7,and 9 lines. I remember how daring it seemed raising our bet to 9 lines a spin when we first played. Wow, 45 cents a spin max bet! And how exciting it was hearing the cascade of coins drop into the machine’s hopper. Those were the days! Back when there were REAL coins involved. One could have a whole lot of fun on very little money. It’s no wonder we played so often.

We gamers might have been able to play without spending much money in the old days, but for the tribes it was a different story. There were tribal/state compacts required by IGRA for casinos that wanted to have Class III, Vegas-style machines. There were payments that had to be made to the State of California for the privilege of operating the casinos. These payments to California didn’t cost the San Pasqual Band of Mission Indians, who owned Valley View, nearly as much as what they pay today, but still it was a lot of money. If you haven't read PART 1 and PART  2 of this series, you might want to do so first.

Here’s what Valley View paid under the original 1999 compacts to operate their 750 machine Class III casino.

When gambling was first legalized in California, the tribes operating casinos paid into two special State Funds. One was the Revenue Sharing Trust Fund designed to assist tribes without casinos, or tribes with very small casinos with under 350 machines. The tribes who operated casinos shared their profits with the ones that didn’t through these payments. My figures are taken from the 2005-06 fiscal year and were published by the LAO in February 2007. The report is very long but very interesting if you like tribal history and you can read it HERE. 

Valley View paid $360,000 into this RSTF fund in each of the early years - nothing for the first 350 machines and $900 apiece for the next 400 machines. The LAO report says $33 million was paid by all the California tribes in total to the RSTF to share their revenue with other California tribes. 

Under their compacts these same tribes also paid $27 million in to the CA General Fund. Another $140 million was paid to cover the cost of gambling addiction programs, regulatory costs, grants to local governments affected by tribal casinos, etc, etc. $101 million was also paid into a designated account expected to be used to repay State transportation funds for loans to the General Fund in prior years. 

Mind boggling, isn’t it? And all this is before considering the costs to the casinos of construction and maintaining their facility, hiring their workforce, paying utilities, etc. — and before even considering the costs of purchasing or leasing the machines in it from the slot manufacturers. Under the 2004 compacts, the figures get even worse. We don’t dare think about what the State is trying to extract from our Native American friends under the 2006 proposed compacts!

Seeing the costs to have Class III - Vegas style games in the casinos with state compacts, I think you can understand why the Class II Bingo-type slots allowed under IGRA might appeal to the poor, cash-strapped Indians hoping to make a little money operating their gambling halls.

Class II - Bingo type gaming is MUCH less expensive for the tribes than Class III - Vegas style gaming. No compact with the State is necessary for a tribe to operate a Class II Gaming facility. None of the payments required of casinos with Tribal/State compacts have to be made.

Here’s a quote from the Republican Caucus California State Senate Briefing Report 2/12/2014:

“A tribe could open a Class II gaming facility without a compact on the land in question [reservation land] at any time. Class II gaming is defined as the game of chance commonly known as bingo (whether or electronic, computer, or other technological aids are used in connection with playing the game) and if played in the same location as the bingo, includes pull tabs, punch boards, tip jars, and other games similar to bingo…” 

You are really playing electronic Bingo disguised to look like slots, when you play a Class II machine. A Random Number Generator in your machine is not determining your win. You are not playing against the casino. You are playing against the other players linked to your machine, and it is all determined for you. Numbers are being drawn for whole banks of machines through a central processor (server) when you play. These are then translated into slot combinations to illustrate a win equal to what the the red balls you see on the little bingo card on the corner of your screen says you’ve won. And the razzle-dazzle display on your screen makes it all feel like a real slot machine win.

“…No compact with the State is necessary to operate a gaming facility with only Class II Slots. When the Legislature refused to ratify the compact between the State of California and the Lytton Band of Pomo Indians to operate a Class III casino in San Pablo, the tribe opened a Class II facility there using video bingo machines that resemble slot machines. Lytton, which has no tribal-state compact makes no payments to any state-managed fund, and is not regulated or audited by the CGCC, (the California Gambling Control Commission) has been very successful in this venture.” 

Valley View did not switch to Class II machines to try to save money or add Class II machines in order to have more machines than their compact allowed, but our local casino Pechanga did. In the early days, Pechanga was not the mega resort it is today. Today it is the largest casino in the West (Including Vegas casinos), and it is the casino resort ranked first by USA Today in their recent survey. In the early days of California Native American Casinos, Pechanga was trying to cut costs just like all the other casinos were. We didn’t often play there. We did not like playing at Pechanga in it’s early “Class II” days, and so we drove to Valley View in San Diego county to play real slots instead. 

There were two strange types of machines gamblers played at Pechanga. One room had games that resembled the Texas Eight-Liner machines I wrote about in an earlier article. The other had machines with the little Bingo Cards in the corner alerting players that the games they thought were slots were Class II Bingo machines instead. The machines appeared to play much like any Vegas-style slot on the casino floor in the early 2000’s, except that if you got a win, you had to daub your bingo card to claim your prize. You did this by pushing the play button a second time, and you had to do it before your time ran out. If you weren’t paying attention and were talking to your neighbor and missed the end of the countdown, you also missed your prize. 

I hated the Class II machines at Pechanga. The requirement to daub within the designated time was stressful, and so I always played the machines by pushing the play button twice instead of once whether I thought I had a winning card or not. I didn’t want to risk not getting my prize by not daubing in time. Daubing the card was the equivalent of shouting “Bingo” in a regular bingo hall to claim a win I guess. If you don't do that before the next ball is drawn you lose there too. Fortunately we are not required to daub our card to claim our win on Class II slots today. I don’t know what company made those old Class II slots. I was not so aware of the various manufacturers and the differences in machines at that time. I just knew I didn’t like them.

I still don’t. But as I learn more about Class II slots and how they work, and as the manufacturers get increasingly better at the mathematics and technology that makes these Class II Bingo machines look and act more like real Class III Vegas-type Slot machines, I find it easier to ignore the tiny bingo card in the corner, and I sometimes wager a little money in the Class II machines. 

The biggest difference between the two classes of machine, and the most important thing to remember when you play, is this:  With Class III - Vegas style machines,  you are playing against the house and wins are determined by the computer’s random number generator. With Class II - Bingo machines, you are playing against other players, there is no random number generator in your individual machine,  and you can only win prizes that haven’t already been paid out.

There will be at least one more entry (and maybe two) about Tribal gaming and Class II machines over the next few days. I’ll share part of an article by Frank Legato containing an interview with a VP of Casino Operations, Charles Lombardo, about how these Class II machines work. I’ll also refer you to a YouTube channel posted by Random $$ Slots. You’ll be able to watch 20 videos of various Class II slots found in our casinos today and read his commentary on them. His films will illustrate a lot of what to look for if you play these machines. The best is yet to come.

California Tribes & Gaming - Part 2

California Tribes & Gambling - Part 2

Have you noticed when you play slots at Indian Casinos, that many of the machines have a small Bingo card somewhere on your screen’s display? Did you ever wonder why? Are we playing slots or are we playing Bingo when we play these machines? Are we playing both? Is there a connection between these games and IGRA (the Indian Gaming Regulatory Act)? What is it? Will we win more or less money playing these slots, and is our win figured the same way? We’ll try to answer some of these questions in Part 3, but first we have a little more history to cover. We need to know why we even have these machines.

Under IGRA, all tribal gaming falls into one of three categories, or classes, with varying levels of tribal, state, and federal regulation.

Class I Games: These are social games or traditional Indian games usually related to tribal ceremonies or celebrations. There is a description of several tribal games of the Chumash people at santa ynez chumash. if you are curious about this tribe’s traditional games of skill or chance. These games are subject to regulation only by the tribes themselves.

Class II Games: These are games of Bingo, whether or not electronic, computer, or other technological aids are used in playing the game. If played in the same location as the Bingo game, Class II games also include pull tabs, punch boards, tip jars, instant bingo, and other similar games. They also includes non-banked card games like poker. (Non-banked games are card games that are played exclusively against other players rather than the house). IGRA provides for regulation of these games by both tribal ordinance that must meet federal guidelines and by the approval of the National Indian Gaming Commission (NIGC).

Class III Games: These are sometimes called Nevada-style games or Vegas-style gaming. They include all other forms of gambling, including slot machines, blackjack, craps, roulette, and dice games not prohibited under state constitution and laws. These games are regulated by the tribes and states pursuant to tribal ordinances and tribal-state compacts.

Gaming Compacts. 

Federal law (IGRA) requires that all tribes who want to engage in Class III gaming (Vegas-type slots) must enter into a compact of agreement with the state in which the tribe is located before gaming can occur. On September 10, 1999, 56 tribes led by the Pala Band of Mission indians entered into Tribal-State Gaming Compacts permitting Class III video gaming devices on tribal lands. These compacts were subject to approval by California voters on Proposition 1A - the Indian Self-Reliance Initiative - which appeared on the March 2000 state ballot. With 64.5 percent of California voters casting a “yes” vote, the initiative amended the State Constitution’s ban on casinos to allow gaming on tribal lands subject to the terms of the compacts. 

I am always hesitant to quote statistics in what I write because they are so quickly outdated. The figures here come from the California Legislative Analyst’s Office and were published in LAO Tribal Gaming, May 20, 2015. The LAO office is the one that writes the analysis of voting propositions for CA each election. Much of the information in this post comes directly from that source.

A tribe can open a casino with Class III games only if (1) the Governor and the tribe reach an agreement on a tribal-state compact, (2) the CA Legislature approves the compact, and (3) the federal government approves the compact. According to the LAO, the Legislature has ratified tribal-state gaming compacts with 73 of California’s 110 federally recognized tribes. Of these tribes, 58 currently operate 60 casinos in 26 counties. The industry generates about $7 billion in revenue after paying winnings.

Financially, it is in the State’s interest to enter into compacts with the tribes. In accordance with the terms of various tribal-state compacts, the General Fund is projected to receive $330 million in revenue in 2014-15. An additional $30 million in revenue will support state regulatory and problem gaming costs. (Where does this money come from? Take a look in the mirror. Where else but from its players would a casino get the money to pay the state of California the share it demands?)

(My source comparing the old (1999) compacts and the newer (2004) compacts that have been ratified also comes from the LAO  2/02/07 )

Under the 1999 compacts, casinos were each authorized to have up to 2,000 machines with a statewide limit of 61,957. Payments were made to the state Revenue Sharing Fund on a per machine basis. These payments were a way to share revenue with the 73 tribes that did not operate casinos. Tribes with casinos paid nothing to the State for their first 350 slot machines. They paid $900 per machine for machines 351-750 , $1,950 for machines 751-1250, and $4,350 for machines 1250-2000. There were other payment made to the State under these compacts as well which we will touch on next time.

Today under the revised 2004 compacts the State takes an even bigger cut of casino profits. Each casino could have an unlimited number of machines, but payments of $8,000 to $25,000 per machine to the General Fund were required. 2006 compacts have been proposed according to LAO allowing tribes to operate over 2000 machines at one, two, or three facilities on tribal lands after negotiating payments for road improvements and repairs, increased fire and police protection, etc. And, yes, after paying more per machine. We’re just skimming the surface with these figures. Read the LAO report to learn more.

Compacts are required for Class III gaming. What happens if the Tribe and State negotiate an agreement, but the Legislature fails to ratify their compact? There are several options. (a) The tribe could request renegotiation with the governor, (b) It could sue in Federal Court claiming the state acted in “bad faith,” (c) A compact could be imposed on the state by the federal government. 

When working on “Spin to Win”, I learned that Harrah’s Rincon (now called Harrah’s Resort Southern California) had this problem. Feeling that the State was taking advantage of the economic desperation of the tribes trying to climb out of poverty, Rincon sued Governor Schwarzenegger for “illegal taxation” and “bad faith” in 2004 renegotiations. The tribe finally prevailed after 7 years of litigation, and theirs became the first California compact agreement negotiated with oversight of the federal courts.

So now we have a little understanding of how much money the casinos must pay to the State to operate their machines. This is in addition to all the other expenses of operating their gambling houses. We know why they are looking to cut costs wherever they can.  We know why we are winning less and doing it less often.

In the next section, we’ll look at the differences between Class II and Class III machines, and see how the casinos save money buying or leasing these Class II Bingo slots instead of paying for Vegas-style Class III machines. We’ll look at the difference in how they play and how they pay. And we’ll answer many of your questions about why we are seeing so many of these Class II “Bingo” slot machines in our local Native American gambling venues. More to come in Part 3.

California's Tribal Casinos - Part 1

When most people think of gambling, they think of Las Vegas. And it’s no wonder. There are a lot of places to lose your money in Vegas. There are 75 legitimate casinos (those with 15 or more slots or table games) in Sin City alone if you include the 45 on the Strip and the ones on the Boulder Strip. 

Here’s a fun fact. The Strip is not actually located in the city of Las Vegas. The 4.2 mile stretch of hotels and casinos south of Las Vegas city limits is actually located in the unincorporated towns of Paradise and Winchester. The famous Las Vegas sign is not in Las Vegas either. It was constructed in 1959 exactly 4.5 miles outside the city limits.

Las Vegas is located in Clark County, which encompasses all of Southern Nevada. Clark County has 176 casinos, and last year those 176 businesses took in $9.5 billion in gaming revenue. If you like numbers Steve Beauregard has extracted figures for you from the NV State Gaming Control Board’s report. If you are interested, take a look at them here at gamboool.com

As for me, I’m more interested in the 479 Native American Casinos that 500 Nations tells me are owned by 244 of the nation’s 565 federally recognized tribes and operate in 28 of our 50 states. I’m especially interested in the twenty-one located in Riverside and San Diego counties in Southern California, just a short drive from where I live. 

Did you ever wonder why California has so many Native American casinos — and NONE that aren’t owned by the tribes? Here’s a little history lesson to help us understand.

California law banned all gambling from the time CA became a state. There were games of chance in the Golden State - just not legal ones. Over the years voters gradually modified the law, authorizing various types of wagering. Horse racing in 1933. Bingo games for charitable purposes in 1976. The California Lottery through the passage of Prop 37 in 1984. Importantly, Proposition 37 also amended the State constitution to specifically prohibit “casinos of the type currently operating in Nevada and New Jersey.”

So how did gambling become the mega-industry it is today in CA, when the state constitution was amended to specifically forbid it? Look no further than the passage of the federal Indian Gaming Regulatory Act (IGRA) four years later.

To understand the history of Indian casinos in CA, you need to understand a little about how tribes and tribal rights are viewed in the United States. Indian tribes possess a special status under US law, known as Tribal Sovereignty. According to the US Constitution, the federal government reserved the power to regulate commerce with three groups: with foreign nations, among the various states, and with Indian tribes. Two Supreme Court decisions in 1831 and 1832 determined that the tribes were independent political communities with original natural rights that preceded European colonization — rights with which no state could interfere.

In the early 1980’s the Cabazon Band of Mission Indians, like many other tribes, was seeking a way to lift itself out of extreme poverty. The tribe turned to operating bingo games and poker halls as a way of earning revenue. A short time later, the Indio police and the Riverside County sheriff raided and shut down the ventures. The tribe sued in federal court in 1987 and won. 

The court said that if state law criminally prohibits a form of gambling, then the tribe within the state cannot engage in that activity. However, if state law civilly regulates a form of gambling, then the tribes within the state may engage in that gaming free of state control. In essence the court formally recognized the right to conduct gaming operations on tribal lands as long as such games were not criminally prohibited by the state. (CA approved Bingo games ten years earlier - Hmm, I wonder… Could there be a connection between the little bingo cards you frequently see on Class II NA slots and that fact? Perhaps so. We’ll talk about Class II slots next time.)

After the Cabazon ruling was handed down in 1987, state governments, frustrated by their lack of authority over tribal activities, appealed to Congress to give them more power over tribal gaming.  The result was the Indian Gaming Regulatory Act of 1988 (IGRA). States lobbied vigorously for IGRA and for the compacting provisions of the law over tribal objections. Contrary to popular perception, IGRA did not expand the power of tribal governments. In fact it curtailed tribal power by giving state government unprecedented authority over tribal gaming activities, requiring the tribes to negotiate agreements with states in order to engage in casino-style gaming activities.

So does any of this have anything to do with the games we play today? If you gamble at any of the 479 Native American casinos in the US, it does. We will be discussing more about tribal gaming and the three classifications of slot games under IGRA in the next section. Stay tuned.

French Lick Resort - USA Today's #9 Casino

Were there any surprises in my article yesterday about USA Today’s ranking of America’s top ten casinos? Were your favorite places to play missing from the twenty contenders for the top ten spots? Have you gambled in any of these casinos that made the cut and always left a loser? Would your top ten finishers have been very, very different from the published list? Would the twenty casinos the paper’s readers had to pick from included other choices? Perhaps some that wouldn’t be classed as resorts? And why wan’t Southern California Gaming Guide’s favorite Barona on that list anyway?

Articles I’ve read do not tell us the criteria USA Today used to pick the finalists. Nor how their readers voted for the top ten. But it certainly seems that the main criteria for making the twenty contenders list wasn’t lucky or loose machines in the casinos. It was the amenities offered to the resort visitors to ensure a memorable visit. 

I have found a good article at GamingZion.com complete with photographs that shows what might have swayed the judges to include three of the top 10 in their list of contenders: Thunder Valley in California near San Francisco, French Lick in Southern Indiana, and Red Rock Resort in Summerlin near Las Vegas. I won’t repeat the details here, but you can read the article and see the pictures yourself. You’ll agree the facilities are magnificent. The machines? Well that might be another story. I don’t know.

I have not gambled at any of the paper’s top ten except Pechanga, and Harrah's Resort Southern California, so I don’t have a lot of substance to add to GamingZion’s article, but being a relocated Hoosier, I will add a few words about Indiana’s only casino on the list: French Lick Resort. I haven’t gambled at French Lick, either, but I grew up in Southern Indiana about 60 miles west of the French Lick / West Baden area. My generation knew French Lick as the birthplace of basketball star Larry Bird, and the subject of somewhat questionable and risque jokes about the town’s name. 

French Lick is a national historic landmark. The resort is set in 2,600 acres of the breathtaking Hoosier National Forest. The two hotels were originally built in the late 1800’s because of the healing properties of the sulfur springs nearby. The casino was a $382 million restoration and expansion added in 2006. 

You don’t often think of Indiana as the home or vacation spot of famous people, but the hotel housed its share of celebrities. Bing Crosby stayed there. Abbott and Costello did a war bond drive there. The 1924 PGA tournament was held there. The site was a favorite of boxer Joe Louis and musician Irving Berlin. It was also the training site for both the Chicago Cubs and Chicago White Sox in 1943-44. 

Despite its reputation, the hotel was never “officially” used as a gambling hall, nor, contrary to legend, did gangster Al Capon ever stay there. Local stories say that the owner met Capone on the hotel steps and turned him away.

The rich and famous would vacation at the springs hotels for extended periods of time. Located between Louisville and Indianapolis, luminaries and the social elite would take a train to the Kentucky Derby and then stay at the French Lick Hotel until the Indianapolis 500. The owner Thomas Taggart served 3 terms as mayor of Indianapolis and briefly as senator. It was through these channels that the French Lick Springs Resort found itself the unofficial headquarters of the Democratic Party.

When the stock market crashed in 1929, the hotel closed and was sold to the Jesuits for a dollar. They operated a seminary in the buildings known as West Baden College until 1985. It was listed as a National Historic Landmark in 1974, but the building suffered considerable neglect over the years. Indiana Landmarks and an anonymous donor spent over $200,000 stabilizing the structure which was then sold in 1994 to a development company that included Grand Casinos Inc. The hotels and grounds received multimillion dollar renovations under the direction of Bill, Gayle, and their son Carl Cook, returning the property to the grandeur of days of yore. In 2007 the French Lick Resort was born.

Gambling was illegal in Indiana from inception: it was written into the original state constitution in 1851. The legislature did not approve Indiana’s first four gaming houses until 1996. The law required that they not be built on state land, so Indiana’s first casinos were all riverboat casinos. When gambling was approved at French Lick ten years later, the casino was designed as a riverboat surrounded by a small pond, and acquired the nickname: The Boat in the Moat. Two years later, the law changed, and the moat was filled. The boat was converted into the state’s first land based casino.

Today the resort features a 51,000 square foot smoke free gaming room with 37 table games and only 1,300 slots. Besides gambling, the French Lick resort offers hiking trails, horseback riding, and bowling. It was meant to be a vacation getaway for families - it has become USA Today’s 9th best casino.

USA Today Picks the Nation's Top Casino

There are more than 1,500 casinos scattered across the face of this great nation, more than any other country on the planet. What does that say about us? It says we Americans love to gamble! The problem is with so many choices, which casino should we  pick? USA Today recently conducted a poll to determine the best of the best, and they have announced their winner. Which casino is it? The winner will come as no surprise to most of you living in Southern California. 

If you are one of the hundreds of YouTube viewers who eagerly check their computers every Wednesday morning to see who won the Native American VS LasVegas competition for the week, you can probably guess. For the past 20 weeks ShinobiYT and VegasLowRoller have engaged in their friendly competition to see which is the better place to play, Southern California or Las Vegas. ShinobiYT, who leads in the competition, frequently plays at Pechanga, Harrah’s Resort Southern California, and Barona. His opponent VegasLowRoller plays off-Strip in Las Vegas usually at the Cannery. Like the USA Today poll, their results confirm what we California players all know: not even Vegas can beat our Native American Indian casinos. 

A panel of casino and gambling experts from Casino Player, Strictly Slots, and Abundant Travel magazines picked the 20 most deserving contestants for the USA Today poll, and readers chose the top ten over a four week period.

The top 10 winners in order are as follows:

 1) Pechanga Resort & Casino - Temecula, CA

 2) Mohegan Sun - Uncasville, Conn

 3) Foxwoods Resort Casino - Mashantucket, Conn

 4) L’Auberge Casino Resort - Lake Charles, LA

 5) Hard Rock Hotel & Casino - Biloxi, Miss 

 6) Harrah’s Resort Southern California - Valley Center, CA

 7) Borgata Hotel Casino & Spa - Atlantic City

 8) Red Rock Casino Resort & Spa - Las Vegas

 9) French Lick Resort - French Lick, IN

10) Thunder Valley Casino Resort - Lincoln, (northern) CA

Besides the top 10, which were determined by popular vote, the runner-up nominees include the following in alphabetical order: Aria Resort & Casino, Beau Rivage Resort & Casino, Bellagio, Caesars Palace Las Vegas, Cosmopolitan Las Vegas, Hard Rock Hotel & Casino Las Vegas, Mandalay Bay Resort & Casino, Mirage Hotel & Casino, Seminole Hard Rock Hotel & Casino, and Wynn Las Vegas. Did your favorite make the cut?

It appears from reading the top 20 listing that the critical criteria was not the looseness of the slots. It was more the attractiveness of the resort and its amenities - the fun and recreation to be had vacationing at these spots. Like Harrah's Lazy River feature, SoCal's only swim up bar. 

Pechanga held a $100,000 giveaway slot tournament July 22 to thank its loyal players for their support. If you get a chance to visit the Temecula, CA, area, stop by the resort/casino and see for yourself why it was the easy pick. The casino has over 3,000 slot machines, table games, entertainment, dining, golf, and 517 hotel rooms to make your visit an enjoyable one.

Bad News for Grandma and Other Gamblers on Social Security

Grandma might be in trouble with the government and not even know it. Her favorite gaming hobby might turn into a horror when she starts to draw Social Security each month. That could happen as early as age 62 if she opts not to wait for her full benefits at 66. Some people don’t even realize Social Security can be taxable. Not everyone makes enough other money to have to pay tax on those monthly payments. But for those who do, the IRS can tax up to 85% of their benefits. Combine that with her taxable gambling wins, and she might just have to rethink how much fun she can have in the casinos once those benefits begin.

Gambling is a favorite pastime of the geriatric crowd. Visit any casino in the late morning or early afternoon hours, and you’ll see banks of blue haired ladies and distinguished looking grey haired men playing the slots. The casinos are happy to have these older gamblers visit and spend their Social Security checks playing the games. They offer all kinds of incentives like free bus rides, and free play, and reduced-price buffets, and bingo and other entertainment for the over 60 crowd to get them in the door. Casinos like the older gamblers. The older gamblers like the casinos. The games are easy to play, and they sometimes get to win a little money. There are nice people to interact with socially, and it’s all more fun than vegging out in front of the TV all day. Too bad the government expects these players to keep track of what they win and pay tax on it.

The tax law is not very kind to its older taxpayers. Sure people over 65 get a higher standard deduction, but that’s about the only break they get. One aspect of taxes for older filers that really hurts sometimes is the possibility that they may have to pay tax on up to 85% of their Social Security benefits. Ouch! That hurts.

There are worksheets in Publication 915, in the 1040 instructions, and in mailings from SSA to determine how much of what SS recipients draw is taxable. I have a book which will be coming out soon on Gambling and Taxes that will go into all of it in detail. But I want to hit the highlights now for those who may have parents and grandparents who filed extensions this year and need to get started on their returns. This will not cover everything, because people on Social Security could have many other things complicating their tax returns: IRA and annuity distributions, working as consultants rather than employees, having income over the thresholds that causes a phaseout of itemized deductions and reduced exemption amounts, repayment of part of their benefits because they are still working and haven’t reached full retirement age, etc. Because we’re focusing on gambling income, we’ll leave all that for another day. We don’t want to go into such detail that we can’t see the forest for the trees! Just taxes on Social Security and gambling today.

It requires completing an 18 line worksheet to see how much of your Social Security income is taxable. But there’s a quick calculation you can make to see if you need to do the worksheet. It’s easy. You take half of the amount in box 5 on your (and your spouse’s) SSA form, add it to all the other income from the front page of your 1040 (plus tax exempt interest if you had any), and compare the sum to the base amount for your filing status. 

That base figure is $25,000 if single, head of household, or married filing separately and not living with your spouse at any time during the tax year. It is $32,000 if you are married filing jointly. And it is 0 if you are married filing separately and lived together at any time during the year. If half your Social Security and that other income exceeds these base figures, part of your Social Security will be taxable. If not, it will not be taxable. If the quick calculation is more than $44,000 for people married filing jointly or more than $34,000 for everybody else, the taxable portion may be up to 85% of your benefits. The worksheets in the instructions and Pub 915 will figure the exact amount for you.

Here’s an example of a hypothetical couple on Social Security to illustrate. We won’t work through the 18 line worksheet twice here, but I’ll give you the results. You can see the completed worksheets in the book when its available. Or you can print out your own worksheet now off the web to run these figures through. In this illustration the husband draws $21,000 Social Security and a $30,000 fully taxable pension. The wife draws $11,000 Social Security and a $5,000 taxable pension. Their only other income totals $1,000. Together they had $7,500 in gambling winnings and $8,000 in gambling losses. When  you work through the Social Security worksheet and the tax calculation with these figures, you will be shocked by the results. Here's what you will find.

(a) Without any gambling winnings, the couple would pay tax on $11,000 of their $32,000 SS benefits. With an additional $7,500 of gambling winnings (whether or not they can itemize and deduct any losses), they will pay tax on $19,175 of their SS benefits! That means instead of paying tax on 35% of their benefits, they are going to be paying tax on 60% of what they drew.

(b) This taxable Social Security is going to raise their Adjusted Gross Income (AGI) from $47,100 to $62,675. Higher AGI can cause a lot of problems for people who could lose many tax credits, deductions, and benefits above certain AGI thresholds. Some state tax issues too. We’ll ignore that now, but keep in mind there could be other problems for some filers. At a minimum they’ll be figuring federal tax on $15,575 more income — the $7,500 gambling winnings and the $8,075 additional Social Security that is taxed.

(c) Taking the standard deduction instead of itemizing means the $8,000 loss is deducted nowhere on their return. But most likely this couple won’t be able to itemize. Probably their house is paid for, or they have downsized into an apartment, and they don’t have enough deductions to exceed their $14,800 standard deduction.

(d) Subtracting the $14,800 standard deduction and two personal exemptions totaling $7,900 from their Adjusted Gross Income leaves this couple with $24,400 of taxable income to look up in the tax table in one case and $39,975 in the other.

(e) The tax on $24,400 in 2014 was $2,756. On $39,975 is was $5,089. So our couple is paying $2,333 more in federal taxes because of the way our tax laws are written. 

This is so unfair in so many ways. 

It is no wonder that many gamblers ignore reporting their gambling wins and losses when they aren’t reminded of them by getting a W2G. It’s no wonder that their tax preparers don’t want to probe too deeply into their elderly clients’ casino activities when they file the tax returns. They know the law isn’t fair to the elderly. Nobody wants to pay a tax that they don’t think is fair. (Nobody wants to pay tax. Period. But especially not an unfair one.)

Someone really should lobby Congress to rewrite these laws. Allowing netting of wins and losses at the end of the year would solve the whole problem. But we can’t change things, I’m afraid. Reform will never happen because of the revenue the government would lose changing the law. So, I guess we’ll just have to do the best we can to keep our parents and grandparents in compliance without digging too deeply into their finances and hope they still have enough money left after the big tax hit to have a little casino fun every now and then.

Making Money on YouTube

Are you one of the thousands of entrepreneurs who upload videos to YouTube each week hoping to make a little extra income monetizing your favorite hobby? Do you have dreams of turning that activity into a thriving business that could bring in enough money to live on? You’ve seen articles and ads about how much money is made by some Video Stars. Wouldn’t you like to earn a part of that too? Sure you would. But you might be surprised how little of the money earned from internet videos and ads on YouTube the creators actually get to keep. 

After my husband read my last blog entry about You/Tube and business taxes, he found an article on Yahoo which he shared with me. It focused on how little of the money these YouTube channels bring in that their creators actually get to keep. Joe found it interesting and thought those of you who read this and those of you who entertain us with slot videos might find it helpful too. You can compare your reality with what might possibly be internet fiction by the bloggers yourself. Read the August 3 article at http://finance.yahoo and draw your own conclusions.

If you are posting videos on line to make a little money from YouTube, you already know they are keeping a pretty big share of the income you generate. According to what we’re told, YouTube takes a 45% cut of any ad revenue earned by each of your videos you post. And that’s before taxes and your own operating and editing costs.  I have seen companies on line offering a 65-35 split if you sign with them, so a 45% rake doesn’t really surprise me too much. 

The income figures do surprise me, however. They seem inflated to me. I can’t believe videos generate  anything near the money the articles say these stars make. Not for practically all of you. YouTube’s top filmer called PewDiePie - I’ll call him PDP - supposedly earned $7.4 million last year according to Yahoo. But  Statsheep, a site that generates statistical estimates about YouTube channels, estimates that PDP actually earns even more. They say his earnings are closer to $10.5 million each year based on his recent traffic. Just for making jokes about video games!

How much does he get to keep?  Here’s their math.

Total Revenue: $10.5 million

After YouTube’s 45% rake:  $5.775 million

After taxes at 30% on his part: $4.0425 million

Net Income: Roughly $4 million.

Unbelievable! But before you buy a videocamera and quit your day job, consider what it costs to become a YouTube star. Turns out you can be one of the most famous people on the web and still barely get by. 

The Yahoo writer also ran the numbers on Olga Kay, another well know video star. You can also read more about her in a New York Times article “Chasing Their Star on YouTube.” Olga films self-deprecating monologues on female American life.  She has earned $100,000 to $300,000 in each of the last three years and has a million subscribers. She makes 20 videos a week, all of which are filled with ads through Google’s automated YouTube partners program. They say she gets about $7.60 per 1,000 ad views, down from $9.35 in 2012 according to Tube Mogul, which buys and sells video ads. Ads are not run on all YouTube videos. Articles claim a video creator will earn roughly $2,000 for every million views. (And then YouTube takes its 45% cut. And then IRS takes its cut of the remainder.)

Olga Kay has business expenses which she deducts. She claims to  spend $500 - $700  a week on editing costs. That figures out to be $25 - $35 per video. She must have to pay someone to do her editing for her. If she earns $100,000 a year, she might be looking at as little as $13,500 annually after YouTube’s cut, editing expenses, and taxes according to her numbers below. If she’s paying that much to have her vids edited, you guys who film slot games might want to consider branching out and making a business of editing other people’s films for a living as well. 

Here are Olga Kay’s numbers.

Total Revenus: $100,000

After You/Tube 45%: $55,000

Minus editing costs ($500 per week x 50 weeks): $25,000

After 30% taxes: $38,500

Net income: $13,500.

Jason Calacanis, a well-known Silicon Valley entrepreneur who was part of YouTube’s professional partners program said in the write-up that to make 10 videos he would spend $25,000 to $75,000 in costs before a dime was earned in advertising.  I can’t imagine it taking that much money, but what do I know! I guess music videos might cost a lot if they were well done and creative.

Is any of this anywhere close to what your YouTube channels earn you? Do any of these figures for income or expenses seem reasonable? I find it all very hard to believe.  And yet, I’ve met a personable young girl, the former lead singer of my son’s band in LA , who makes a lot of money on YouTube talking while she plays video games and such. She’s cute as a button and goes by the user name Misses Mae, and I’m sure she would be happy to have you visit her site and subscribe. According to  my son, she has been doing this for about 3 years. She said the first 100,000 subscribers threshold took her a long time to reach, but after she crossed that threshold, the numbers very quickly doubled and are still growing.

He also tells me YouTube has studios, one in Playa del Rey in Los Angeles, which are more or less a cross between cable access and studio production that some of their filmers use. The Young Turks even recorded their news program at Playa del Rey while their own studio was being built. Misses Mae YT doesn’t record in the YouTube studios, but for most filmers, as your numbers grow, so does your access to recording time in the YT studios.

How do you get your money when you post on line? I’ve been told that some filmers work directly with YouTube and are paid through AdSense which does not take a cut of your earnings or charge PayPal fees. Others work with Multi-Channel Networks. The MCN are middlemen who promote your channel (among other things.) YouTube/Google pays the Network which takes a cut anywhere between 20-40%, and deposits the remaining amount in the videographer’s PayPal account (minus fees.)  Which is the better way to go? I don’t know. Ask someone who does this to make a little money. Start a SlotFanatics thread to discuss it if you like. Their members should be people who know.

Well, OK, I have to confess, after reading these articles, I now realize that I need to modify my tax advice in the last blog. I had NO idea it cost so much to make these films. If you are paying $25-$35 a film like Olga Kay, you definitely DO need to deduct expenses on your Schedule C or C-EZ. Heck, you could even end up with a business loss if you have to pay that much in expenses, and you don’t have much in the way of subscribers or income. Maybe your loss could reduce your AGI and countract the inflated AGI problems caused by your gambling wins.

,

So, lets hit the business tax highlights in review once more. Your income will be reported to you and to IRS on a 1099-Misc form. The 1099-Misc you receive should have the fees you paid YouTube and/or your MCN subtracted already. If they haven’t been subtracted and the pre-fee amount is shown on the 1099, you should subtract what your business records show you paid in fees yourself as an expense on Schedule C or C-EZ. If you’ve been charged PayPal fees that haven’t been subtracted already, you should deduct them too. Remember to keep organized complete business records and receipts for everything you spend to earn this money. to back up your deductions. (But not the records of the cash you run through the machines gambling. You keep those records too, but you keep them in your gambling diary for Schedule A, not for Schedule C.)

I hope, you are all doing your own editing, but if not, deduct as a business expense what you pay to have your vids edited. And if you are really making big money - bigger than I suspected before - you might actually want to consider  taking  your other  business deductions as well even though it is a lot of work. Depreciate your camera and computer, and write off the editing software costs. Keep a mileage log for the business travel between casinos where you film and from your tax home (your usual place of business) to out of town locations where you have occasional business activity. For most of you it will be worth hiring a tax preparer if you are spending  that much money and generating that kind of income.

If you have a different experience with your YouTube business than my two articles describe, or if you have suggestions that would be helpful to other readers, feel free to comment here - or send me an email with your thoughts and ideas. I’m always eager to learn more from people who have first-hand knowledge of how it all works. And if you need help with the tax forms, I’m happy to help you there too if I can.

To close, let me give a very special “thank you” to a very special YouTuber who explained to me how MCNs and AdSense work!  I appreciate you very much.  :)

YouTube and Taxes

There are hundreds, no, thousands, of people who post videos on YouTube every year.  If you are reading this, you are probably one of them. One plus of engaging in this activity is that YouTube/Google will send you a check every now and then. They’ll give you a share of the income they generate running ads at the start of your videos. The amount you earn is determined by a secret formula based on the number of views, and likes, and subscriptions your films generate. What you might not have expected is that if those checks total $600 or more each year, YouTube/Google will also send you an IRS tax form called a 1099-Miscellaneous (1099-Misc) so you’ll know how much business income from filming and internet publishing you have earned. This is money you have to report when you file your tax return for that year. Bummer!  IRS takes the fun out of everything.

These payments from YouTube/Google are NOT gambling income. It doesn’t matter for your video filming business whether you won or lost or got a W2G or no form of any kind for any film you show the rest of us. Your gambling wins are reported on line 21 of your 1040, and your losses (up to the amount of your winnings) are deducted on Schedule A if you are able to itemize, just the same as they would be if you hadn’t ever recorded the film. This income is different. The amount reported on the 1099-Misc is NOT income from gambling. It is income from publishing films of your games on the internet. The business code you will be using is the one for information services which includes internet publishing: Code 519100. (You can find the business code for any business venture at the end of the Schedule C instructions.)

The payment you earn from YouTube/Google is reported as business income — not as gambling income — in the tax year YouTube/Google sends you the check. It is reported on Schedule C or C-EZ and is carried from that schedule to line 12 of your 1040. (And also to Schedule SE. - I’ll explain that later.)  

Some of you don’t want to think of posting on YouTube as a business. You don’t want to keep records. You just want to enjoy the activity. I’ve read threads on SlotFanatics saying as much.  Wise people, these YouTubers.

OK. That’s no problem. This doesn’t have to be hard. if that is how you feel, and you don’t want to keep records and deduct expenses of earning your YouTube checks, you don’t have to. (I wouldn’t either.) Use Schedule C-EZ instead of Schedule C. Report the amount from your 1099-Misc in Part II, line 1. Put 0 on line 2 for your total expenses. This difference from line 3 (which will be the same as line 1) goes from this form to line 12 of your 1040 (and to Schedule SE to calculate self-employment tax and the line 27 adjustment). That’s it. 

Except, of course, unless you have another self-employed activity that you earn money at. (IRS can never tell us anything without an “except” or an "unless" to complicate things!) In that case you have to file a Schedule C for each of them - not C-EZ. But if you have that problem, you probably also have an accountant doing all this for you.

If you don’t deduct any expenses, there is nothing to this. No record keeping requirements even, because, since you are not deducting your business expenses of filming, YouTube/Google has kept the only record you need, the record of the income they paid you.

Now, if you WANT to deduct expenses that your business incurred, that’s a different story. Everything between the $$$ is tax talk that most of you will want to ignore. Feel free to skip to the summary at the end.

$$$

Business expenses are deductible for your video filming business, but you must be very, very careful to keep detailed records if you are going to write off your filming expenses. And to do this correctly, you’ll be keeping these records for five years, even if you give up the business before then. 

I am not saying this will be easy. I’m not recommending you do this. I’m just saying it’s legal, and I’ll help you all I can. But believe me, you are NOT going to want to do this. Not with the amount of income your business generates. There are only three areas I can think of where you MIGHT have tax write offs: depreciating your filming equipment, MAYBE meeting the requirements for home office deductions, and MAYBE mileage write offs between casinos on the days you film. I’ll share some very basic tax information on all three items, but, be warned, you’ll need to study and learn a lot more if you decide to do this, or you should plan to pay a tax specialist to do it for you. (And that may cost you more than YouTube/Google paid you.)

Let’s look at depreciation first. What makes this so difficult is that the type of assets you use in this filming business — cameras for instance — cannot be written off in the year you purchase them like some things used in business can. Assets like video cameras fall in a class called listed property. Pull up Form 4562 and its instructions off of the IRS web site. Just looking at this form is going to make you want to forget the whole thing.

 Listed property is reported in Part V on the back of this form. Listed property is given special attention by IRS. The business assets in this group are ones frequently subject to abuse. They are  items bought for use in a business that are very attractive and desirable to own, and items that you might like to have for personal use as well as for your business: cars, computers, video cameras - business assets used for entertainment, recreation, and amusement. Things you might buy for yourself and try to write off as a business expense. Things that IRS agents are going to scrutinize more closely than less attractive assets such as filing cabinets and the like. That’s why they have you LIST these things so they can look for them on your return in other years…unlike things like office furniture and backhoes that all get lumped together because there is little chance of abuse.

The next thing to notice about listed property is that you have to have records of how much of the use of this asset was for business and how much was personal use. If your business use is more than 50% (and will remain more than 50% over the entire 5 year recovery period), you’ll be using line 26. If it is less than 50% business use, you’ll be using line 27 — and in addition, you must recover your cost through straight line depreciation - not any accelerated method - if you might use that asset less than 50% for business any year if the recovery period. Discussion of various methods of depreciation and recovery periods is a whole other topic to cause you headaches.

Did I even tell you what a recovery period is? It’s how long the IRS expects you to be able to use an item in your business. This time period is different for different items - there’s a chart at the end of Pub 946 to give you the recovery periods of common business assets. The time periods are not even realistic sometimes. Who is going to use a computer for five years in a business in this day and age! But it is what it, is and you have to use the methods and recovery periods IRS says to use.

You probably have no idea what I just said. I’ve probably lost you already, and we’ve just started. I’m sorry this is so difficult. Feel free to decide to change your mind about taking business deductions at any time during this discussion! No one would fault you at all.

There are tables in the depreciation publications 946 and 583 to tell you what percent of the cost of your business asset can be written off each year of its recovery period depending on the depreciation method you are using. To make things even harder, you may be getting only a half year or a quarter year’s write off the first year depending on what month you put your camera in service in your business.  This is very, very complicated stuff. I cannot teach you depreciation in a computer blog - it would take a book, maybe a couple of books,  to do this right. Even then you might not understand. Look at the instructions to the form 4562. If it is gobbledygook to you, I’d advise you to just forget about deducting depreciation expenses. You probably don’t have that much income from YouTube/Google to offset anyway.  

The second deduction I want to just touch on and discourage you from taking is the home office deduction. Some people who run a business out of their home do it in such a way that they can write off some household expenses that are normally personal nondeductible expenses as business ones. To do this, their home office must be used exclusively and regularly as their principal place of business for that business. This allows them to deduct a portion of certain household expenses, and, of more value, to deduct travel expenses from the home office where they do their editing to the place they do their filming. 

The requirements for this write off are also very, very strict, and ANY personal use of that office at all causes it to not  qualify. If you so much as watch a friend’s YouTube video or a movie on Netflix in the office where you do your editing, you have not used that office EXCLUSIVELY for business, and the deductions will not be allowed if you are audited. Warning: businesses with home office expenses are frequently chosen for audit. You also get into issues of depreciation here too. If you use your computer in your business in your office, you find yourself in a catch 22 situation. If your depreciation schedule for your computer doesn’t show  100% business use (which is NOT going to happen — don’t be checking email or Facebook on it if you plan to say it does) you have automatically made your home office disqualify. If you own your home you normally deduct mortgage interest and real estate taxes on Schedule A. You’ll find with a qualifying home office you are expected to calculate the percentage of your home taken up by the office and allocate those deductions based on square footage between Schedules A and C. You are also allowed depreciation deductions that complicate your return if you ever sell your home. If you’re interested in learning more about home office deductions, read IRS publication 587. I think you’ll find this too is more trouble than it is worth.

The third write off is vehicle expense deduction. Vehicles used in business can be depreciated — but believe me, you don’t want to get into that. There is also a standard mileage rate than can be used in place of the cost of the car and all other expenses of operating it for business. (Things like gasoline, repairs, etc.) The standard mileage rate for this year (2015) is 57.5 cents per mile, up from 56 cents per mile in 2014. It goes up slightly every year, just like our living expenses do.

You are not allowed to deduct mileage to and from your principal place of business from your home on your tax return. Commuting expenses are not deductible. If you have more than one place of business you are not supposed to deduct mileage between your home and first stop nor between your last stop and home. However, if you have more than one place of business, you can deduct mileage for your trip between these two sites in the same day. The reason some people try to deduct business in the home expenses is really to get this mileage write off by conducting some business in that home office before driving to the other location where they conduct business activities. They sometimes forget minimal business use does't count. You office has to be your main place of business, not just another one.

I'll go out on a limb and opine that It appears to me that travel between two casinos where you film videos in the same day could be justified as a business expense, but not the travel from or back to your home. However, I am not a CPA or an enrolled agent, and the law does not allow me to give tax advice, so please don’t say I told you to do this. Read the IRS literature on business expenses, discuss the subject with your paid preparer, file as honestly as you can, and remember ultimately YOU are responsible for whatever you put on your return. Regardless of who advised you that you could or could not do something!  My advice, for what it is worth which is less than nothing, is forget about all the headaches this will cause and just report the income and don't mess with expenses. But don’t say I’m the one who told you so.

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Back to the basics. We do need to talk just a little bit about Self-employment tax since both Schedule C and Schedule CEZ refer you to Schedule SE.  Self-employment tax is really Social Security and Medicare tax. When you work for someone as an employee, half of this tax is paid by your employer and half is withheld from your pay. (It’s frequently called FICA from the Federal Insurance Contribution Act.) When you work for yourself or when you are paid as a subcontractor, you pay both parts yourself. To make it easier to pay in, it is calculated on Schedule SE of your 1040 and carried to line 57  in the other taxes section.  You are given an adjustment for half the tax on line 27 since you are paying both parts.

There are two schedule C-EZs - a short one on the front of the form which almost everyone does and a long one on the back for special cases. There’s a flow chart to tell you which one to use. 

(There are two forms because there are special tax provisions in the law for certain categories of filers such as ministers and Christian Science practitioners, some members of certain religious orders, and certain church employees. There are also special calculations for people who have exceeded the Social Security threshold of $117,700. (This is the 2014 amount - it changes each year). Certain people with unreported tip income can’t use the simpler form. Also there is an optional method for people who don’t have enough Social Security coverage who are willing to pay in more - even with losses - to build up their earnings record. None of these will likely apply to you. Almost everyone will use the short Schedule SE.)

You do the arithmetic on the SE form to get the amount of self-employment tax to put on line 57 and to calculate the adjustment for line 27. Self employment tax gets added to your income tax when you file your return.

So, in summary, here's all you really need to know, Filming slot videos for YouTube is a business if you are getting paid to do it, but it is not a gambling one. Gambling wins and losses don’t matter on your filming business schedule. The simplest way to handle everything for taxes is report the figure from the  YouTube/Google statement on Schedule C-EZ and line 12 of your 1040. Figure your self-employment tax on the short Schedule SE for line 57 and the adjustment on line 27. And don’t worry about record keeping for filming and editing expenses if you aren’t deducting expenses.  

Report the wins and losses from your wagering the same way you always have. And do keep a record of your gambling wins and losses in a simple, daily gambling diary of some sort especially if you are able to itemize. Your casino win/loss statements by themselves will not be enough. They are supporting documents. Even the print out from the casino says you can’t rely solely on them. Ignore your gambling diary and your win/loss statements for your filming business — they’re records for your personal casual gambling, not for your business.  And if you need help with any of this, I’ll try to answer your questions if I can .