Is the “Drafting Error” Justification for the Tax Bill Veto Legit? You Make the Call!

The Governor’s veto of the 2016 tax bill based on the now infamous “$100 million dollar drafting error” has potentially major ramifications for state policy and for citizens themselves.  The Administration insists nothing could be done to remedy this situation short of legislative action, and signing this bill would have been fiscally irresponsible.  Republicans countered these things happen and there are several ways to justify administering the law based on legislative intent.    

Who’s right?  Who knows?  But it’s morbidly interesting and entertaining in a "that’s why I didn't go to law school” sort of way to examine the arguments on each side.  

First, the language at issue (Laws 2016, chapter 188, article 5, section 28) concerning the problem: access to favorable tax treatment of pull tabs:

Bingo hall. (a) “Bingo hall” means the premises on which an organization licensed under this chapter regularly conducts bingo if:

  1.  more than 50 percent of the organization’s gross receipts from lawful gambling in the prior calendar year were attributable to the conduct of bingo or the organization had no receipts from lawful gambling in that year; OR  (emphasis ours)
  2.  no other organization conducts lawful gambling on the premises.

Here’s a synopsis of each sides’ points.  First, the “there is no remedy except for legislative action” position from the cosigned letter from Commissioner Myron Frans of MMB and Commissioner Cynthia Bauerly of Revenue to Governor Dayton and Lt. Governor Smith

  • Because of the unfortunate use of the word “or,” most any location that sells pull tabs and chooses to run a bingo game can declare itself a “bingo hall.”
  • The qualifier “regularly” doesn’t help.  An establishment might conduct bingo very infrequently but predictably and the proportion of total revenues coming from bingo is immaterial.
  • DOR has an obligation to administer the tax laws as written.  There is no ambiguity here – the language says what it says and its purpose was to grant preferential treatment.  DOR can’t determine who is eligible for this favorable treatment and who is not.

Now the rebuttal taken from the June 2 letter from House Tax Chair Greg Davids to Governor Dayton arguing the law can be administered as intended through a letter of legislative intent:

  • Words have meaning.  “Bingo hall” clearly denotes a place devoted to entirely or mostly to bingo.  The use of the word ‘regularly” only reinforces the idea legislators intended to single out a small subset of the pull tab universe.
  • A justification for administering the law as intended can also be based on the nonsense resulting from using the word “or.”  It makes no sense to carefully define a test for eligibility in condition 1 and then throw everything out the window in condition 2.
  • The state routinely uses revenue estimates to construe the meaning of provisions; the estimate conferees used for this provision when crafting the omnibus bill reinforces what the legislative intent was.
  • The state has administered tax laws based on legislative intent before.
  • Even using the most generous interpretation of “bingo hall” to administer the law, does not create an immediate fiscal problem.  The legislation only creates a $100 million impact if it’s not corrected in 3 years; the stadium reserve fund would remain fully funded until a correction could be adopted in 2017.

This situation is a little reminiscent of the old “You Make the Call” television spots during NFL games of years past in which viewers were challenged to make the correct ruling on bizarre in-game situations.  The difference in this case is there is no referee or rule book to determine who is “right.”  The play stands as is with citizens ultimately "making the call" in November.