02/06/2004 12:00AM

Court rules for Prairie Meadows

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Prairie Meadows Racetrack and Casino could be entitled to a refund of $54 million after the state's supreme court ruled on Tuesday that different tax rates for Iowa's gambling facilities violated the state's constitution.

The ruling held that the state could not tax riverboat casinos and land-based casinos at different rates. Under the current tax policy, riverboats are subject to a 20 percent gambling tax, while racetrack casinos were taxed at an escalating rate that would have reached 36 percent by next year.

It was not clear on Friday whether Prairie Meadows would get the full refund. Racing officials in the state have said that they may work out an agreement on the debt with the State Legislature, which is trying to devise ways of covering a budget shortfall.

The ruling closes a case that was initially brought in 1998 by Polk County, which owns Prairie Meadows. The case eventually reached the U.S. Supreme Court last year.

Although the federal court said that states were within their rights to set different tax rates to encourage economic development, it remanded the case to the Iowa Supreme Court for a local test of the law.