Justia Gaming Law Opinion Summaries

The case involves two casino operators, PNK (Baton Rouge) Partnership, PNK Development 8 LLC, PNK Development 9 LLC, and Centroplex Centre Convention Hotel, LLC, who incentivize their patrons with rewards, including complimentary hotel stays. The City of Baton Rouge/Parish of East Baton Rouge Department of Finance and Linda Hunt, its director, discovered through an audit that the operators had not remitted state and local taxes associated with these complimentary stays for several years. The City argued that the operators needed to pay these taxes, while the operators presented various arguments as to why they did not. The City filed a lawsuit in state court, which the operators removed to federal court on diversity jurisdiction grounds.The operators' removal of the case to federal court was challenged by the City, which argued that the tax abstention doctrine (TAD) warranted abstention in this case. The United States District Court for the Middle District of Louisiana agreed with the City, finding that all five TAD factors favored abstention: Louisiana's wide regulatory latitude over its taxation structure, the lack of heightened federal court scrutiny required by the operators' due process rights invocation, the potential for the operators to seek an improved competitive position in the federal court system, the greater familiarity of Louisiana courts with the state's tax regime and legislative intent, and the constraints on remedies available in federal court due to the Tax Injunction Act.The United States Court of Appeals for the Fifth Circuit affirmed the District Court's decision. The Appeals Court found that the District Court had correctly applied the TAD and had not abused its discretion in deciding to abstain. The Appeals Court agreed that all five TAD factors favored abstention and that any doubt about the propriety of removal should be resolved in favor of remand. View "City of Baton Rouge v. PNK" on Justia Law

The case involves two casino operators, PNK (Baton Rouge) Partnership, PNK Development 8 LLC, PNK Development 9 LLC, and Centroplex Centre Convention Hotel, LLC, who incentivize their patrons with rewards, including complimentary hotel stays. The City of Baton Rouge/Parish of East Baton Rouge Department of Finance and its director, Linda Hunt, discovered that the operators had not remitted state and local taxes associated with these complimentary stays for several years. The City argued that the operators needed to pay these taxes, while the operators put forth various arguments as to why they did not. The City filed a suit in state court, which the operators removed to federal court on diversity jurisdiction.The operators' cases were initially heard in the United States District Court for the Middle District of Louisiana. The City filed a Motion to Remand, arguing that the tax abstention doctrine (TAD), as put forth in Levin v. Commerce Energy, Inc., warranted abstention. The District Court agreed with the City, stating that all five TAD factors favored abstention: Louisiana's wide regulatory latitude over its taxation structure, the lack of heightened federal court scrutiny required for the operators' due process rights under the Louisiana Constitution, the potential for the operators to seek an improved competitive position in the federal court system, the familiarity of Louisiana courts with the state's tax regime and legislative intent, and the constraints of the Tax Injunction Act on remedies available in federal court.The case was then reviewed by the United States Court of Appeals for the Fifth Circuit. The court affirmed the District Court's decision, agreeing that the TAD applied and that all five factors favored abstention. The court concluded that the District Court's decision to abstain was within its discretion. View "City of Baton Rouge v. Centroplex Centre Convention Hotel, LLC" on Justia Law

In 2014, Salvatore Groppo pleaded guilty to aiding and abetting the transmission of wagering information as a "sub-bookie" in an unlawful international sports gambling enterprise. He was sentenced to five years' probation, 200 hours of community service, a $3,000 fine, and a $100 special assessment. In 2022, Groppo moved to expunge his conviction, seeking relief from a potential tax liability of over $100,000 on his sports wagering activity. He argued that the tax liability was disproportionate to his relatively minor role in the criminal enterprise.The district court denied Groppo's motion to expunge his conviction. The court reasoned that expungement of a conviction is only available if the conviction itself was unlawful or otherwise invalid. The court also stated that the IRS's imposition of an excise tax does not provide grounds for relief as 'government misconduct' that would warrant expungement.On appeal, the United States Court of Appeals for the Ninth Circuit affirmed the district court's decision. The appellate court held that because Groppo alleged neither an unlawful arrest or conviction nor a clerical error, the district court correctly determined that it did not have ancillary jurisdiction to grant the motion to expunge. The court explained that a district court is powerless to expunge a valid arrest and conviction solely for equitable considerations, including alleged misconduct by the IRS. View "USA V. GROPPO" on Justia Law

The Georgia Supreme Court granted certiorari in this case to decide whether revenue generated from the lease of a bona fide coin operated amusement machine (“COAM”) qualified as “gross revenues” exempt from taxation under OCGA § 48-8-3 (43). Funvestment Group, LLC, the lessee of the COAMs at issue and the owner of the location where the COAMs were available for play, argued that revenues generated from the lease of COAMs were considered “gross revenues” exempt from sales and use tax. The Court of Appeals concluded that the subject lease revenues were not “gross revenues” and that the exemption only applied to money inserted into COAMs for play. The Supreme Court concluded the Court of Appeals erred in reaching this conclusion, and thus reversed the Court of Appeals' judgment. View "Funvestment Group, LLC v. Crittenden" on Justia Law

The Eighth Circuit reviewed a case for the second time regarding “whether a South Dakota tax on nonmember activity on the Flandreau Indian Reservation (the Reservation) in Moody County, South Dakota is preempted by federal law. On remand, and after a six-day video bench trial, the district court entered judgment in favor of the Tribe, concluding again that federal law preempts the imposition of the tax.   The Eighth Circuit reversed and remanded. The court explained that in light of guideposts from the Supreme Court, even with the evidence that the district court heard at trial, the court cannot conclude that the federal regulation in IGRA regarding casino construction is extensive. The court reasoned that even with a more factually developed record than the court considered on summary judgment, the Bracker balancing test does not weigh in favor of preemption under IGRA because the extent of federal regulation over casino construction on tribal land is minimal, the impact of the excise tax on the tribal interests is minimal, and the State has a strong interest in raising revenue to provide essential government services to its citizens, including tribal members. The district court thus erroneously entered judgment in favor of the Tribe based on IGRA’s preemption of the excise tax. View "Flandreau Santee Sioux Tribe v. Michael Houdyshell" on Justia Law

In 2003, the Alabama Legislature and the citizens of Greene County voted to allow nonprofit organizations in that county to operate bingo games for fundraising purposes. Greenetrack, Inc. ("Greenetrack"), which was not a nonprofit organization, almost immediately began offering live and electronic bingo games at its gambling facility. From 2004 to 2008, Greenetrack reaped vast profits under the guise that its whole casino-style bingo operation was constantly being leased and operated by a revolving slate of local nonprofit organizations, whose nominal role earned them a tiny fraction of the bingo proceeds. Eventually, the Alabama Department of Revenue ("the Department") audited Greenetrack, found that its bingo activities were illegal, and concluded that it owed over $76 million in unpaid taxes and interest. Following a decade of litigation, the Alabama Tax Tribunal voided the assessed taxes on the threshold ground that Greenetrack's bingo business (regardless of its legality) was tax-immune under a statute governing Greenetrack's status as a licensed operator of dog races. The Department appealed, and the Alabama Supreme Court reversed, rejecting the statutory analysis offered by the Tax Tribunal and circuit court. Judgment was rendered in favor of the Department. View "Alabama Department of Revenue v. Greenetrack, Inc." on Justia Law

Appellee Greenwood Gaming & Entertainment Inc. (“Greenwood”) operated Parx Casino (“Parx”), located in Bensalem, Pennsylvania. During 2014, as part of its efforts to encourage slot machine and table game play, Greenwood distributed to patrons of Parx who played its slot machines and table games various “promotions, giveaways and direct player development:” items given away included cash, department store gift cards, and items of personal property. Parx also gave away tickets to attend live concerts and entertainment performances. In 2016, Greenwood filed a petition for refund with the Board of Appeals of the Department of Revenue (“Board of Appeals”) for the calendar year 2014, contending that it was entitled under Section 1103 of the Pennsylvania Gaming Act to exclude from the taxable revenue attributable to its table games and slot machines the value of all cash and personal property it distributed to the players of those games. The Pennsylvania Supreme Court concluded that concert tickets were not services within the meaning of Section 1103, and so were excludible from these taxable revenues. View "Greenwood Gaming v. Pennsylvania" on Justia Law

After taxpayers filed suit challenging the IRS's deficiency findings and penalties, the tax court sustained the deficiency determinations but rejected the accuracy-related penalties. In this case, the Miccosukee Tribe shared profits from its casino with Tribe members and encouraged its members to hide their payments from the IRS. The taxpayers here followed the Tribe's advice, and they are now subject to hundreds of thousands of dollars in tax deficiencies.The Eleventh Circuit affirmed the tax court's judgment and rejected taxpayers' assertion that any taxes are barred by the Miccosukee Settlement Act that exempted an earlier land transfer from taxation. Even if the court interpreted the Act as providing an indefinite tax exemption for the "lands" conveyed under it or the agreement, the casino revenues still do not fit the bill because the casino's land was not conveyed under either the Act or the agreement. Furthermore, an exemption for "lands" only exempts income "derived directly" from those lands, and this court has already held that casino revenues do "not derive directly from the land." The court also rejected taxpayers' assertion that the payments are merely nontaxable lease payments from the casino, citing factual and legal problems. Rather, the court concluded that the payments are taxable income. View "Clay v. Commissioner of Internal Revenue" on Justia Law

HWCC-Tunica, LLC, and BSLO, LLC, had casino members’ rewards programs that allowed members to earn entries into random computerized drawings to win prizes. In 2014, after recalculating their gross revenue and deducting the costs of prizes from their rewards programs’ drawings, HWCC and BSLO filed individual refund claims for the tax period of October 1, 2011, through August 31, 2014. The Mississippi Department of Revenue (MDOR) denied the refund claims in 2015. HWCC and BSLO appealed, and MDOR and the Mississippi Gaming Commission (MGC) filed a joint motion for summary judgment, arguing the plain language of Mississippi Code Section 75-76-193 (Rev. 2016) does not allow a casino to deduct the cost of prizes purchased for a rewards program’s drawings because “these promotional giveaways are not the result of ‘a legitimate wager’ as used in [Mississippi Code Section] 75-76-193.” After a hearing on the motion, the chancellor determined that Section 75-76-193 does not allow HWCC and BSLO to deduct the cost of the prizes and that there were no genuine issues of material fact. After review, the Mississippi Supreme Court found the chancellor erred by giving deference to the MDOR’s and the MGC’s interpretations of Code Section 75-76-193. That error notwithstanding, the Supreme Court found the chancellor reached the right conclusion: that no genuine issues of material fact existed. Accordingly, the Supreme Court affirmed the chancellor’s grant of summary judgment. View "HWCC-Tunica, Inc. v. Mississippi Dept. of Revenue" on Justia Law

The Eighth Circuit held that the Indian Gaming Regulatory Act does not preempt the imposition of statewide tax on the gross receipts of a nonmember contractor for services performed in renovating and expanding the Tribe's gaming casino located on the Reservation. The court reversed the district court's grant of summary judgment for the Tribe and held that the Tribe has failed to show that the tax has more than a de minimis financial impact on federal and tribal interests. Furthermore, the State's legitimate interests in raising revenues for essential government programs that benefit the nonmember contractor-taxpayer in this case, as well as its interest in being able to apply its generally applicable contractor excise tax throughout the State, were sufficient to justify imposing the excise tax on the construction services performed on the Casino's realty. Finally, the court granted the State's motion to dismiss the State Treasurer and remanded for further proceedings. View "Flandreau Santee Sioux Tribe v. Haeder" on Justia Law