By Melissa Daniels | PA Independent
HARRISBURG — While lawmakers continue to raise concerns with the state’s process to privatize the Pennsylvania Lottery, one state senator is calling out the bidding company for potential abuse of tax strategy through the “Delaware Loophole.”
But the state said any potential agreement to privatize the lottery includes requirements to pay Pennsylvania taxes.
State Sen. Christine Tartaglione, D-Philadelphia, said she wants to know why the sole bidding company, Camelot Global Services PA LLC, registered an address in Delaware on Nov. 13. That address — 1209 North Orange St. in Wilmington — is home to 6,500 companies, many of which are considered “shell” companies, according to a news release from Tartaglione.
Delaware has no corporate income tax, whereas Pennsylvania’s is nearly 10 percent.
That business registration was filed one week before the state announced Camelot sent in a priced bid.
“More than a year ago, in response to questions about the notorious Delaware Loophole, you assured my colleagues and I that the Department of Revenue was doing everything it could to ensure that companies doing business in Pennsylvania are paying their fair share of taxes,” Tartaglione wrote in a letter to Secretary of Revenue Dan Meuser. “The building at 1209 N. Orange Street in Wilmington is home to more than 6,500 companies, yet has only has 35 parking spaces.”
Tartaglione’s observations come as a growing number of Democrats, including Auditor General-elect Eugene DePasquale, are urging Gov. Tom Corbett’s administration to slow down the privatization process. The state said it is seeking a 20-year base contract with a private manager who can boost PA Lottery profits.
Camelot, which runs the National Lottery in the United Kingdom, was the only company that submitted a bid.
The state said it is building special requirements into its arrangement with a potential private manager.
Elizabeth Brassell, press secretary for the Department of Revenue, said in an email to PA Independent that the contract a private manager would sign includes specific requirements to ensure a presence in Pennsylvania both physically and fiscally — regardless of which state the manager is incorporated.
“The manager must conduct substantially all of the services within Pennsylvania, and 80 percent of the hours worked, 80 percent of the employees and 80 percent of contractors and subcontractors must be in PA,” Brassell wrote.
The private manger also will be subject to all Pennsylvania taxes including income tax.
The state knew it would have an international pool of lottery experts involved in the process, Brassell said.
The state’s taxation terms are spelled out in the agreement’s terms and conditions, available for download on the Department of Revenue website.
Pennsylvania has the sixth largest lottery in the United States by sales. Its profits fund programs for senior like free transit, rent and property tax rebates, senior centers and prescription drug assistance programs.