Alabama Tax Tribunal Judge Jeff Patterson recently overturned a tax assessment of over $75 million by the Alabama Department of Revenue against Greenetrack, Inc.
The assessment stemmed from a March 31, 2009 audit report by Revenue examiners and covered January 2004 – December 2008.
Following the conclusion of the audit, Revenue entered a final assessment of $75,511,338.17 in unpaid sales tax and $746,292.01 in unpaid consumer’s use tax. Both amounts included interest accrued.
At Greenetrack’s facility in Greene County, there has been pari-mutuel wagering on horse and dog racing conducted over the years.
By statute, these activities are exempt from paying sales and consumer use tax.
Instead, Act 1975-376 imposed various license fees and taxes under the jurisdiction of the Greene County Racing Commission, which governs the race wagering at Greenetrack. § 16 of that act stated, “[T]he license fees, commissions, and excise taxes imposed herein shall be in lieu of all license, excise, and occupational taxes to the State of Alabama …”
However, Greenetrack has also been known to conduct bingo gaming at its facility.
Amendment 743, passed in 2003, governs the legality of bingo in Greene County, including the relevant rules concerning licensing and operation.
In its audit report, Revenue examiners essentially contended that the tax exemption created previously was only meant to cover legal racing activities at Greenetrack. Revenue also argued that Greenetrack was breaking the law when it came to how it was running bingo operations.
About the facility’s bingo operations, examiners wrote, “[I]t is evident that the nonprofit organizations have illegally entered into contracts with Greenetrack, Inc., a for-profit corporation, to operate the bingo facility. The nonprofit organizations receive only a token amount of the immense revenues generated by the bingo operation. Since the bingo operation at Greenetrack is not being operated in compliance with Amendment 743, the gross receipts derived from the bingo operation are subject to sales tax.”
“The basis for the assessment of tax due, results from an illegal operation of bingo at the Greenetrack facility. Greenetrack, Inc. owes sales tax on the total wagers derived from the bingo operation,” the audit concluded.
Greenetrack subsequently appealed this assessment, arguing it was exempt for all revenues, not just pari-mutuel wagering on racing.
Oral arguments before the Alabama Tax Tribunal were held September 20, 2018.
The opinion and final order by the tribunal judge, issued August 30, 2019, stated, “The Revenue Department argues that the legislature intended for the exemption to apply only to the Taxpayer’s dog-racing activities and not to its subsequent bingo operations.”
“The Taxpayer (Greenetrack) argues that the exemption is limited only by the words used by the legislature in § 16 and in subsequent legislative enactments,” the opinion said.
Revenue further argued, “To rule with the taxpayer would in essence state that the intent of the legislature was to allow for operations such as Greenetrack to conduct a multi-million (if not billion) dollar operation completely tax-free even if it does not serve the charitable purpose for which [the] legislature created it. Had the taxpayer felt this result was so clear under statutory law, surely it would not have waited almost 10 years through several legal proceedings before making this outlandish argument when a simple exemption argument could have put the matter to rest years ago.”
However, in the end, the judge did indeed side with Greenetrack.
“The legislature exempted the Taxpayer from the taxes at issue. Thus, the final assessments are void,” Judge Patterson ruled.
The judge also said that “if the outcome in this appeal seems ‘outlandish,’ the remedy rests with the legislative branch that enacted the law upon which this ruling is based.”
Read the full opinion and final order here.
What’s next?
The State of Alabama has 30 days from the issuance of this tribunal final order to appeal to circuit court.
In a statement to Yellowhammer News, Department of Revenue spokesperson Amanda Collier advised, “The department is reviewing the decision and evaluating options.”
Yellowhammer News was informed this week that the attorney general’s office has been involved in this review and evaluation process.
This case could have significant ramifications when it comes to potentially lost tax revenues for the state.
A new radio ad playing in the Montgomery market also contends that exempting Greenetrack from sales tax but not doing the same for other non-racing bingo facilities in the same county essentially means the government is picking winners (or one winner) and losers.
It was not immediately clear who is behind this radio ad, as no disclaimer accompanies the spot.
Listen:
Bingo background:
Greenetrack, on its actively utilized Facebook page, self-identifies itself as a “casino” and “bingo hall.”
A more in-depth description identifies that “gaming machines” are being operated at the facility.
The description reads, “Searching for the best place for a fun night in Eutaw? Greenetrack Inc is a gaming complex in Eutaw, offering the best in entertainment and gaming. Come enjoy all of the different games, amenities and prizes we have to offer at our complex. You can bet on different greyhound and thoroughbred horse races, play some gaming machines or just enjoy the full bar and grill! You’ll have a wonderful time with your friends and family at Greenetrack. Race on down to our gaming complex today and start getting paid to have fun.”
Greenetrack’s Facebook cover photo appears to show examples of “gaming machines” at the facility.
As of 1:00 a.m. Wednesday, Greenetrack’s most recent post, made approximately one hour prior, congratulated “another lucky jackpot winner.”
Videos and other pictures posted on Greenetrack’s Facebook page detail other types of gaming conducted at the facility, including on “WhiteSands gaming machines.”
Electronic bingo operations have been ruled to be illegal in the state by the Alabama Supreme Court.
The attorney general’s office is still currently embroiled in a civil lawsuit filed in 2017 against Greenetrack and other Greene County operators allegedly conducting illegal electronic bingo activities.
Attorney General Steve Marshall has said the ultimate goal of the lawsuit, specifically relating to Greenetrack, is to shut the facility’s electronic bingo operations down permanently.
“It is the responsibility of the Attorney General to ensure that Alabama’s laws are enforced, including those laws that prohibit illegal gambling,” Marshall explained at the time of the lawsuit being filed. “Through multiple rulings in recent years, the Alabama Supreme Court has made it abundantly clear that electronic bingo and the use of slot machines are illegal in all Alabama counties.”
Sean Ross is the editor of Yellowhammer News. You can follow him on Twitter @sean_yhn
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