In a closely watched and hotly debated court case, the 2nd U.S. Circuit Court of Appeals in Manhattan has ruled against the Mashantucket Pequot Tribe over the taxation of non-tribally owned slot machines. The decision, which reversed a lower court ruling, has widespread ramifications, as a victory could have seen other gaming tribes follow the Mashantuckets’ lead on reservation casinos throughout the country.
The case involves two non-tribal businesses that lease slot machines to the tribe for use at Foxwoods Resort Casino. In 2005, New Jersey-based Atlantic City Coin & Slot Co. refused to pay personal property taxes to the town of Ledyard, Connecticut, on slot machines leased to the tribe. The company, backed by the tribe, claimed it did not have to pay the taxes because it would interfere with tribal sovereignty. WMS Gaming, another slot machine company, joined the suit in 2008.
Taxes on the slot companies would have come to about $20,000 in property tax income annually—less than two-tenths of 1 percent of the $15.2 million the companies anticipate each year in revenues from their dealings with the tribe.
But there were seven more slot machine distributors, and the tribe had suggested that the principle the lower court had applied in banning the taxes could be applied to anyone who maintained property on tribal lands. If the appeals court had upheld the lower court ruling, exempted taxes could have come to hundreds of thousands of dollars a year.
A victory for the tribe could have also sparked similar lawsuits on Indian reservations throughout the country.
“With this decision, the town of Ledyard will be able to collect taxes that are critically important to providing government services, including those that result from being a host community for the Foxwoods casino,” said Ledyard Mayor John Rodolico in a statement.
The tribe is considering appealing to the U.S. Supreme Court.