Owner of Lawrenceburg casino must pay more Indiana taxes, court rules

The Indiana Lawyer

The Pennsylvania-based company that operates Hollywood Casino in Lawrenceburg must pay additional Indiana taxes accumulated over a three-year period, the Indiana Tax Court ruled Wednesday.

The court granted summary judgment in favor of the Indiana Department of Revenue in a lawsuit filed by PENN Entertainment Inc., f/k/a Penn National Gaming Inc.

On its 2015, 2016, and 2017 Indiana adjusted gross income tax returns, PENN reported the value of income taxes it had paid in other states.

PENN had deducted those payments from its federal income tax returns and added the value of those taxes back to its Indiana tax base.

The Indiana Department of Revenue audited PENN’s AGIT returns for the years at issue. Afterwards, the department determined certain other payments by PENN to other state governments also needed to be added back to the calculation of PENN’s Indiana tax base.

As a result, the department determined PENN owed additional taxes for 2015, 2016, and 2017, plus interest and penalties.

PENN protested the department’s proposed assessments of additional taxes, the amount of which is not spelled out in the court ruling.

Following an administrative hearing, the department eliminated the assessment of penalties but otherwise denied PENN’s protest after concluding that PENN should have included in its Indiana tax base the value of certain payments made to other state governments, as required by Indiana Code § 6-3-1-3.5(b).

PENN requested a rehearing, which the department denied.

PENN challenged the ruling and argued it does not have to add back those payments.

It claimed the department misapplied the governing statute.  PENN further argued that adding back the value of the out-of-state payments violates its rights under the United States Constitution and the Indiana Constitution.

The Indiana Tax Court denied PENN’s motion for summary judgment and granted the department’s motion for summary judgment.

Special Judge John Baker wrote the opinion for the court.

Baker noted that, for business entities such as PENN, Indiana defines “adjusted gross income” the same as federal “taxable income” as defined in Section 63 of the Internal Revenue Code with certain adjustments.

PENN did not deny that some of its out-of-state tax payments should be included in its Indiana tax base.