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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. OK, now do something about this preverted anacronism

  2. William Hartley prosecutor of Wabash county constantly violates people rights. Withholds statement's, is bias towards certain people. His actions have ruined lives and families. In this county you question him or go out of town for a lawyer,he finds a way to make things worse for you. Unfair,biased and crooked.

  3. why is the State trying to play GOD? Automatic sealing of a record is immoral. People should have the right to decide how to handle a record. the state is playing GOD. I have searched for decades, then you want me to pay someone a huge price to contact my son. THIS is extortion and gestapo control. OPEN THE RECORDS NOW. OPEN THE RECORDS NOW. OPEN THE RECORDS NOW.

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  5. Out here in Kansas, where I now work as a government attorney, we are nearing the end of a process that could have relevance in this matter: "Senate Bill 45 would allow any adult otherwise able to possess a handgun under state and federal laws to carry that gun concealed as a matter of course without a permit. This move, commonly called constitutional carry, would elevate the state to the same club that Vermont, Arizona, Alaska and Wyoming have joined in the past generation." More reading here: http://www.guns.com/2015/03/18/kansas-house-panel-goes-all-in-on-constitutional-carry-measure/ Time to man up, Hoosiers. (And I do not mean that in a sexist way.)

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