ALTOONA, Iowa -- The Prairie Meadows Board of Directors entered a closed session Wednesday afternoon to discuss the possibility of the IRS removing its non-profit status.
Board members will come to a decision on what will happen if the IRS’ crippling decision to take away the casino’s tax exempt status happens. Members also voted unanimously to release the IRS audit and its response to the audit.
That will take the casino from a non-profit business to a for-profit business. It also puts hundreds of millions of dollars in donations to the community in jeopardy.
The IRS' contention is that Prairie Meadows is too successful and too commercial to have a tax-exempt status. The IRS says Prairie Meadows appears to be a commercial enterprise.
Attorney Tom Flynn says Prairie Meadows differs from Las Vegas casinos. The board is not arguing the success of the organization, but it is disputing how the money is used once it's generated.
Prairie Meadows argues that it lessens the burden of the government by supporting the Iowa horse industry and by giving money to the community. Therefore, it should receive an exemption from the Internal Revenue Code 501 (c) (4) as a social welfare organization.
Flynn says that exemption does not forbid a non-profit from having a commercial enterprise as long as that entity is lessening the burden of the government.
Prairie Meadows worked with the Iowa Legislature when it was founded in 1985 to receive its status. It was audited by the IRS in 2004 for its 2002 tax return. The IRS took no issue at that time.
The board has 30 days to respond to the IRS with a protest letter, and board members say they have a strong argument.
"We know we have a very strong argument to continue operating the way we do right now. You see how much money we gave back to the community this year? We want to continue doing this. I assure you this has nothing to do with any financial impropriety or excessive wages," said Bob Myers, Chairman of the Prairie Meadows Board.
Flynn said Prairie Meadows wants to publicly share both the IRS audit and the board's response.
"We do not want the audit out and circulated until we have our chance to put together our response and why some of the facts and conclusions stated by the IRS are improper," Flynn said.
The board released a statement Wednesday, reading in part:
“Prairie Meadows will be vigorously defending its status during further discussions with the IRS. Even though federal tax can be a complex subject, as the process moves forward, Prairie Meadows will endeavor to keep the community appraised of developments so that it may better understand the issues raised by the IRS and Prairie Meadows’ response to such issues.”
Prairie Meadows and its legal team are presently focused on preparing a full response to the IRS; once the response is finalized, which should be within the next 45 days. Prairie Meadows intends to publicly share both documents so that the community has a complete understanding of the matter."
Prairie Meadows in 2015
The board said in 2015, it provided 1,400 jobs with wages and benefits totalling more than $54 million. It paid rent to Polk County totalling $15.6 million and distributed more than $10 million to Polk County, $4.3 million to Des Moines, $1 million to Altoona, $763,000 to the Polk County School District and over $4 million to various charities.
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