Court Rules Harrah’s New Orleans Must Pay Back Taxes on Hotel in Decade Long Dispute

Posted on: August 3, 2020, 09:12h. 

Last updated on: August 3, 2020, 01:29h.

Harrah’s New Orleans is once again on the losing end of a court decision regarding its claims that it doesn’t need to pay taxes on comped or discounted hotel rooms.

Harrah's New Orleans hotel tax
Courts say Harrah’s New Orleans owes the state tens of millions of dollars in unpaid hotel taxes. (Image: Patrick Connolly/Las Vegas Review-Journal)

A three-judge panel in the First Circuit Court of Appeal ruled 2-1 in favor of the state that it has the legal authority to collect hotel room taxes from the casino regardless of whether the property provides discounts or full comps to its gamblers. The court upheld a 2019 decision by 19th Judicial District Court Judge William Morvant.

Harrah’s — owned by the newly formed Caesars Entertainment Inc. — argued a law passed in 2001 exempts the casino from occupancy taxes on free and reduced-rate rooms. The Louisiana Secretary of Revenue contends otherwise, and the courts have so far been on the state’s side.

At stake is upwards of $40 million in back taxes. Caesars has set aside that amount of money in the event of a losing legal battle. The casino operator can ask the First Circuit to reconsider this week’s ruling or appeal to the Louisiana Supreme Court to take on the matter.

Caesars has yet to publicly reveal its next steps.

Majority Rules 

Harrah’s says the 2001 law exempts the gaming operator from paying occupancy taxes on comped rooms. The amendment to the casino’s hotel tax obligations was approved at the time due to the original operator of the casino filing a voluntary petition seeking relief under the US Bankruptcy Code.

But this week, the two judges in the majority pointed to the original legal contract between the state and casino in their reasoning for voting against the gaming company. They say the 2001 amendment was not permanent, and hotel taxes are due.

“Room taxes shall be paid by the casino gaming operator on all discounted and complimentary rooms to be paid at the applicable tax rates based upon average seasonal rates for the preceding year of hotels in the Central Business District and French Quarter of the parish of the official gaming establishment,” Judge William Ray Chutz wrote in the majority.

Costly Casino

Harrah’s New Orleans and the state have been litigating the hotel tax dispute since 2010. The current state hotel occupancy tax is 10 percent, so for every $200 hotel room the casino has awarded for free to a customer, the state would collect $20.

The only casino in the Big Easy currently features a 450-room, 26-story hotel tower. Under the property’s 30-year operating extension reached with the state and city last year, Harrah’s must build a new 340-room hotel by 2024.

With limited rooms, over the years Harrah’s has been booking blocks at nearby hotels. Its 30-year monopoly extension on land-based commercial gambling in New Orleans comes at a steep price — $325 million in property upgrades, and high taxes.

The city is to receive $19.5 million from the casino by 2022, Harrah’s must pay the state $3.4 million annually for the license, and the casino guarantees $60 million a year in gaming tax revenue.

Now, Caesars could be on the hook for another $40 million-$50 million in back hotel taxes.