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The Indiana Supreme Court will hear oral arguments in January for a case involving a tax assessment dispute between a Pennsylvania company with gaming and entertainment ventures in multiple states, including Indiana, and the state’s department of revenue.
The hearing is scheduled for Jan. 16 at 9 a.m. in the Supreme Court Courtroom.
According to the court, PENN Entertainment, Inc., a multistate corporation, protested the Indiana Department of Revenue’s notices of proposed assessments for tax years 2015 through 2017.
PENN, a Pennsylvania company, operates Ameristar Casino East Chicago in northwest Indiana and Hollywood Casino & Hotel Lawrenceburg in southeast Indiana.
PENN argued DOR added back to Penn’s tax base excise taxes and payments imposed by other states that were not subject to Indiana’s “add-back” provision at I.C. § 6-3-1-3.5(b)(3). DOR removed penalties but otherwise denied PENN’s protest.
On appeal, the Indiana Tax Court granted DOR’s summary judgment motion. Penn Ent., Inc. v. Ind. Dep’t of State Revenue, 230 N.E.3d 385 (Ind. Tax Ct. 2024), vacated.
The Indiana Supreme Court has granted PENN’s review petition and assumed jurisdiction over the case.
In its opinion, the tax court noted that PENN, on its 2015, 2016, and 2017 Indiana adjusted gross income tax returns, reported the value of income taxes it had paid in other states. PENN had deducted those payments from its federal income tax returns, and added the value of those taxes back to its Indiana tax base.
The revenue department audited PENN’s AGIT returns for the years at issue. Afterwards, the department determined certain payments by PENN to other state governments also needed to be added back to the calculation of PENN’s Indiana tax base.
PENN did not deny that some of its out-of-state tax payments should be included in its Indiana tax base.
The company instead argues the specific out-of-state payments at issue should not be added to its Indiana tax base because the payments were for “un-apportioned excise taxes, privilege fees, and other non-tax payments” that are not measured by income.
The tax court sided with the revenue department and ruled Indiana has a rational interest in ensuring that taxpayers’ income base includes amounts that the taxpayers deducted from their federal income taxes.
“PENN acknowledges the general point, because it did add back some amounts to its Indiana tax base reflecting payments of other state’s income taxes. The added-back amounts are substantial (before Indiana calculates and takes only its proportional share), but PENN is a large business with operations in many states. The Court cannot conclude the Department’s proposed assessments violate PENN’s substantive due process rights under Indiana’s Due Course of Law Clause,” the tax court’s opinion stated.
The case is PENN Entertainment, Inc. (f/k/a PENN National Gaming, Inc.) v. Indiana Department of State Revenue, 24S-TA-382.
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