The Internal Revenue Service recently concluded that Prairie Meadows Racetrack and Casino in Altoona, Iowa should lose its nonprofit status. According to a letter sent by the IRS, the casino has less than 30 days “to respond and make a case for why it should retain its nonprofit status.” The situation follows an 18-month investigation.
The IRS stated Prairie Meadows is “one of the top 10 revenue-generating organizations operating as nonprofit social welfare agencies in the country, taking in $2 billion a year in bets or gross receipts.” The designation only is granted to bodies that “exclusively benefit the social welfare and lessen the burden of government” by returning all of their profits to charities and government bodies. Prairie Meadows attorney Tom Flynn noted 92 percent of the $2 billion the casino takes in goes back to gamblers. He added the casino pays the annual mortgage for the Iowa Events Center.
Flynn also stated the IRS said if the property is tax-exempt, hotel, banquet hall and gift shop revenue should be taxed.
Prairie Meadows President and Chief Executive Officer Gary Palmer said if Prairie Meadows loses its tax-exempt status as a nonprofit, “central Iowa stands to lose about $30 million a year that has been returned to a variety of charitable organizations and governmental bodies.” Palmer added the casino hired a tax attorney from Washington, D.C. to help prepare a response to the IRS.
Opened in 1989 as a non-profit business, Flynn said Prairie Meadows has returned $1.4 billion in scholarships, grants for cultural projects and gambling taxes. Its nonprofit designation was reaffirmed in 1996 and 2002.
Prairie Meadows rents its facility from Polk County for $15.6 million a year. It has ranked second to Horseshoe Casino Council Bluffs among Iowa’s 20 casinos. In 2014, Prairie Meadows’ gross gaming revenue was $185.7 million, compared with Horseshoe Casino Council Bluffs at just over $189 million.
