A Breakdown of Prairie Meadows’ $60M Burden to the IRS

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$60.4 million dollars -- that's how much the Internal Revenue Service says Prairie Meadows Race Track and Casino Owes in penalties and taxes dating back to 2012.

The Prairie Meadows Board of Directors voted Wednesday afternoon to release the results of the 300+ page audit, which began in 2014.

Channel 13's Sonya Heitshusen breaks down the audit:

The first issue raised by the IRS is PMRC's non-profit status. The audit shows Prairie Meadows took in $6.6 billion in revenue between 2012 and 2014.  During the same time frame, Prairie Meadows paid Polk County $78 million and doled out $62 million to dozens of Polk County's various charities. That totals $140 million dollars, which is 2 percent of its revenues.

Because of that, the IRS says "The only difference in the operation of PMRC and a for-profit casino is only that PMRC does not pay taxes… The activities of the organization have materially expanded to become commercial in nature.  Although they carried on some social welfare activities, based on analysis of the whole operation, it was concluded that the business activity was the primary activity.”

The change came primarily when Prairie Meadows added slot machines in 1997. The slots and Polk County bailed out the failing race track. That gave Polk County greater control of Prairie Meadows. But the IRS says Polk County now has less control of the casino.

Tom Flynn, the attorney for Prairie Meadows, disagrees.

"There’s still a very close, close relationship between Prairie Meadows and Polk County ... There’s nothing in the code that says Polk County has to control Prairie Meadows in order for us to have this tax-exempt status," he said.

Another issue:  The revenues from those slot machines, poker games and table games.

The audit shows Prairie Meadows collected $54 million in revenue from the games in 2012, $46 million in 2013 and $41 million in 2014. Prairie Meadows didn't pay taxes on any of it. The IRS says it should.

"Because it is operated in a commercial manner and ... because the gaming operations have materially changed," the audit states.

The IRS says Prairie Meadows should also be paying taxes on revenue from its hotel, banquet facilities and gift shop.

The Prairie Meadows Board of Directors disagrees, which sent a response to the IRS and hopes to hear back in the next 2-3 weeks. Ultimately, the board could appeal, a process that could take years.

Board Chairman Robert Myers hopes it doesn't come to that.

"We're hopeful.  We're encouraged.  Maybe we can get this thing over and done fairly quickly."

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