New Jersey Judge Throws Away Atlantic City Casinos Tax Break

On August 29, the New Jersey Superior Court Atlantic County Law Division declared that tax relief in relation to property tax for Atlantic City casinos is against the state’s constitution.

Atlantic City Casinos Got a $55 Million Tax Break Thanks to the PILOT Amendment

ProPublica reported that judge Michael Blee has doubled down on the tax reliefs for Atlantic City casinos, which amount to millions of dollars.

According to judge Blee’s decision, the amendment to the law of New Jersey, which was passed in haste by Governor Phil Murphy in 2021, breaches the New Jersey constitution.

The legislation introduced by governor Murphy made a change in the PILOT taxation system. Since 2016 Atlantic City casinos have been obliged to pay a percentage of their total revenue from gaming activities from the previous financial year instead of property tax. 

However, in 2021, when the tax break amendment was passed, the gaming industry was complaining of the difficulties it was experiencing as a result of the COVID-19 pandemic. It painted a very scary picture threatening the closure of four of the state’s nine casinos. With the passing of the new law amendment, the casino industry eventually succeeded in excluding the revenue from online gambling activities from the PILOT contribution calculation.

As a result, the yearly property tax paid by the Atlantic City casinos was reduced by $55 million meaning that Atlantic City schools and communities were deprived of this amount.

NGO Liberty and Prosperity 1776 Raged a War on the Amendment

Atlantic City casinos could not get away with this enforced tax break this easily. A conservative NGO of name Liberty and Prosperity 1776 filed a lawsuit against the amendment on the grounds that it is against the state’s constitution, which bans the introduction of preferential taxes. The assigned judge Blee of course made a decision in favor of the NGO discarding the tax break.

According to the court decision, the law amendment was done in favor of the casinos in the state and not “for a public purpose” as was stated by Governor Murphy on behalf of the casino industry. Therefore, the introduced tax break is in violation of New Jersey’s founding document, which expressly prohibits preferential treatment when it comes to tax payments.

The claims of the “troubled” Atlantic City casino industry somehow do not seem to correspond with the numbers shown by its yearly financial results. In 2021 gross operating revenue posted by Atlantic City casinos amounted to $767 million. The results this year do not seem to be worse. The net revenue for the second quarter of 2022, which came from gambling activities totaled $828.8 million, which meant that it increased by 14.1% in comparison to the same period last year. The results for the first six months of 2022 are pretty similar with net revenue of $1.5 billion, which marked a boost of 19.9% year on year.