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Atlantic City Casinos Brace for New Taxes

19 August 2002

ATLANTIC CITY, New Jersey – As reported by the Press of Atlantic City: "Southern New Jersey businesses are trying to measure the pain of this year's doubling - and then some - of state business taxes.

"…Since the casino industry routinely figures finances in the hundreds of millions, even billions, of dollars, $20 million might seem somewhat insignificant.

"Still, it's a hefty amount, and it's what Atlantic City casinos are preparing to pay this year as a result of the new state corporate business tax structure, which was enacted July 2 but is retroactive to Jan. 1.

"According to figures compiled from last week's federal securities filings and interviews with gaming executives, the state tax bill for Atlantic City casinos will be between $17 million and $20 million more this year. That excludes the 8 percent tax they pay on gross gambling revenue.

"…The Casino Association of New Jersey, which represents the city's dozen casinos, joined the New Jersey Chamber of Commerce in lobbying against the tax.

"`Obviously we thought this was bad legislation for the business environment in the state of New Jersey. Obviously we were not alone. Every other major business entity in the state was also against this,' said association President Timothy Wilmott, who is Eastern Division president of Harrah's.

"State officials revamped the tax structure to help offset a $6 billion budget deficit. The new tax structure is expected to bring in at least $1.8 billion this year, $1 billion more than the state collected in corporate revenues last year.

"…The tax also effects how some big companies structure their debt. Harrah's Entertainment, for instance, this week formally made its two Atlantic City casinos guarantors of $1.3 billion in intercompany debt, ensuring that the interest expense they've been paying is still deductible in New Jersey.

"Richard Chandonnet, Harrah's corporate tax director, testified Wednesday before the Casino Control Commission that his company hopes to save $9 million in state taxes from the interest-expense deductions…"

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