A licensing rule that allows casino operators to reduce their tax burden by holding up to three separate licenses for operations that could be grouped in contiguous buildings or even under one roof, was reviewed by Colorado gaming regulators at the state’s Limited Gaming Control meeting yesterday.

The rule allows some operators to avoid the state’s graduated gaming tax, which rises with revenues. In Cripple Creek, for instance, 10 of the town’s 14 casinos benefit from the rule, which is estimated to have cost the state $4.8 million in 2010.

Regulators are also considering the argument that single-licensed operators who pay the graduated tax are competitively disadvantaged by the rule, effectively subsidizing those who qualify for the loophole. The Colorado Gaming Association, on the other hand, argues that operator business models and loan covenants have been structured around the rule, and to change it would cause a reduction in gaming devices and jobs, damaging the local economy and costing the state even more money.

According to the Denver Post, Colorado Gaming Association president Michael Smith said multiple licensing has spurred gaming investments in the state and changing the policy would be unfair to operators that expanded under the established rules. The Post also reported the following exchange between Smith and Robert Webb, chairman of the Commission.

"Wouldn't you readily admit that the multiple licenses convey a financial benefit on the large casino that has three licenses versus the large casino that has one?" Webb asked.

"I would agree that it does convey a tax benefit," Smith responded.

"On that basis, do you believe that's appropriate?" Webb asked.

"I don't believe it's unfair given the history of gaming in Colorado," Smith said.

The issue was considered four hours at the October 20 meeting and will be revisited at the Commission’s next meeting on November 17.