HWCC-Tunica, Inc. v. Miss. Dep't of Revenue

Decision Date28 May 2020
Docket NumberNO. 2019-CA-00336-SCT,2019-CA-00336-SCT
Citation296 So.3d 668
Parties HWCC-TUNICA, INC./HWCC-Tunica, LLC and BSL, Inc./BSLO, LLC v. MISSISSIPPI DEPARTMENT OF REVENUE and Mississippi Gaming Commission
CourtMississippi Supreme Court

ATTORNEY FOR APPELLANTS: A. THOMAS TUCKER III

ATTORNEYS FOR APPELLEES: MORTON W. SMITH, Ridgeland, JUSTIN P. WARREN, BRIDGETTE T. THOMAS, OFFICE OF THE ATTORNEY GENERAL, BY: DEANNE SALTZMAN, LOUIS FRASCOGNA, Jackson

BEFORE KITCHENS, P.J., MAXWELL AND CHAMBERLIN, JJ.

KITCHENS, PRESIDING JUSTICE, FOR THE COURT:

¶1. HWCC-Tunica, LLC, and BSLO, LLC, have casino members’ rewards programs that allow members to earn entries into random computerized drawings to win prizes. In 2014, after recalculating their gross revenue and deducting the costs of prizes from their rewards programs’ drawings, HWCC and BSLO filed individual refund claims for the tax period of October 1, 2011, through August 31, 2014. The Mississippi Department of Revenue (MDOR) denied the refund claims in 2015.

¶2. In 2017, having exhausted all of their administrative remedies, HWCC and BSLO appealed the MDOR's refund denial and filed individual chancery court petitions against the MDOR and the Mississippi Gaming Commission (MGC) in the Chancery Court of Tunica County and the Chancery Court of Hancock County. The MDOR and the MGC filed a joint motion for summary judgment, arguing that the plain language of Mississippi Code Section 75-76-193 (Rev. 2016) does not allow a casino to deduct the cost of prizes purchased for a rewards program's drawings because "these promotional giveaways are not the result of ‘a legitimate wager’ as used in [ Mississippi Code Section] 75-76-193." After a hearing on the motion, the chancellor determined that Section 75-76-193 does not allow HWCC and BSLO to deduct the cost of the prizes and that there were no genuine issues of material fact.

¶3. HWCC and BSLO appealed. We find that the chancellor erred by giving deference to the MDOR's and the MGC's interpretations of Code Section 75-76-193. But we find that even though the chancellor did err by giving deference, she reached the right conclusion: that no genuine issues of material fact existed. Accordingly, we affirm the chancellor's grant of summary judgment.

STATEMENT OF THE FACTS

¶4. In 2013, HWCC-Tunica, Inc., converted into HWCC-Tunica, LLC. Also in 2013, BSL, Inc., converted into BSLO, LLC. HWCC operates the Hollywood Casino in Tunica County, Mississippi, and BSLO operates the Hollywood Casino in Hancock County, Mississippi.1 Both are subsidiaries of Penn National Gaming, Inc., and both are subject to the Mississippi Gaming Control Act. See Miss. Code Ann. § 75-76-1 (Rev. 2016).

¶5. Hollywood Casinos has a rewards program for its patrons entitled "Marque Rewards." The Marque Rewards program allows those casino patrons who join to earn entries into computerized drawings that randomly select members to receive "personal property items including cash, I-pads, televisions and vehicles." There are three methods by which Marque Rewards members can earn entries into these drawings:

(1) the active-play method; (2) the kiosk method; and (3) the ADT (a player's "average daily theoretical") method.

¶6. To earn entries by the active-play method, rewards members must accumulate points earned on a coin-in basis by actively gambling or by wagering in a casino game with his or her rewards card inserted into that game's machine. For HWCC, every dollar put in equals one point. BSLO has the same coin-in equation for casino games, except for the game of video poker, in which every two dollars put in equals one point. The kiosk method allows rewards members to earn "one drawing entry" by swiping his or her rewards card at one of the designated kiosks placed throughout the casino. The final method, the ADT method, is the one by which the majority of rewards members earn their entries into the computerized drawings. This method uses a tier-points system, which is based on a member's ADT. The rewards member's ADT is calculated by means of a complex algorithm that considers several factors, such as the time spent, the speed of placing a wager, and the amount of the wager. These points, earned by members’ actively gambling or wagering, then are converted into tier points. As the tier points accumulate, the rewards members earn entries into the drawings. Unlike the other two methods, the ADT method does not contain a limit on the number of entries per person.

¶7. In 2014, in response to an interpretation of a similar gaming statute by the Pennsylvania Supreme Court, Hollywood Casinos hired an accounting firm to conduct a review of its prior gaming taxes and calculate the amount of personal property that was distributed to rewards members for slot machine play.2 The accounting firm concluded that from October 1, 2011, to August 31, 2014, the following amounts of personal property had been distributed to rewards members as a result of slot machine play: $763,055.76 by HWCC and $1,424,292.83 by BSLO. Hollywood Casinos then, under Section 75-76-193, deducted these personal property costs from its gross revenue figures for slot machine play and sought a refund or credit for the tax periods beginning October 1, 2011, and ending August 31, 2014. See Miss. Code Ann. § 75-76-193 (Rev. 2016). HWCC sought a refund or credit in the amount of $91,566.69 and BSLO sought a refund or credit in the amount of $173,790.68. Hollywood Casinos provided documents and data detailing each computerized drawing that had been held during the applicable tax periods.3

¶8. On June 17, 2015, the MDOR denied Hollywood Casinos’ refund claim and cited the Mississippi Gaming Regulation, Title 13, Part 7, Rule 3.3(k), as the reason for the denial. See 13 Miss. Admin. Code Pt. 7, R. 3.3(k) (adopted May 1, 2013), Westlaw. Hollywood Casinos timely appealed the MDOR's denial to the Review Board, which upheld the denial. Hollywood Casinos timely appealed that ruling to the Board of Tax Appeals, which denied its refund claim and affirmed the Review Board's ruling.

¶9. In February 2017, under Mississippi Code Section 27-77-7, HWCC and BSLO appealed the MDOR's decision to their respective chancery courts.4 On May 26, 2017, the Chancery Court of Tunica County entered an agreed order providing that BSLO's action was to be transferred to and consolidated with HWCC's action in Tunica County.

¶10. On March 30, 2018, the MDOR and the MGC filed a joint motion for summary judgment, arguing that "[ Mississippi Code Section] 75-76-193 is clear and unambiguous[,]" and even though no deference was given to the applicable MDOR and MGC regulations, Hollywood Casinos’ computerized drawings are not the result of "legitimate wager" under Section 75-76-193. On April 30, 2018, Hollywood Casinos filed its response opposing the joint motion for summary judgment.

¶11. The chancellor held a hearing regarding the motion on December 20, 2018. On January 28, 2019, the chancellor granted the MDOR's and the MGC's joint motion for summary judgment. The chancellor determined that

1. Promotional activity is separate from slot machine activity and not deductible under [ Section] 75-76-193 ;
2. The promotional giveaways are not deductible under the [MGC's] [r]egulations because they are not "winnings" or "the direct result of slot machine play" or "determined by coin out";
3. The promotional giveaways are not the result of a "legitimate wager";
4. [Hollywood Casinos] cannot verify whether all entries related to the promotional giveaways are the result of slot machine wagers, and
5. [Hollywood Casinos] in the request for a "deduction" under [ Section] 75-76-193 [has] the burden of proof and [ Section] 75-76-193 is construed in favor of [the MDOR and the MGC].

Additionally, the chancellor adjudicated that "this matter of law is reviewed de novo, but with great deference to the agency's interpretation." She continued, describing the applicable standard of review as follows:

[I]f an agency's interpretation is contrary to the unambiguous terms or best reading of a statute, no deference is due. An agency's interpretation will not be upheld if it is so plainly erroneous or so inconsistent with either the underlying regulation or statute as to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. Miss. Methodist Hosp. and Rehab. Ctr., Inc. v. Miss. Div. Of Medicaid , 21 So. 3d 600, 606-07 (Miss. 2009) (internal quotations and citations omitted). Buffington v. Mississippi State Tax Com'n , 43 So. 3d 450, 453-54 (Miss. 2010).

The chancellor went on to interpret Section 27-77-7(5) to give courts authority to defer to the MDOR's and the MGC's regulations and other publications that interpret statutes.

¶12. Hollywood Casinos raises four issues on appeal. First, Hollywood Casinos argues that the chancellor erred by applying the incorrect standard of review under the applicable version of Section 27-77-7. Second, it asserts that the portion of Section 27-77-7(5) that requires courts to give deference to an agency's interpretations of statutes is unconstitutional because it violates the separation of powers doctrine.

Third, it argues that the chancellor erred by giving deference to the MDOR's and the MGC's interpretations of Section 75-76-193, which it claims are contrary to the unambiguous terms or best reading of the statute. Finally, Hollywood Casinos contends that the chancellor erred by finding that no genuine issues of material fact existed.

¶13. The MDOR and the MGC contend that the chancellor did not err because, even though she did mention giving deference to the MDOR's and the MGC's interpretations, the chancellor properly found that the Hollywood Casinos failed to show genuine issues of material fact as to whether Section 75-76-193 was applicable in this case.

STANDARD OF REVIEW

¶14. This Court has held that " Mississippi Code Section 27-77-7(5) provides the process and standard of review for chancery court review of MDOR and [Mississippi Board of Tax...

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