The Internal Revenue Service recently withdrew its challenge of the tax-exempt nonprofit status of Prairie Meadows racino in Altoona, Iowa. The facility could have been forced to pay back taxes and penalties of more than million. The statement released by the IRS cited a review of Iowa law and said Prairie Meadows’ profits from horse racing and gaming comply with the casino’s exempt purpose. “Based on a review of the facts and circumstances, it was determined that the IRS should not pursue revocation at this time,” according to the statement.
Prairie Meadows had been operating as a tax-exempt nonprofit since 1989. But following an 18-month audit investigation, the IRS determined the casino was operating more like a business than “exclusively for social welfare purposes” and announced in May it would lose its tax-exempt status. The casino appealed in June with proof that it “continues to be a valid social welfare organization.”
Washington, D.C. attorney Marc Owens, representing Prairie Meadows, said, “It sounds like the IRS sort of came to their senses, which I figured they would do. The question is how long it would take.”
The casino still is appealing an IRS bill of up to $1 million on revenue from ATMs and gift shops and other sources.
Prairie Meadows and Mystique Casino in Dubuque are the only casinos in the U.S. organized under 501(c)(4) of federal tax law, which allows civic leagues or organizations operated exclusively for the promotion of social welfare to avoid paying federal taxes. The two casinos combined provide tens of millions to government entities, community groups and philanthropic causes. The IRS has not questioned Mystique Casino’s nonprofit status.
Prairie Meadows, which opened as a horse racetrack through a $40 million loan from Polk County taxpayers, has given back more than $1.6 billion to state and local governments, according to casino figures, including taxes, grants and lease payments to the county, which owns the Altoona facility. Recently the charitable contributions have directed millions in economic development and to charities such as United Way. Lease payments to the county are used to pay debt associated with the construction of the Iowa Events Center.
Polk County Board of Supervisors Chairman Tom Hockensmith said, “This is an early Christmas present to the citizens of Polk County. There’s a lot of relief from the board, too. I can tell you that.”
