Appeal from the Circuit Court of Cook County; the Hon. Earl
Arkiss, Judge, presiding.
MR. JUSTICE WARD DELIVERED THE OPINION OF THE COURT:
Rehearing denied January 29, 1974.
The common issue in these two appeals, which were consolidated for argument and decision, is the proper measure of the tax imposed by section 10a of the Illinois Horse Racing Act (Ill. Rev. Stat. 1971, ch. 8, par. 37j1) upon Chicago Thoroughbred Enterprises, Inc., on moneys wagered at horse races conducted by it during the years 1966 through 1972. Chicago Thoroughbred Enterprises, Inc., is the defendant-appellee in No. 45359 and is the plaintiff-appellee in No. 45589. The Illinois Racing Board, though a party only to No. 45589, is involved in the subject matter of No. 45359. We shall, for brevity, refer to Chicago Thoroughbred Enterprises, Inc., as "C.T.E." and to the Illinois Racing Board as "the Board", while referring to the plaintiff in No. 45359 as "the State".
The appeal in No. 45359 is from a judgment entered upon a complaint filed by the State in the circuit court of Cook County on February 18, 1972, seeking to recover from C.T.E. amounts claimed to be due as the result of alleged underpayment of the tax on horse races conducted at Arlington Park Race Track for each of the years from 1966 to 1971, inclusive. On July 28, 1972, the circuit court entered judgment in favor of C.T.E. An appeal by the State to the Appellate Court for the First District was transferred here under Rule 302(b). 50 Ill.2d R. 302(b).
The appeal in No. 45589 is from a decree entered upon a complaint for injunction filed in the circuit court of Cook County by C.T.E. on July 31, 1972, against the Board. This case involves horse races conducted by C.T.E. at Arlington Park Race Track during the year 1972. The complaint alleged that the Board intended to collect the privilege tax at a higher rate than that authorized under section 10a of the Act. C.T.E. paid that portion of the tax which it conceded to be due, and deposited the balance (amounting to $642,968) into a protest fund, pursuant to the provisions of sections 2a and 2a.1 of the act of 1911 in relation to the payment and disposition of moneys received for or on behalf of the State (Ill Rev. Stat. 1971, ch. 127, pars. 172, 172a). The case was heard by the same judge who heard the case which is on appeal in No. 45359. A decree was entered on October 6, 1972, ordering that the amount being held in the protest fund be returned to C.T.E. The Board has appealed from that decree, and C.T.E. has taken a cross appeal from that portion of the decree which held that C.T.E. was not entitled to be paid interest on the amount refunded to it. The appeal and cross appeal in No. 45589 were also brought here pursuant to Rule 302(b).
We consider first the appeal in No. 45359. C.T.E. is a Delaware corporation which during the years in question has owned two horse-racing tracks in Illinois. One is Arlington Park Race Track, located in Arlington Heights, in Cook County, and the other is Washington Park Race Track, located in Homewood, also in Cook County. C.T.E. maintains two operating divisions, called the Arlington Park Jockey Club and the Washington Park Jockey Club. Prior to 1961 there existed two Illinois corporations bearing those names, but in that year each of them was merged into C.T.E., and they thereby ceased to be independent legal entities.
In each of the years from 1966 through 1971 the following procedure took place with respect to C.T.E.: An application was filed with the Board under the name of the Arlington Park Jockey Club division for a license to conduct horse races at Arlington Park Race Track and for an allotment of racing dates at that track. A separate application for a license to conduct races at Washington Park Race Track and for an allotment of racing dates at that track was filed in the name of the Washington Park Jockey Club division. Each of these applications was granted. In addition, at the request of C.T.E., the Board transferred the races set for Washington Park to Arlington Park, and all of the C.T.E. races were run at the latter track. Counsel for C.T.E. stated that the reason for requesting the transfer was that Arlington Park has a larger capacity. We may add that it appears that the Board was fully aware that the two jockey clubs were simply divisions of C.T.E.
Since 1965 the tax imposed by section 10a has been constructed on a graduated scale dependent upon the amount of money wagered. When first instituted, the tax ranged from a minimum of 5% on the first $5,000,000 wagered to a maximum of 8 1/2% on amounts over $60,000,000. (Laws 1965, p. 1647, sec. 1.) In 1969 the rate in each of the six brackets was raised by 3/4%, so that the minimum and maximum became 5 3/4% and 9 1/4% respectively. Laws 1969, p. 824, sec. 1.
For each of the years in question C.T.E. paid an amount in taxes which was arrived at by calculating separately the tax due on the amount wagered at the races conducted pursuant to the license applied for in the name of its Arlington Park Jockey Club division and the tax due on the amount wagered at the races conducted under the license applied for in the name of the Washington Park Jockey Club division, and by adding these two figures together to arrive at the total tax. It is the State's position that the tax should have been figured on the combined dollar amount wagered at the races conducted under both licenses.
Because the tax is graduated, the difference between the taxes which were actually paid and those which the State contends should have been paid is substantial. In 1966, for example, the sum wagered in the races conducted pursuant to the license granted to the Arlington Park Jockey Club division was $53,951,941, while the sum wagered in the races held pursuant to the license applied for in the name of the Washington Park Jockey Club division was $47,062,545. If calculated separately, the taxes due on these amounts were $3,816,155 and $3,265,004, respectively, yielding a total tax of $7,081,159. If the tax is computed upon the total amount wagered of $101,014,486, it comes to $7,786,231. Thus for 1966 the differences between the amount of tax which was paid and the amount which the State maintains should have been paid is $705,072. For the total period involved, the amount of tax alleged to be due and unpaid is $4,203,560. In addition, the State sought recovery of interest at 6% per annum on the amount of tax unpaid for each year running from the year in which the tax became due. With this addition the total recovery sought was $4,937,687. C.T.E. does not challenge the State's right to recover interest on whatever taxes may have been unpaid.
We set out below the pertinent portions of section 10a as it read before its amendment in 1969:
"In addition to the license fee herein provided for, a tax upon the total of all moneys wagered each day of a racing meet is hereby imposed upon every person, association, corporation or trust for the privilege of conducting horse racing meetings other than charity meets under the provisions of this Act, at the following rates at any race track or enclosure located within a county of 500,000 or more population or within a county of less than 500,000 population but within 100 miles of the corporate limits of any city in this State having a population of 1,000,000 or more:
Upon the first $5,000,000 of annual pari-mutuel handle ............................................. 5% $5,000,001 to $10,000,000 .......................... 6% $10,000,001 to $30,000,000 ......................... 7% $30,000,001 to $40,000,000 ..................... 7 1/2% $40,000,001 to $60,000,000 ......................... 8% Over $60,000,000 in annual pari-mutuel handle .. 8 1/2%
At any race track or enclosure located within a county of less than 500,000 population and more than 100 miles from the corporate limits of any city in this State having a population of 1,000,000 or more the ...