New Jersey to Appeal Atlantic City Casino Property Tax Order

Posted on: March 15, 2022, 08:22h. 

Last updated on: March 15, 2022, 05:51h.

Devin O'Connor @CasinoorgDevinO Read More
Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

New Jersey state attorneys are expected to appeal Superior Court Judge Joseph Marczyk’s February 25 order that ruled against the state’s amended payment-in-lieu-of-tax (PILOT) arrangement with Atlantic City casinos.

New Jersey Atlantic City casinos PILOT tax
A roulette table on the Ocean Casino Resort floor in Atlantic City in January of 2019. New Jersey is likely to appeal a recent court ruling that went against its plans to tax the nine casinos in Atlantic City less. (Image: AP)

Marczyk concluded last month that the state’s decision to remove iGaming and online sports betting revenue from the calculation used to determine how much the nine casinos collectively pay in property taxes violates a 2018 consent order.

The judge cited New Jersey in 2018 agreeing to direct 13.5% of the annual casino property taxes to Atlantic County. The 2018 agreement, Marczyk determined, is dependent on gross gaming revenue from all verticals, including iGaming and mobile sportsbook income.

Atlantic County Executive Dennis Levinson reveals that attorneys representing the state plan to appeal the PILOT decision.

“It’s just a tactic to delay the process. These things are typically not granted,” Atlantic County Executive Dennis Levinson said, as first reported by the Press of Atlantic City.

The county has until this Thursday, March 17, to appeal the Marczyk decision.

Judge Assigned

Marczyk’s conclusion did not prevent New Jersey from moving ahead with its revised PILOT framework with the nine casinos. However, his order required that the state make Atlantic County full on the tax amount it would have received. That’s without the 2021 revision to strike iGaming and online sports betting revenue from the property tax bill computation.

With the state expected to appeal, the case will move from Marczyk to Atlantic County Assignment Judge Michael Blee.

New Jersey’s legal code says assignment judges are “the chief judicial officer within the vicinage and shall have plenary responsibility for the administration of all courts therein.” Assignment judges are responsible for the implementation and enforcement of matters affecting the county and municipal governments, including such items as budgeting and property tax disputes.

Unless changed through a court ruling, the 2021 PILOT revision will save the nine casinos $55 million in property taxes this year alone.

Authority to Define Gross Gaming

State attorneys testifying before Marczyk last month argued that New Jersey lawmakers possess the legal authority to determine how gross gaming revenue (GGR) is defined. Attorney John Lloyd expressed the state’s opinion that it is able to exclude gross income from iGaming and internet sports betting from the overall GGR sum.

The casino industry has successfully motivated state lawmakers into removing the interactive gaming revenue from the PILOT calculation. The Atlantic City resorts argue that much of the online revenue is shared with third-party operators like DraftKings that have little or no physical presence in the casino beach town.

The casinos’ argument is essentially, “Why should we have to pay property tax on gaming revenue that’s going to companies not located in Atlantic City?”

Former New Jersey Senate President Stephen Sweeney (D) championed the casino tax break. He claimed that as many as four Atlantic City casinos are in peril of closing without such affordance.

Atlantic County, under the 2021 PILOT amendment, claims it will lose between $15 million to $26 million over the next five years compared with the 2018 consent. Since the original PILOT terms were struck in 2016, revenue from all gaming tied to Atlantic City casinos has been included in the property tax calculation.