## Facts

- Iowa authorized slot-machine gambling on riverboats and later allowed racetracks to operate slot machines.
- Iowa imposed substantially different tax rates on slot-machine gambling receipts depending on whether the receipts were generated at racetracks or on riverboats.
- Racetrack slot-machine receipts were taxed at rates nearly double those imposed on riverboat slot-machine receipts, including a graduated structure for racetracks that increased over time while the riverboat rate remained lower.
- Racetrack gambling operators sued the Iowa Treasurer to enjoin collection of the portion of racetrack taxes exceeding the riverboat tax rate, alleging unconstitutional unequal treatment.
- The Iowa Supreme Court previously held the differential tax violated both federal equal protection and Iowa’s equality provision; the U.S. Supreme Court later rejected the federal equal protection claim and remanded.
- On remand, the Iowa Supreme Court reconsidered only the state constitutional claim and the appropriate disposition.

## Issues

1. Whether Iowa’s higher tax rate on racetrack slot-machine receipts than on riverboat slot-machine receipts violates Iowa Constitution article I, section 6, notwithstanding the U.S. Supreme Court’s conclusion that the same scheme survives federal rational-basis review.

## Decision

- The Iowa Supreme Court held the differential tax scheme violates Iowa Constitution article I, section 6.
- The court found no basis to change its prior state-constitutional conclusion after considering the U.S. Supreme Court’s federal analysis.
- The court reversed the trial court’s ruling for the State.
- The court remanded for determination of the appropriate relief.

## Legal Principles

- Iowa Constitution article I, section 6 operates as a state equality guarantee and may be interpreted independently of, and more protectively than, the Fourteenth Amendment’s Equal Protection Clause.
- A state court may invalidate a tax classification under the state constitution even when the U.S. Supreme Court has upheld the same classification under federal equal protection.
- Significant tax disparities between similarly situated, competing businesses engaged in the same regulated activity can violate state equality provisions when the disparity is treated as arbitrary or insufficiently justified under state standards.

## Conclusion

The Iowa Supreme Court reaffirmed that Iowa’s markedly higher taxation of racetrack slot-machine receipts compared to riverboat slot-machine receipts violates the Iowa Constitution’s equality guarantee, reversed the judgment for the State, and remanded to the district court to determine appropriate relief.


Racing Ass’n of Cent. Iowa v. Fitzgerald, 675 N.W.2d 1 (Iowa 2004)