Harrah’s New Orleans Loses Louisiana Tax Case, Faces Potential $50m Payout

  • The case began in 2010 and relates to unpaid hotel room taxes dating back 19 years
  • The amount of taxes at stake is estimated to be between $30m and $50m
  • Court has ruled that Louisiana's right to the taxes is “clear and unambiguous”
  • Harrah's can still appeal to the state Supreme Court or request reconsideration of the ruling

 

Harrah's New Orleans
Harrah’s New Orleans may have to pay out $50m in unpaid taxes after losing a ten-year court case with the Louisiana Department of Revenue. [Image: Shutterstock]

A ten-year court battle

A Baton Rouge appeals court has ruled in favor of the state of Louisiana in a tax case involving Harrah’s New Orleans.

The case began in 2010 after the Louisiana Department of Revenue (LDR) claimed that Harrah’s New Orleans owed back taxes on hotel rooms. The casino, owned by Caesars Entertainment, argued that under state law it should be exempt from paying sales and occupancy taxes on certain hotel rooms.

Harrah’s will be required to pay back the taxes dating back to 2001

The court has now ruled in favor of the LDR, meaning Harrah’s will be required to pay back the taxes dating back to 2001. Caesars and Harrah’s have reportedly reserved $40m to repay the funds. The amount of taxes at stake is estimated to be between $30m and $50m.

The finer details of the case

Harrah’s argument stems from its agreement with the Greater New Orleans Hotel and Lodging Association. The operator argued that this partnership superseded any tax requirements of the LDR, and therefore made complimentary rooms non-taxable.  In contrast, the LDR argued that Harrah’s should still pay the required 9% tax on hotel rooms regardless of any agreement.

Ultimately, the First Circuit Court of Appeal upheld the 2019 decision made by 19th Judicial District Court Judge William Morvant. The ruling stated that the LDR’s right to the missing taxes was “clear and unambiguous.”

operator still has the option to appeal to the Louisiana Supreme Court

The operator still has the option to appeal to the Louisiana Supreme Court, but this court only agrees to hear a small number of cases. The operator can also file a request with the First Circuit Court of Appeal for it to reconsider its decision. A trial is scheduled for September to determine the exact amount owed if the ruling remains unchanged.

Last year, Louisiana lawmakers agreed to a 30-year extension to Harrah’s state casino license. The Senate voted 27-10 for the extension, which had the support of state Governor John Bel Edwards. As part of this agreement, Harrah’s has pledged to invest $325m to build a new hotel and upgrade existing facilities in the state.

Pandemic struggles for Louisiana casinos

Louisiana’s casino market has struggled so far in 2020 as a result of the COVID-19 pandemic. Casinos in Louisiana were officially permitted to reopen on May 18 following a nine-week period of closures.

gross gaming revenue for New Orleans casinos was $25.6m for June

According to data from the Louisiana Gaming Control Board, gross gaming revenue for New Orleans casinos was $25.6m for June, a drop of 43% year-on-year. Harrah’s New Orleans reported a 75% decrease in revenue, generating $5.6m in the 18 days it was open in June. Riverboat casinos in New Orleans felt less of an impact. Overall revenue for the market’s three riverboat casinos totaled $18.1m for June, a drop of 20% from 2019.

Earlier this month, Penn National Gaming announced that nearly 1,150 casino workers would be laid off from four Louisiana casinos in August as a result of losses. According to notices filed with the Louisiana Workforce Commission, around 161 workers are going to be let go from L’Auberge Hotel and Casino in Baton Rouge, while 441 employees will be let go from L’Auberge Lake Charles Casino.

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