Kansas City Chiefs score big win as Missouri high court sides with team in tax case
The Kansas City Chiefs scored big Tuesday when the Missouri Supreme Court reversed a state hearing panel’s decision that would have saddled the team with $1 million in back taxes in connection with the renovation of Arrowhead Stadium a decade ago.
The high court said the state’s Administrative Hearing Commission erred when it ruled last year that the team should have paid sales taxes on a number of items bought during the $375 million upgrade completed in 2010.
Taxpayers paid $275 million of the total for things like expanded concourses and replacing basic stadium infrastructure. The Chiefs kicked in the rest.
The Chiefs contended that nearly all of the purchases the team funded were exempt from sales taxes because that money went into a common construction fund controlled by the Jackson County Sports Complex Authority.
The Missouri Development Finance Board had granted a special tax credit for the project, the Chiefs argued, so no sales and use taxes were owed on purchases from the fund. Plus, everything bought for the stadium project belonged to the county, not the team, right down to coach Andy Reid’s desk.
County government and the sports complex authority agreed with the Chiefs on all that. But the Missouri Department of Revenue thought otherwise, which set off the six-year legal battle that came to an end with the high court’s unanimous decision.
The dispute stems from a 2014 audit in which the revenue department challenged sales tax exemptions on $23 million in purchases that the department said were “improperly claimed” between 2008 and the project’s completion in 2010.
The department said those items were not exempt from sales taxes because they meant to further the Chiefs’ own business interests rather than the public purpose of fixing up the stadium, which Jackson County voters approved in 2006 by authorizing a tax hike to renovate both Arrowhead and Kauffman stadiums.
In exchange for the upgrades, both the Chiefs and the Royals agreed to extend their leases for 25 years.
Among the expenditures the revenue department questioned were the purchases of leotards for cheerleaders, autographed footballs and a framed jersey of Buffalo Bills Hall of Fame running back Thurman Thomas. Also challenged were exemptions on more substantial assets. Things like like weight-lifting equipment, televisions, lockers for practice facilities and a statue of team founder Lamar Hunt.
The Chiefs balked at paying the $1.8 million in delinquent taxes and late fees that the state said the team owed at the time and appealed to the Administrative Hearing Commission, an obscure body that settles disputes over decisions made by state agencies.
The case file grew voluminous as the dispute dragged on. The Chiefs were displeased to learn in 2019 that three years of the organization’s private tax returns had become part of the public record. The team successfully had those records removed from public viewing after The Star reported on some of their contents.
When the hearing commission finally ruled in January 2019, it was a split decision. The commission agreed that some of the challenged expenditures were exempt from taxes. Some others, the Chiefs had agreed didn’t qualify, such as champagne and cookie “bouquets” that the auditors had flagged.
But the commission said the Chiefs still owed $930,000 in back taxes, plus interest.
The Supreme Court heard the team’s appeal last fall. In the decision written by Judge Laura Denvir Stith, the court said the administrative commission and revenue department had both been wrong.
Even though the Chiefs directed how their funds would be spent in the renovation, the money was under the county’s control, which had tax-exempt authority for the project and owns everything purchased with those funds.
“The team was not the source of the consideration for the contested items and, therefore, was not the purchaser of the items for sales and use tax purposes,” Stith wrote. “The AHC’s decision is reversed, and judgment is entered in the team’s favor.”
This story was originally published June 2, 2020 at 3:44 PM.
