Penn Entertainment Wants Indiana Supreme Court to Settle Gaming Tax Dispute

Penn Entertainment, one of the largest casino operators in the US, has petitioned the Indiana Supreme Court to settle a dispute over the company's state income tax liability. The issue revolves around whether gambling taxes paid to other states should be included when calculating Penn's Indiana tax burden.

The Indiana Supreme Court chambers. (Source: Indiana Public Media)

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At the heart of the dispute lies Indiana's add-back provision. This provision requires businesses operating in the state to add back certain deductions allowed by federal law for taxes measured by income paid to other states. Penn argues that the gambling taxes it pays to 10 other states fall under this provision and should, therefore, be added back when calculating its Indiana adjusted gross income.

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The company's position is based on the argument that these gambling taxes are essentially income taxes, even though they are calculated based on gross receipts or revenue. Penn points to a previous Indiana Supreme Court ruling that classified a similar tax imposed by West Virginia as an income tax, subject to the add-back provision.

However, the Indiana Tax Court ruled against Penn in 2023, finding that the gambling taxes in question were more akin to privilege taxes, which are not subject to the add-back provision. This decision resulted in Penn owing a significant amount of additional Indiana state income tax.

Undeterred, Penn is now seeking the high court's intervention. The company argues that the Tax Court's decision creates an unfair double taxation situation and contradicts the Supreme Court's earlier ruling on the West Virginia tax.

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Taking a Stand

By taking the case to the Indiana Supreme Court, Penn Entertainment is seeking a definitive ruling that could have far-reaching implications for its business operations and tax strategy. The company contends that the tax court's interpretation is overly broad and could lead to double taxation, which they argue is not the intent of the law.

The Indiana Supreme Court's decision in this case will have significant implications for both Penn Entertainment and other businesses operating in the state. If the court rules in favor of Penn, it could result in a substantial reduction in the company's Indiana tax liability. Conversely, a ruling against Penn would uphold the Tax Court's decision and leave the company facing a larger tax bill.

The case is expected to be closely watched by the gaming industry and tax professionals, as it could set a precedent for how gambling taxes are treated for tax purposes in other states with similar add-back provisions.


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