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Analysis | The Alabama Supreme Court’s very troubling Greenetrack opinion

A little more than a week ago, the state’s highest court dropped a bombshell that relatively few people seemed to notice.


What the Alabama Supreme Court has done to Greenetrack should scare the hell out of everyone. 

A little more than a week ago, the state’s highest court dropped a bombshell that relatively few people seemed to notice. In a lengthy, meandering opinion that contained a weirdly-high number of analogies and hypotheticals, the ALSC overruled the state’s Tax Tribunal and two circuit courts and determined that Greenetrack, a small dog track in Eutaw, owed more than $76 million in unpaid taxes on electronic bingo games it operated from 2004 to 2008. 

Now, I know what you’re thinking: Oh, great, more fighting over electronic bingo. 

And in some ways, you would be correct. This absolutely is a fight – in fact, it’s a very personal fight, it seems, for the state’s highest court. One that has led the ALSC to ignore the law, ignore precedent, ignore processes and ignore its responsibility to set aside politics and personal feelings. 

And before you think that maybe that’s an exaggeration, here’s what the ALSC did in the Greenetrack ruling: 

  • It ruled on issues that were never raised in a lower court, ignoring established case law and taking the extraordinary step of punishing a defendant for failing to address those issues;
  • It set aside the rulings of two lower courts – including one from a conservative judge that the court handpicked – and the ruling of an administrative law judge appointed by the state’s Tax Tribunal, and then, to avoid sending the case back down to the lower court, which it absolutely should have done, it simply entered the judgment it wanted;
  • To justify granting summary judgment, the ALSC, in a footnote, said (and I’m not making this up) that it was doing so because the case had stretched on too long;
  • It determined that a tax exemption could be undone and a business could be held responsible for taxes – retroactively, mind you – because the ALSC decided to change the interpretation of legislation – an act courts typically leave up to the legislature; 
  • It ignored its own precedent used to create electronic bingo laws – that the underlying legislative intent and surrounding voter conversations were unreliable – and stated literally the opposite to find Greenetrack to be in violation of its tax exemption; 
  • It ignored the fact that Greenetrack’s operation was determined legal in the years 2004-08 by the only authority authorized to make such a ruling – the county sheriff – and instead determined that Greenetrack operated in violation of the county constitutional amendment – a key component to determining the track owed millions in taxes; 
  • It spent numerous paragraphs attempting to explain why it was right for the state to tax Greenetrack for “credits” played at its casino, despite no casino in the world being taxed in such a manner; 
  • And, finally, throughout its opinion, the state’s highest court used dismissive and hostile language, making it obvious the ALSC justices held some level of personal hostility towards Greenetrack, or, perhaps, gambling establishments in general.

Now, I know that all sounds like a lot, but we can move through it quickly and break it down in a manner that’s easy to digest. 

Let’s start with what all of this is about: $76 million in back taxes. 

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In 2009, in the heart of the Gov. Bob Riley war on bingo – a war many have claimed was launched to pay back Mississippi gaming interests who funneled money to Riley – a newly appointed head of the Alabama Revenue Department issued a stunning ruling: after an audit of Greenetrack’s finances, the department determined that Greenetrack was in violation of its tax exempt status and owed additional sales and use taxes on electronic bingo. 

It came to this conclusion a couple of different ways. 

First, it said that Greenetrack’s electronic bingo wasn’t covered by the 1975 tax exemption passed by the Alabama Legislature – an act that was so broad that it essentially granted tax exempt status to Greenetrack as a property. The “tax act,” as it’s called, levied a 4-percent tax on gaming, and it did so, as stated in the legislation, “in lieu of all … (other) taxes.”

Secondly, the Revenue Department said that Greenetrack couldn’t be protected from later laws granting tax exemptions for bingo games, because Greenetrack violated the terms of its county’s constitutional amendment by operating its games improperly. There are several stipulations in the Greene County bingo amendment dealing with the entities that can operate games and the lease agreements that can be undertaken, and the Revenue Department claimed Greenetrack had violated at least three. 

So, the Revenue Department determined that Greenetrack owed sales and use taxes of about $70 million and it attached a lien to the Greenetrack property. The press releases were sent out claiming that Greenetrack’s operators were tax cheats. 

Very few people took this seriously at the time. Primarily because of the manner in which it was handled. 

Under normal circumstances, when the Revenue Department conducts an audit of a legally operating Alabama business, it does so in coordination with the owners/operators of that business. There is a process that the department is required to follow. The business in question is allowed to have input and to challenge findings and offer additional evidence. 

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Greenetrack’s experience was much different. 

The owners of Greenetrack found out that a lien was being imposed when a Greene County probate judge phoned the track the day the lien notice was filed in his office. 

To this day, no one from the state of Alabama has notified Greenetrack of the lien. And no one has adequately explained just how the Revenue Department came up with this staggering $70 million figure. The track never once received a tax bill – even after the lien was issued. 

To be clear, Greenetrack pays its required taxes each year, so the Revenue Department has the track’s financials. I’ve seen those financials. The amount paid in taxes for those years – at a tax rate that would be very similar to what the track should be charged for sales and use taxes – is less than half of what the state is attempting to charge it. 

The way it arrived at that astronomical figure was to also charge tax on credits won and played by electronic bingo players. As the ALSC explained in its ruling, a player puts in a dollar and wins $10 in “credits.” The player could cash out or continue playing. But if the player chooses to keep playing and plays the $10 in credits, the Revenue Department said that it was fair game to tax Greenetrack for $11.  

Such a system would leave the state of Alabama taxing fake money. Except, it only wants to do so in this particular case, because in a separate case, the same Revenue Department determined that game credits weren’t real money and chose not to tax them. 

The Legal Process

From the initial assessment in 2009, though, the case became a seemingly endless legal mess that sent it bouncing from court to court – with the Alabama Supreme Court stepping in periodically to remove judges on the case or appoint a new judge – and the two sides arguing over processes and appropriate venues. 

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The basic arguments never changed, however: the Revenue Department contended that Greenetrack’s electronic bingo revenue wasn’t exempt from state sales taxes because the track wasn’t covered by the 1975 racing act and because Greenetrack violated the constitutional amendment allowing for bingo in Greene County. 

Greenetrack’s arguments also never wavered, and the transcript from its 2019 hearing before a Tax Tribunal judge – a transcript that was submitted to the ALSC – explained the track’s position in detail. 

According to the transcript from that hearing, which led the appointed judge to rule in Greenetrack’s favor, attorneys for the track showed conclusively that the 1975 racing act covered essentially every taxable activity at the property, including food and drink vending, merchandise sales, various fees and all other taxes. 

There is no question about this, because the Alabama Legislature, which passed the original act, determined later that it needed to pass amendments to that act in order to impose other taxes on activities at the track. 

Essentially, lawyers for Greenetrack argued that the 1975 act’s intent wasn’t to exempt from taxes a specific activity (greyhound racing), but was instead meant to exempt a specific taxpayer (Greenetrack) from all taxes except those imposed by the act itself. And the state legislature clearly believed the same thing, since it came back and amended its work. 

Attorneys for the Revenue Department argued that such a reading was “outlandish,” and said that the intent of the legislature at the time was evident, since electronic bingo didn’t even exist at the time. 

To that, Tax Tribunal Chief Judge Jeff Patterson wrote, “… the remedy rests with the legislative body. ‘To apply a different policy would turn this court into a legislative body, and doing that, of course, would be completely inconsistent with the doctrine of separation of powers.’” 

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A Greene County Circuit Court later agreed on the issue and essentially adopted Patterson’s ruling. 

But the Alabama Supreme Court was, as usual, a different story. 

The Overstep

The ALSC spent several pages attempting to undermine Patterson’s ruling, using analogies about Walmart and gas taxes and generally hoping that mockery masked the court’s lack of legal argument. Because it most certainly lacked one. 

Then, it took a step that caught even seasoned Alabama attorneys off guard: instead of limiting its opinion to the sole issue decided by the lower courts – that Greenetrack was exempted from taxes by the 1975 racing act – the ALSC took up, essentially, the entire case. The opinion stated plainly that the ALSC was taking up issues that the lower courts had “never considered.” 

It then spent numerous pages arguing with itself – setting up strawmen and then using an odd combination of ridicule and vitriol to knock them down. It took on compliance with the constitutional amendment, the track’s arrangement with nonprofits to operate electronic bingo games, the proper way to tax game credits and why the taxes should be applied retroactively even though ALSC was, at that very moment, changing the laws as even the tax tribunal understood it. 

According to a tax attorney who spoke to APR, the seemingly arbitrary change in the law, and the ALSC coming over the top of lower courts and the tax tribunal to rule that a tax exemption doesn’t exempt “all” taxes even when it clearly says it exempts “all” taxes, is most troubling. 

“So now Alabama businesses and Alabama nonprofits can’t rely on the laws as written. What was a perfectly acceptable tax exemption yesterday is today no longer acceptable, and oh yeah, you owe a bunch of taxes because we interpreted it differently today. That’s not a great way to do business,” the attorney said. The attorney, who isn’t connected to the case in any way, spoke to APR on condition of anonymity, because he has argued cases before the court. 

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And that’s possibly the most important aspect of this: What Greenetrack was doing – the manner in which it operated – was legal. The county’s bingo amendment was passed in 2003, and even as the ALSC acknowledged in its opinion, the ultimate authority to “promulgate rules and regulations for the licensing, permitting and operation of bingo games in the county” was the county sheriff. 

Greenetrack followed the rules and regulations established by the sheriff. There has never been an allegation otherwise. 

The same can’t be said for the ALSC following its own rules. 

In order to make the case that Greenetrack’s bingo games weren’t covered by the 1975 racing act, the justices spent a good deal of time breaking down how the Alabama Legislature surely felt when it was passing that tax exemption into law. It wasn’t enough to simply read the plain text of the law, the opinion said, but you also had to read between the lines and examine intent. 

That’s a particularly novel idea for this court, since in 2016, in another bingo case, the ALSC overturned another judge – coincidentally, another ALSC-appointed judge – who ruled VictoryLand casino in Shorter was treated unfairly by law enforcement and was a victim of unfair prosecution. As part of that ruling, the court stated that there was no possible way to accurately determine legislative intent, and certainly no way to ascertain what voters might have been thinking. It dismissed as inconsequential and potentially misleading legislative records and newspaper reports, and it said fliers advertising the vote were irrelevant.

That’s some very rapid legal evolving. 

Or it could just be exactly what the entire opinion seems to be: a court with ultimate authority using its power to punish a legal business whose product the justices happen to find distasteful. 

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If so, that should worry the hell out of all of us. 

Josh Moon is an investigative reporter and featured columnist at the Alabama Political Reporter with years of political reporting experience in Alabama. You can email him at [email protected] or follow him on Twitter.

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