On appeal from the Casino Control Commission.
R.s. Cohen, Muir and Kestin. The opinion of the court was delivered by R.s. Cohen, J.A.D.
[262 NJSuper Page 573] This appeal challenges the denial by the New Jersey Casino Control Commission (the CCC) of the petition of Atlantic City Megabucks Trust (the Trust) for amendment of a CCC regulation.
The proposed amendment would have permitted the casinos, which are members of the Trust, to ratably deduct, for calculation of the eight percent tax on gross revenues, either the annuity payments made by the Trust to Megabucks winners at the time those payments are made, or the cost to the Trust of funding the annuity payments at the time the cost is expended. No one has challenged the standing of the Trust to bring this appeal, and we do not find it necessary to raise the issue ourselves.*fn1
"Megabucks" is a system of linking the top jackpot prize of licensed progressive slot machines located at a number of casinos, in which every coin or token placed in any slot machine connected to the system increases the amount of the progressive jackpot. The current amount of the jackpot is determined by the amount of play at all of the Megabucks machines, and is registered on a payoff display on the face of each slot machine. When the jackpot is won, each slot machine in the system resets to a specified minimum amount.
The Trust, which was created by the casinos, manages the Megabucks system on their behalf. It insures that payments are made, all in conformity with CCC regulations. See N.J.A.C. 19:45-1.39A. et seq. The regulations permit the jackpot prize to be in the form of an annuity, in which the patron "wins the right to receive cash payments at specified intervals in the future." N.J.A.C. 19:45-1.40B(a). Casinos finance the operations of the Trust and the funding of the jackpots by contributing
to the Trust six percent of their net receipts from the Megabucks slot machines.
Currently, Megabucks payoffs are made in a manner like that adopted by the New Jersey Lottery. Twenty payments are made, the first immediately by the casino where the patron wins, and the following nineteen by the Trust at one year intervals. The Trust may arrange the deferred payments by purchasing either an annuity contract from an insurance company or a series of nineteen U.S. Treasury Zero Coupon Bonds that will mature on each anniversary of the win. We are told that the Trust currently secures the annuity payments through the purchase of bonds, and that the cost is about forty cents for every dollar of annuity payout. We have no comparable figures for the purchase of annuity contracts, but we imagine that the up-front cost also represents a fraction of the total amount to be paid out over the years.
The Trust's dispute with the CCC focuses on the meaning and effect of some of the statutes and regulations governing the extent of casino liability for the eight percent tax on gross casino revenues. N.J.S.A. 5:12-144. For the purpose of calculating the tax, gross revenues are defined by N.J.S.A. 5:12-24 to include all receipts from gaming operations, including uncollected checks, less only two items. One is a deduction for uncollectible gaming receivables. The other deduction, the one involved here, is "the total of all sums paid out as winnings to patrons."
The quoted language of N.J.S.A. 5:12-24 is modified by language contained in N.J.S.A. 5:12-45, a section defining "slot machine." From its enactment as L. 1977, c. 110, § 45, until a 1985 amendment, the statute defined the means by which a slot machine made a payoff as follows:
It is clear that the amendment permitting slot machine payoffs of merchandise or any thing of value did not focus on annuity jackpots. Instead, what the casinos wanted and got in the 1985 amendment was permission to make payoffs in automobiles, resort vacations, and the like. It is equally clear that the disallowance of the cash equivalent value of any merchandise or other thing of value, as a deduction from the gross revenues tax, was intended to serve the purpose of avoiding the imponderables of evaluation, and the inevitable disagreements that would have to be resolved by the CCC. There was no more significant reason than that. There was no appeal by the casinos challenging the validity of the no-deduction provision.
It was not until 1990 that the CCC adopted regulations permitting progressive slot machines and annuity jackpots. One of the new regulations, N.J.A.C. 19:45-1.40A(a), expressly applied to annuity jackpots the prohibition of N.J.A.C. 19:45-1.40A(b) against deduction of the cash equivalent value of payouts in merchandise or other things of value. There was no appeal from the adoption of the regulations. Instead, the Trust petitioned the CCC for amendments ...