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Harrah's Casino in New Orleans

While asking state lawmakers to grant an early extension of their monopoly license to operate a land casino in New Orleans, the owners of Harrah’s are challenging in court the Louisiana Department of Revenue’s contention that the casino owes tens of millions in back hotel taxes to the state.

Harrah’s officials say a 2001 law exempts them from paying sales and occupancy taxes to the state on hotel rooms that they "comp" or discount to their customers or that they comp at other hotels. But Department of Revenue officials believe that if Harrah’s gives away, for example, a $200 hotel room, it should still pay the 9 percent in hotel taxes on that room, or $18, to the state.

At stake is as much as $40 million in hotel taxes dating back to 2001, according to one estimate.

Harrah’s officials have included language in their license extension — embodied in House Bill 544 — that would specify the casino company would not have to pay those hotel taxes in the future if a state court in Baton Rouge rules in its favor.

Harrah’s effort to avoid the hotel taxes doesn’t sit well with officials at the Superdome Commission and the Ernest N. Morial Convention Center, the state entities that would otherwise be receiving the disputed taxes.

State Senate President John Alario, R-Westwego, agrees with them.

“I do think they ought to be paying [in the future], as we think they should be paying it now,” Alario said in an interview. "I think the state has a good case."

If the Department of Revenue wins, Harrah's would have to pay the state hotel taxes for discounted and comped rooms for both the casino’s existing 450-room hotel and the 340-room hotel that Harrah’s is planning to build if the Legislature this year extends the casino license, five years before it expires.

House Speaker Taylor Barras, R-New Iberia and HB544’s sponsor, also wants to let the courts decide the question for the back hotel taxes and future taxes alike.

“If they decide ‘No, you shouldn’t tax comp rooms,’ and on the front part going forward we decide we should tax them, we’re doing the opposite of what the court case decided,” Barras said in an interview.

The sales taxes in question amount to an estimated $2 million to $3 million per year to the Convention Center and the Superdome Commission. The figure would presumably nearly double to $4 million to $6 million once Harrah’s opens the new hotel.

Alario said the Department of Revenue told him that the back taxes are worth $40 million to the state, but department officials would not confirm that figure.

Gov. John Bel Edwards questioned how other hotels in New Orleans could pay taxes to the state on discounted and comped rooms but not Harrah’s.

“It’s my understanding that it’s state law that applies to all of these (New Orleans hotel) properties, and I don’t know how you would do that with respect to Harrah’s and not all of the rest,” the governor said in a brief interview.

Harrah’s lawsuit says the company receives the tax breaks thanks to a memorandum of understanding that Harrah’s reached with the Greater New Orleans Hotel & Lodging Association in 2001.

The Harrah’s bill easily passed the House on May 2, 84-9. The Senate Judiciary B Committee will hear HB544 on Tuesday. Alario said officials will make clear before the committee that Harrah's will owe the taxes going forward if it loses the court case.

Alario originally planned to add an amendment to the bill making it clear that Harrah's would have to make the hotel tax payments from now on even if the state loses the court case. He said he changed his mind after discussing the matter with Revenue Secretary Kimberly Robinson.

Once it passes the committee, HB544 would advance to the full Senate.

Harrah's has been paying hotel taxes imposed by Orleans Parish on the rooms it comps and discounts. The company is disputing only the state hotel taxes. Harrah’s attorneys initially filed their lawsuit in 2010.

“Harrah’s position in this case is not simply an aggressive tax position taken by an aggressive taxpayer; it is a complete affront to its prior commitments and the specific legislative mandates that were passed and must be given effect to enable Harrah’s to operate its hotel,” the Department of Revenue’s outside attorney, Drew Talbot, wrote in requesting Judge William Morvant of the 19th Judicial District Court in Baton Rouge to rule for the state.

Morvant will hear the competing arguments in July.

Caesars Entertainment, which is Harrah’s parent company, issued a statement to The Advocate.

“Harrah’s New Orleans doesn’t comment on pending litigation, although we would note that no other state imposes a tax on comped rooms, nor do other casinos or hotels in Louisiana pay such a tax,” Caesars said. “We believe that the litigation is unrelated to pending job and tax revenue-raising legislation related to Harrah’s New Orleans.”

This year marks Harrah’s second attempt in two years to renew its state operating license long before it expires.

The House also overwhelmingly passed a bill last year to extend the license. But the bill stalled afterward as senators, led by Alario, began asking questions that had escaped House members. The Senate ended up passing a version of the bill that demanded hundreds of millions of dollars more from Harrah’s than the House version. When the two chambers could not reconcile their differences, the bill died.

Alario agreed to support another attempt by Harrah’s after a study he commissioned following the 2018 legislative session determined that the extension for the casino company was worth to the state a figure about midway between what the House and Senate were seeking.

Alario is co-sponsoring HB544 with Barras. The speaker also sponsored last year’s bill that would have provided the state $130 million less than HB544 in one measure, “net present value,” over the 30 years of the extension.

Besides building the hotel, in return for the license extension, Caesars has pledged to pay the state and city tens of millions of dollars in taxes over the 30-year extension, modernize the casino’s interior and construct restaurants with “celebrity chef partnerships.” Harrah’s investment will create 600 construction jobs and 500 new permanent jobs, company officials say.

Edwards and New Orleans Mayor LaToya Cantrell have endorsed the bill, saying it represents a good deal for New Orleans and the state.

When Barras and Harrah’s first introduced HB544 this year, an obscure provision would have absolved Harrah’s of paying the state hotel taxes going forward.

This caught the attention of Kyle France, who chairs the Louisiana Stadium and Exposition District, which oversees the Mercedes-Benz Superdome, the Smoothie King Center, the Baby Cakes’ minor league baseball stadium, Champions Square, the TPC golf course in Westwego and the John A. Alario Event Center, named after the senator’s father, also in Westwego.

Harrah’s then agreed to have the bill amended so that it would exempt Harrah’s from those taxes only if it wins the lawsuit. The House Criminal Justice Committee approved the amendment without objection just before passing the bill on April 24.

France supports Alario’s move to clarify the language.

“Harrah’s attempt to not include the state portion of this tax in the license renewal is a troubling sign,” France said in a text.

In an interview, he noted that Superdome officials are seeking $450 million to upgrade the Poydras Street stadium and need all the dollars they can get.

Melvin Rodrigue, who chairs the convention center board, also believes that Harrah's should be paying the state hotel taxes on the discounted and comped hotel rooms.

“It’s an inequity to the other hotels in the community if they don’t have to pay it (to the state),” Rodrigue said. “It’s a significant amount of money.”

Follow Tyler Bridges on Twitter, @tegbridges.