New Jersey Attorney asks Court to Halt Proceedings on Gambling Taxation Amendment

An Atlantic County judge has ruled that New Jersey state’s ‘PILOT’ calculation scheme for its nine casino concessionaires is unconstitutional. The payment-in-liex-of-tax (PILOT) programme was designed by lawmakers last year and included a loophole which allowed casino operators to remove online gaming and sportsbook revenues from its tax liability commitment.

However, judge Michael Blee ruled that this initiative defied the state’s ‘Uniformity Clause’ which serves to restrict preferential taxation treatment for any specific sector or industry, unless it supports a matter of public importance. However, acting State Attorney General, Matt Plakin, has challenged this legal view, suggesting prioritising the preservation of one of Atlantic City’s most lucrative markets was most definitely in the public’s interest. He has requested a stay of Blee’s decision, asserting that the city would incur ‘tax and budgeting chaos’ should a lengthy legislative process commence to change the principles of the PILOT scheme.

Plakin’s concern for the financial health of the nine local casino resorts was one of the catalysts for Governor Phil Murphy’s decision to introduce the PILOT calculation. Indeed, in the months leading up to the tax reprieve, four casinos announced that they may not survive the crushing impacts of the coronavirus pandemic. It’s also the case that vast sums of revenue generated by sports betting platforms tethered to local casinos is funnelled into third party pockets, with operators such as Draft Kings scooping up the majority of income.

The original case against the state’s reconfigured approach to gaming tax law was brought about by non-profit organization ‘Liberty and Prosperity 1776’. The group’s leader, attorney Seth Grossman, responded to the Attorney General’s delay plea, by stating, ‘’no credible fact or expert opinion evidence that laws reducing taxes for a specific industry, such as casino properties, and raising taxes on other properties… increases the overall economic health of Atlantic City and Atlantic County.’’

If Plakin is successful in his request, Atlantic City’s casino firms would stand to save a cumulative total of $55m this year. This could potentially extend to a figure as high as $315m, over the full duration of the PILOT programme, which has been scheduled as the calculation process until 2026.