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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. From his recent appearance on WRTV to this story here, Frank is everywhere. Couldn't happen to a nicer guy, although he should stop using Eric Schnauffer for his 7th Circuit briefs. They're not THAT hard.

  2. They learn our language prior to coming here. My grandparents who came over on the boat, had to learn English and become familiarize with Americas customs and culture. They are in our land now, speak ENGLISH!!

  3. @ Rebecca D Fell, I am very sorry for your loss. I think it gives the family solace and a bit of closure to go to a road side memorial. Those that oppose them probably did not experience the loss of a child or a loved one.

  4. If it were your child that died maybe you'd be more understanding. Most of us don't have graves to visit. My son was killed on a state road and I will be putting up a memorial where he died. It gives us a sense of peace to be at the location he took his last breath. Some people should be more understanding of that.

  5. Can we please take notice of the connection between the declining state of families across the United States and the RISE OF CPS INVOLVEMENT??? They call themselves "advocates" for "children's rights", however, statistics show those children whom are taken from, even NEGLIGENT homes are LESS likely to become successful, independent adults!!! Not to mention the undeniable lack of respect and lack of responsibility of the children being raised today vs the way we were raised 20 years ago, when families still existed. I was born in 1981 and I didn't even ever hear the term "CPS", in fact, I didn't even know they existed until about ten years ago... Now our children have disagreements between friends and they actually THREATEN EACH OTHER WITH, "I'll call CPS" or "I'll have [my parent] (usually singular) call CPS"!!!! And the truth is, no parent is perfect and we all have flaws and make mistakes, but it is RIGHTFULLY OURS - BY THE CONSTITUTION OF THIS GREAT NATION - to be imperfect. Let's take a good look at what kind of parenting those that are stealing our children are doing, what kind of adults are they producing? WHAT ACTUALLY HAPPENS TO THE CHILDREN THAT HAVE BEEN RIPPED FROM THEIR FAMILY AND THAT CHILD'S SUCCESS - or otherwise - AS AN ADULT.....

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