## Facts

- Illinois authorized riverboat gambling in 1990; by the mid-2000s, nine riverboat casinos operated in the state.
- Four “upstate” casinos had adjusted gross receipts (AGR) exceeding $200 million in 2004; five other casinos did not.
- Illinois also had five horse-racing tracks with live racing; the legislature found riverboat gambling harmed horse racing, citing a long decline in on-track wagering.
- Public Act 94-804 imposed, for two years, a 3% surcharge on the AGR of any riverboat casino with more than $200 million in AGR in 2004, which applied only to the four high-AGR casinos.
- The surcharge was paid daily into the Horse Racing Equity Trust Fund and distributed within 10 days: 60% to racing purses and 40% to racetracks for facility and operational improvements tied to live racing; the Illinois Racing Board monitored distributions.
- The taxed casinos argued the statute compelled them to transfer revenue to private competitors in the horse-racing industry.

## Issues

1. Whether the 3% surcharge limited to casinos with AGR over $200 million in 2004 violated the Illinois Constitution’s uniformity clause governing non-property taxation.
2. Whether the surcharge and earmarked distribution of its proceeds to private racetracks constituted a taking of property for private use under the Fifth Amendment.
3. Whether directing surcharge proceeds to private racetracks violated the Illinois Constitution’s public-funds clause by serving a primarily private purpose.

## Decision

- The Illinois Supreme Court reversed the circuit court’s summary judgment for the casinos and upheld Public Act 94-804.
- The court held the surcharge did not violate the uniformity clause because the classification was based on a real and substantial difference (AGR levels) and reasonably related to the statute’s objective.
- The court rejected the takings claim, characterizing the exaction as a tax and holding that a tax cannot be a taking under the Fifth Amendment.
- The court upheld the statute under the public-funds clause, concluding the legislature identified a sufficient public purpose in supporting the horse-racing industry within the state’s broader economic and gambling policy.

## Legal Principles

- Under the Illinois uniformity clause, a non-property tax classification is valid if it rests on real and substantial differences and bears a reasonable relationship to the legislative objective; courts apply strong deference to legislative judgments in taxation.
- A duly enacted tax is not analyzed as a compensable taking under the Fifth Amendment, even if the revenue is earmarked for distributions that benefit private entities.
- Under the Illinois public-funds clause, expenditures that confer benefits on private parties may be constitutional if the legislature identifies a legitimate public purpose and any private benefit is incidental.
- Courts generally defer to legislative fact-finding and policy choices in economic regulation, including tax-and-subsidy schemes among related industries.

## Conclusion

The Illinois Supreme Court sustained a temporary surcharge imposed only on the state’s highest-grossing riverboat casinos to fund a statutory horse-racing support program, finding the classification rational and constitutionally uniform, treating the exaction as a tax not subject to takings analysis, and accepting the legislature’s public-purpose determination for the challenged distributions.


Empress Casino Joliet Corp. v. Giannoulias, 896 N.E.2d 277 (Ill. 2008)