“Except” and “In addition to” Can Coexist, Apparently
Today’s post highlights the exercise of statutory interpretation. Statutes in all areas of the law face scrutiny, including those impacting the gaming industry. The particular statute I am about to
pick apart constructively critique brought parties with substantial interest to court.
Earlier this month, a Pennsylvania appellate court issued a decision holding that the tax rate imposed on daily gross game table revenue from fully automated electronic gaming tables in the state is 48%. Greenwood Gaming and Entertainment, Inc., the petitioner, unsuccessfully argued the tax rate was 34%.
How can a tax rate not be clearly stated? There’s no better example than section 13A62(a) of Title 4 of Pennsylvania’s Consolidated Statutes:
(1) Except as provided in paragraphs (2) and (3), each certificate holder shall report to the department and pay from its daily gross table game revenue, on a form and in the manner prescribed by the department, a tax of 12% of its daily gross table game revenue.
(2) In addition to the tax payable under paragraph (1), each certificate holder shall report to the department and pay from its daily gross table game revenue, on a form and in the manner prescribed by the department, a tax of 34% of its daily gross table game revenue from each table game played on a fully automated electronic gaming table.
(3) The tax reported and payable under paragraph (1) by each certificate holder shall be 14% of daily gross table game revenue for a period of two years following
commencement of table games operations at its licensed facility.
Greenwood Gaming went to state court asking for a declaratory judgment. Greenwood’s position was if paragraph (2) applies, then paragraph (1) does not apply, because the use of “except” in (1) implies (2) or (3) overrides (1) if either applies. Thus, argued Greenwood, application of (2) means the tax rate on daily gross game table revenue from fully automated electronic gaming tables is 34%.
The Pennsylvania Department of Revenue’s position, however, was that paragraph (2) instead supplements paragraph (1), because (2) begins with “in addition to.”
Ultimately, the court had to decide whether the statute was clear and unambiguous; and if not, render an interpretation with the assistance of, among other things, legislative intent. (Note that an unambiguous statute trumps legislative intent.)
To me, the statute is poorly drafted and ambiguous. I don’t see how one can reconcile paragraphs (1) and (2), as written. If the intent was for (2) to override (1), then “in addition to” should have been excluded. If, however, the intent was for (2) to supplement (1), then “except as provided in” should have been changed to “except as modified by,” or some other similarly clarifying phrase.
Nevertheless, the court held the statue is unambiguous, siding with the Department of Revenue. The court raises the fair point that the words “in addition to” would be given no effect if (2) overrode (1). The problem with this position, however, is by treating (2) as supplementing (1), the use of “except” in (1) is correspondingly given no effect. The bottom line is under either interpretation, apparently qualifying language becomes meaningless.
If the court
correctly decided the statute as ambiguous, we would likely have seen a holding in favor of Greenwood. Consider these remarks made by Representative Dante Santoni, a sponsor of the bill behind Section 13A62, on record in a legislative journal:
[The casinos] are allowed to have the maximum amount of fully automated machines at 250, but the tax rate is different. The tax rate is 34 percent if the casino chooses to use those types of machines; 16 percent initially, 14 percent after July 1 if they do not and use the standard tables that will require a dealer, or a person, an employee.
There’s more. The House Committee on Appropriations’ Fiscal Note states:
In addition to the fees collected, a state tax of 14% is imposed upon the daily gross tables games revenue. This rate would be applicable for the first two years of operation for each facility, after which time the rate will decrease to 12%. This tax and any accrued interest is payable weekly to the Department of Revenue. The tax rate on fully automatic electronic gaming tables is 34%.
The court didn’t utilize this strong evidence in favor of Greenwood’s interpretation because it deemed the statute unambiguous. If Greenwood decides to appeal the decision to the Supreme Court of Pennsylvania, we’ll see if the state’s highest court has an alternative understanding (or lack thereof) of the statute’s plain language.
Professor Maule also gives us his take on the case.