Churchill Downs Inc. made a $2.3 million payment to the Internal Revenue Service in the third quarter because of "proposed adjustments" to its tax liabilities from 2004-2007 that arose out of a recent audit of the company's finances, Churchill said late Wednesday.\nThe $2.3 million payment, coupled with other income-tax expenses of $1.3 million, wiped out the company's net earnings for the quarter. As a result, Churchill lost $2.3 million in the quarter, a $4.8 million swing from the $2.5 million in net income the company earned in the third quarter of last year, according to financial statements.\nRevenue in the quarter was $100.9 million, up 1.3 percent compared to revenue of $99.6 million in the third quarter of last year. Operating expenses increased 2.4 percent, from $83.3 million in the third quarter last year to $85.3 million in the third quarter this year, while administrative expenses increased 9.2 percent, from $12.0 million to $13.1 million. \nRevenues from the company's racing operations at Churchill, Calder, Fair Grounds, and Arlington Park declined 7.4 percent, from $73.9 million in the third quarter last year to $68.4 million this year. Revenue from Churchill's online wagering business jumped 32.9 percent, from $13.1 million to $17.4 million, in a reflection of the industry's overall migration of handle to account-wagering companies.\nSlot-machine revenue at Fair Grounds jumped 21.6 percent, from $11.6 million to $14.1 million, according to the financial statements.\nIn a release accompanying the statements, Churchill chief executive Bob Evans said that revenues from Churchill's racing properties were negatively impacted by the recession and the declines in wagering tied to it. \n"Given the economy and industry handle declines, it is increasingly difficult to earn an acceptable return on those investments," Evans said.