An action initiated by the Internal Revenue Service (IRS) could see Prairie Meadows Casino, Racetrack And Hotel in Iowa lose its tax-exempt status and be forced to pay up to $60.5 million in back taxes and penalties.
According to a report from The Des Moines Register, the board for the Altoona-based casino met in a 30-minute closed session on Wednesday before releasing a 93-page report from the IRS detailing the charges along with its own letter of protest.
“We think we don’t owe any of it,” Tom Flynn, an attorney for the venue, told the newspaper. “They’ve painted with a broad brush.”
Prairie Meadows Casino, Racetrack And Hotel has benefitted from tax-exempt status since 1989 when it opened as a horseracing venue designed to benefit the economic development and social welfare of Polk County. It brought in slots in 1997 following an IRS review that allowed the site to keep its non-profit designation providing the local government maintained a “significant voice” in its operation including in the approvals of business plan, budgets, executive staff contracts and purse agreements.
However, a recent 18-month audit investigation by the IRS allegedly found that few of these commitments had been met especially since the development’s operating agreement with Polk County expired soon after the review to be replaced with a lease contract on the building and property, which is owned by the local government.
Prairie Meadows Casino, Racetrack And Hotel along with Mystique Casino And Resort in Dubuque are the only non-profit casinos in the United States and the IRS declared that the former was operating more like a business than “exclusively for social welfare purposes”. The investigation purportedly discovered that local oversight is now nominal as it amounts to only four of the site’s 13-member board of directors.
“The only difference in the operation of Prairie Meadows Casino, Racetrack And Hotel and a for-profit casino is only that Prairie Meadows Casino, Racetrack And Hotel does not pay taxes,” read the IRS report. “The examination of activities, books and records revealed that Polk County does not have a significant voice or an ongoing oversight of Prairie Meadows Casino, Racetrack And Hotel. The four members from the county are very passive and did not have a compelling influence on the board.”
In his defense of Prairie Meadows Casino, Racetrack And Hotel, Flynn told the newspaper that the county relinquished some oversight and control based on a recommendation from the Iowa Racing And Gaming Commission after all bond payments on the property were satisfied in 1996.
Prairie Meadows Casino, Racetrack And Hotel now intends to appeal the charges and has pointed to the millions of dollars it has given to local charities and non-profit organizations. It proclaimed that these funds would disappear if its tax-exempt status were to be revoked.
Flynn told the newspaper that he expects to be granted a meeting with a chief IRS investigator over the next few weeks and would ask for an independent tax appeal officer to review the case should this initial effort fail.