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Court sides with racinos in tax dispute with state

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A federal bankruptcy court has sided with two Indiana racinos in a dispute over their tax burdens, a ruling that could reduce the total amount they pay into state coffers by as much as $30 million per year.

In his ruling Wednesday in U.S. bankruptcy court in Delaware, Judge Brendan Linehan Shannon agreed with Indiana Live’s attorneys that the state is unfairly taxing the Shelbyville racetrack and casino on money it doesn’t get to keep. Hoosier Park, the state’s other racino in Anderson that recently emerged from bankruptcy, joined in the case in August and also will reap the benefit of the ruling.

Indiana Live, which is in the midst of Chapter 11 bankruptcy reorganization, appealed to the court in late July to consider whether the Indiana Department of Revenue is correctly interpreting state tax law.

The racinos have to set aside 15 percent of their revenue in horse-industry trust accounts that go toward purse money and care for older horses. Some of the money also goes toward tobacco cessation and, if it exceeds a state-mandated cap, a portion goes back to the state’s general fund. The racinos have been paying taxes on that portion of their revenue — a policy Indiana Live contends is unfair.

In a 27-page ruling, Shannon argued that Indiana Live is not subject to taxation on that 15 percent because the racino is a “mere conduit” and does not control the money.

“The debtor merely collects the funds and passes them along, and thus they are not included in the debtor’s income,” Shannon wrote. “Because the Graduated Tax is measured by the debtor’s income, the [15 percent] cannot be included in that tax.”

In its initial appeal to the court, Indiana Live attorneys projected that it could save it about $15 million annually in taxes, a figure that would be doubled if applied to both racinos.

“We are pleased with the court’s decision and are gratified that the correct legal result was reached,” David Suess, a Bose, McKinney & Evans attorney representing Indiana Live, wrote in an email.

It’s not clear whether the state will appeal the decision. An Indiana Department of Revenue spokesman said staffers would review the ruling Thursday.
 

This story originally ran in the Oct. 27, 2011, IBJ Daily, a sister publication to Indiana Lawyer.

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  1. Such things are no more elections than those in the late, unlamented Soviet Union.

  2. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  3. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  4. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  5. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

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