Judge Rules Against Harrah’s New Orleans, Casino Must Pay Hotel Comp Taxes

Posted on: July 3, 2019, 08:29h. 

Last updated on: July 3, 2019, 08:29h.

Harrah’s New Orleans has lost a lawsuit in Louisiana state court arguing it wasn’t legally required to pay taxes on discounted or comped hotel rooms. Judicial Court Judge William Morvant said otherwise.

Harrah's New Orleans casino hotel
Harrah’s New Orleans could be on the hook for tens of millions of dollars in unpaid hotel taxes. (Image: Sophia Germer/The Advocate)

The judge ruled that Harrah’s and parent company Caesars Entertainment should have been paying taxes dating back to 2001 on free or reduced-rate hotel stays.

There’s nothing vague and nothing ambiguous about this,” Morvant explained, as reported by The Advocate.

The casino is included in Caesars’ $17.3 billion acquisition agreement to join the Eldorado Resorts portfolio. The Louisiana land-based casino, the only of its kind in the state, was sold to Caesars’ real estate investment trust VICI Properties as part of the massive deal. The transaction is expected to close next year.

Tax Dispute

Harrah’s New Orleans recently struck a 30-year licensing extension with Louisiana in exchange for $325 million in property upgrades, which includes a new 340-room hotel tower. The casino also agreed to pay tens of millions of dollars in new tax dollars to the state and city over the three-decade period.

At least for now, the Big Easy property is facing even more tax money responsibility. Morvant’s verdict sets up a trial showdown between Louisiana and Caesars.

The case dates back to 2001 when Harrah’s New Orleans routinely rented nearby hotel rooms for its patrons, as the casino’s 27-story hotel only opened in 2006. At the time, Harrah’s hadn’t purchased Caesars, and the struggling casino operator struck a deal in with the state to allow it to open restaurants and its own hotel at the NOLA casino.

The state agreed to cut the casino’s annual lease from $100 million to $60 million, and never formally weighed in on a hotel tax on its new guestrooms being discounted or offered for free, nor the ones being rented out at nearby hotels.

Caesars maintains the 2001 agreement exempts the casino hotel from paying such taxes.

Money in Question

New Orleans hotels are required to pay a nine percent tax on stays. That means for every $150 comped room Harrah’s has been handing out, Morvant says the casino should have been delivering the state $13.50.

The precise number of what the ruling this week means for Caesars isn’t exactly known. However, the Louisiana Department of Revenue says it’s likely in the neighborhood of $30 million to $50 million.

Harrah’s New Orleans reported gross gaming revenue (GGR) of $269 million in its last fiscal year (July 1, 2018 – May 31, 2019). The downtown property welcomed more than 3.9 million people onto its gaming floor, and generated taxes of $58.2 million.

The casino pays the state a 21.5 percent tax on GGR, or $60 million, whichever is greater.

Sports betting will remain on the sidelines in Louisiana for the time being after the state legislature passed on a bill last month. The legislation would have put the issue before voters during this fall’s gubernatorial election.