New Jersey Court Reexamines Casino Property Tax Amendments

A New Jersey Appellate Court panel recently heard arguments in two cases concerning amendments to the state governing how much money casinos pay in lieu of property taxes. The cases, brought by Atlantic County and the nonprofit Liberty and Prosperity, revolve around changes made in 2021 that excluded internet gaming and online sports betting revenues from the calculations of casino payments.

The State Argues Casinos Require Special Treatment

In Superior Court in 2022, Atlantic County and Liberty and Prosperity prevailed in their lawsuits, contending that the amendments violated a 2018 consent agreement and the state Constitution. They argued that the changes resulted in a loss of approximately $5 million per year for county taxpayers, benefiting an industry detrimental to public health.

Despite the initial victory, the New Jersey Attorney General’s Office argued in favor of the amendments, emphasizing the need for changes to ensure a predictable revenue stream for casino taxes and to prevent potentially ruinous tax hikes. During the appellate court hearing, Tim Sheehan, representing the state, argued that the amendments were necessary to safeguard the financial stability of casinos and prevent closures.

The Legislature acted to exclude internet gaming and (online) sports gaming revenues … to ensure casino taxes continued in a predictable revenue stream.

Tim Sheehan, New Jersey Attorney General’s Office representative

Sheehan highlighted the rationale behind the amendments, citing concerns that a significant portion of internet gaming and online sports betting revenues went to third parties rather than the casinos themselves. He added the amendments were vital to avoid potential tax hikes, which could be disastrous for the broader sector and damage a leading contributor to the local economy.

The Amendments May Just Spread the Financial Burden

Despite the state’s concerns, Appellate Judge Francis J. Vernoia questioned whether the amendments effectively rescued casinos from ill-conceived business deals at the expense of other property owners. Seth Grossman of Liberty & Prosperity echoed this sentiment, arguing that the burden had unfairly shifted from casinos to non-casino property owners, adding the gambling sector did not need such a safety net.

So the amendment was to make sure the casinos kept more of the money? Aren’t we just rescuing a bad business deal?

Appellate Judge Francis J. Vernoia

The crux of the dispute revolves around whether the amendments violated the terms of the 2018 consent agreement and encroached upon judicial authority. While Sheehan contended that the Legislature had the authority to change laws at any time, Ronald Riccio, representing Atlantic County, argued that such changes cannot alter court orders.

The outcome of the appellate court’s decision is eagerly awaited, with Riccio acknowledging the unpredictability of judicial rulings based on judges’ questions during the hearing. The court should settle on a decision in the coming weeks, potentially impacting the tax obligations of New Jersey casinos and other property owners.