$3.1M tax refund to Dotty’s properties put on hold

The owner of 41 licensed casinos, including several under the Dotty’s and Bourbon Street Sports brands, overpaid its gaming taxes over a 32-month period that began in August 2021.

Now, Nevada Restaurant Services Inc., the license holder, is trying to recover more than $3 million in tax overpayments.

The Nevada Gaming Commission on Thursday rejected a stipulation for settlement on the matter after a 45-minute hearing, hung up over whether the refund should include interest on the overpayment and, if so, how much it should pay.

The five-page stipulation for settlement rejected by the commission said the NRSI’s overpayment was the result of the company not properly deducting wagered amounts from gaming-related promotions from gross revenue of $46.9 million.

In the proposed settlement, the board and NRSI agreed on the state paying back $3,120,197.28 in gross gaming revenue tax, plus $222,744.12 in accrued interest through Aug. 22, plus additional daily interest of $446.09 until the refund is paid. Each party agreed to pay its own attorney fees and costs.

Had the deal been signed off by the commission, NRSI agreed not to contest the matter in court.

Under Nevada statutes, the Gaming Control Board is required to pay interest on refunds at half the prime rate of Nevada’s largest bank plus 2 percent. But commissioners also were told the settlement is negotiable, and they didn’t want to overpay a refund they believe should have been caught sooner by NRSI management.

Since the mistake was discovered, interest rates have fluctuated.

Because the overpayment was first discovered in August 2021 but the refund request came this month, commissioners ordered the Control Board to reconsider the settlement that would have required it to pay more than $3.1 million, plus more than $222,744 in interest.

“This was brought to NRSI’s attention in (2021),” Commissioner Brian Krolicki, a former state treasurer, said during the hearing at the Las Vegas City Council chambers.

“If this is formulaic, then I get it. There’s not much we can do,” he said. “But by definition, the stipulation is a negotiated agreement.”

He and his fellow commissioners said they felt it was important to protect state residents’ interests by renegotiating the settlement since it was NRSI’s delay that resulted in the proposed higher refund amount.

Commissioners considered paying NRSI the $3.1 million overpayment and negotiating the interest amount, but Kannon Smith, an attorney representing the company, said he didn’t have the authority to approve a revised settlement.

“I can’t speak for my clients, so I don’t know what they’ll have to say,” Smith told commissioners. “I don’t suspect that we’d want to be adversarial over this and take it to a hearing, but it’s not my decision.”

Interest accruing

Interest is accruing daily so the final refund amount could climb further until the commission votes either to accept the settlement or bring a disputed settlement to a hearing.

Tax overpayment refund requests are fairly common, but Control Board staff said they’re usually much smaller amounts. Settlement approvals of more than $250,000 are required to be brought to the commission for approval.

“I don’t want to offend our licensee, Dotty’s, but I just feel this is wrong, because not only are we out the staff time that it’s taken to wrestle this to shore here, but I can’t be assured that the state actually generated a quarter of a million dollars in interest during this time,” Krolicki said. “It’s costing us for your company’s lack of attention to this matter.”

Details of how the overpayment was discovered and why it took so long for the refund request to be made were not disclosed.

The matter could be reviewed by the commission in September if the settlement is renegotiated.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on X.