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Saturday, December 18, 2004

Indiana Decisions - Impact of bingo rulemaking decision reflected in annual Dept. of Revenue report

"Scuttled changes to bingo law yield failure and success" is the headline to a story today by Steve Walsh today in the Gary Post-Tribune. [Remember that the Trib does not archive its stories.] Some quotes from the story:

The scuttled rules for Indiana bingo halls may have helped the bottom line for the charities they support.

The state Department of Revenue’s annual charity gaming report suggests the now-defunct rules about distributing the profits may have nudged bingo halls to turn more profit over to their charities — usually themselves in some form — over the previous year.

The 2004 Indiana Department of Revenue Charity Gaming Report showed that charities actually earned more money last year. That came despite a decline in the amount of money bingo brought in this year and a drop in the number of licenses.

Ironically, the state’s charities fought the rules that made them more profitable. Bingo halls successfully stopped the department from adopting rules that would have required not-for-profit organizations to donate a set percentage of their income to charity.

“I think the data show the new rules may have been pushing the charities to turn more of a profit, which is good. After all, this is supposed to be a fund-raiser for the charity,” said Larry McKee, director of revenue for the Indiana Department of Revenue.

In October, a Marion County judge threw out the last of the rules the state Department of Revenue adopted in 2003 to require organizations, running the games, to donate a percentage of their profits to charity. * * *

In 2003, the Indiana Department of Revenue adopted rules to require a percentage of the gross revenue from charity gaming licenses to go to a charity. A bingo license with an annual gross revenue of at least $500,000 would have to donate at least 10 percent of the money to charity.

“It was just unfair. It defied all business sense and all rules of accounting,” said Marilyn Moores, the Indianapolis attorney representing bingo operators. A group of operators, including American Legion Post 168 in Hammond, filed suit. In August, Marion Superior Court Judge David J. Dreyer stopped the department from enforcing the rule. In an Oct. 6 ruling, Dreyer effectively swept away the last of the new rules, according to the Department of Revenue.

The agency set the bar too high by not allowing charities to factor out their operating expenses, Moores said. They didn’t take into account the cost of maintaining the aging halls run by fraternal organizations, such as the Eagles, Moose and VFW, she said.

At the Knights of Columbus in Hammond, bingo is about the only way the organization can afford to maintain its hall, according to Dan Lelito, who manages the weekly bingo games. “Your expenses just keep going up and up. Other KC halls have shut down because they can’t make expenses,” he said.

The Hammond Knights of Columbus took in $998,727 in 2004 from its bingo license and turned a 15 percent profit — higher than the state average of 12.1 percent in 2004. “But we have a $2,400 heating bill and they won’t let you take off $2,400 in expenses,” Lelito said. Bingo is the only way to keep the building open. At the same time, competition from the casino boats continues to eat into the market, Lelito said. * * *

During negotiations with the state, Moores said she suggested as much as 15 percent of the net profit go to charity. The 15 percent would be after expenses, she said. At the moment, factor out the expenses and some bingo licenses are barely turning a profit. The Knights of Columbus in Valparaiso took in $88,548 but showed only a 5 percent profit in 2004. The Loyal Order of Moose Lodge in Hammond took in $325,345 from its bingo license in 2004, but managed only a 3 percent profit. * * *

With the court ruling, both sides believe the General Assembly will have to settle the issue, when lawmakers return to Indianapolis in January.

For background on the trial court decision to throw out the bingo rules, see this 8/11/04 ILB entry [includes a link to the trial court order -- Veterans of Foreign Wars v. Indiana Dept. of Revenue (8/9/04 Marion Superior Ct 10)], and this 9/15/04 ILB entry.

The latter entry reported that Attorney General Carter intended to appeal the decision. A check of the Indiana Court of Appeals docket shows that a notice of appeal was filed 9/8/04. A 12/1/04 doccket entry indicates "notice of completion of transcript." The case number is 49 A 02 - 0410 - CV - 00863 - Indiana Department of Revenue v. Veterans of Foreign Wars Post 9395.

Finally, the Indiana Department of Revenue's 2004 Charity Gaming Annual Report is available here.

Posted by Marcia Oddi on December 18, 2004 12:25 PM
Posted to Indiana Decisions