POLITICS

'Glitch' In GOP Tax Law Comes Back To Bite Trump Megadonors

Some Las Vegas casino magnates are asking Congress to fix an apparent flub in the tax law. Lawmakers are telling them to bargain with their workers first.
The Culinary Union represents service workers across the Vegas Strip and has been organizing Station Casinos for a decade.
The Culinary Union represents service workers across the Vegas Strip and has been organizing Station Casinos for a decade.

A clerical error in Republicans’ 2017 tax overhaul could end up giving Las Vegas casino workers the leverage they’ve been looking for in a long-running and bitter labor dispute.

The owners of the ritzy Palms Casino Resort are asking Congress to patch up an apparent oversight in the Tax Cuts and Jobs Act that ended up devaluing a tax break for upgrades to commercial properties. The Palms, which is part of the Station Casinos chain, is undergoing a $690 million facelift that would presumably qualify for a juicy writedown.

At the same time, the casino has refused to bargain with Palms workers who joined Las Vegas’ powerful Culinary Union last year, voting 84% to 16% in favor of unionizing. The federal labor board said the casino is breaking the law and ordered it to recognize the union and start negotiating. The Palms has opted to take its fight to federal court instead.

The billionaire brothers Frank and Lorenzo Fertitta, who sold the Ultimate Fighting Championship for a fortune, are the controlling owners of Station Casinos. Some lawmakers are now telling the Fertittas that if they want to get that tax break squared away, they ought to sit down at the table with their employees and start working on a contract.

Fourteen Democrats sent a letter last month to Frank Fertitta, who’s the CEO of Station Casinos’ parent company, Red Rock Resorts.

“Each of us has spoken out loudly and frequently about significant problems with the TCJA, and we believe that all the parties adversely affected by the bill deserve a chance to make their voices heard,” the lawmakers wrote. “We also believe that employees at your facilities deserve a chance to make their voices heard.”

Even a Republican, Rep. Brian Fitzpatrick (Pa.), sent a strongly worded letter of his own to Fertitta.

“[I]t pains me to know that your company would be getting this benefit while simultaneously and potentially illegally blocking its employees of their right to form and join a union,” Fitzpatrick wrote. His office said he received no response.

[I]t pains me to know that your company would be getting this benefit while simultaneously and potentially illegally blocking its employees of their right to form and join a union. Rep. Brian Fitzpatrick (R-Pa.) in a letter to the Palms' CEO

Republicans passed the Tax Cuts and Jobs Act in a rush at the end of 2017, knowing their hasty process would result in errors that would need to be fixed with subsequent legislation. Early the next year, Democrats went along with patching up the so-called “grain glitch” affecting farmers.

But Democrats have been less willing to go along with other fixes, including one for the “retail glitch,” which is preventing companies like Red Rocks from immediately writing off property upgrades. And now that they control the House, they have even less reason to play nice.

In an apparent effort to help its case with Democrats, Red Rock has retained the services of House Speaker Nancy Pelosi’s (D-Calif.) former chief of staff, Nadeam Elshami, to lobby lawmakers on the tax issue. The casino group paid Elshami’s firm at least $50,000 for their work in late 2018, according to lobbying disclosure reports.

Elshami didn’t respond to emails seeking comment. The union said it is planning a protest of his office. 

The Culinary Union and its parent union, the 300,000-member Unite Here, are major Democratic allies and play a big role in Democratic get-out-the-vote efforts. The Fertitta brothers are GOP megadonors who have contributed at least $2 million combined to the Trump-linked super PAC America First.

Geoconda Arguello-Kline, the secretary-treasurer of the Culinary Union, said lawmakers should not approve a tax break that benefits the company until it starts bargaining with workers.

“I think it would be so unfair if they gave this tax break to Station Casinos when they’re refusing to respect their workers,” Arguello-Kline said. “I think it’s shameful to lobby on behalf of Station Casinos.”

Republicans wanted their tax law to help companies by letting them write off investments immediately, instead of over a period of many years. They specifically intended to let retail companies immediately deduct the cost of investments in their buildings ― things like new restaurant dining areas or lighting. 

But they accidentally forgot to give such “qualified improvement properties” the proper designation in the tax code, causing them to revert to a much longer timetable than they had even before the new law took effect. 

As a result, a company that spent $100,000 upgrading its property, for example, should have been able to take that amount off its tax bill right away. Instead, without a fix, it can only write it off over a period of 39 years, meaning just $2,564 each year.

Some firms have been postponing renovations ― and others are complaining mightily about their tax bills.

“Small retailers and family owned restaurants were really negatively surprised when they filed their tax return this year,” said Nathan Rigney, lead tax research analyst with The Tax Institute at H&R Block.

A House bill meant to address the “retail glitch” currently has 120 co-sponsors, evenly split between Democrats and Republicans. 

I think it would be so unfair if they gave this tax break to Station Casinos when they’re refusing to respect their workers. Geoconda Arguello-Kline, secretary-treasurer of the Culinary Union

It isn’t clear how much of the Palms renovation would be affected by the reform, but it’s safe to say there’s more money at stake than upgrades at your local diner. The massive casino renovation has led to one of the most expensive hotel rooms in the world, a $100,000-a-night suite designed by artist Damien Hirst.

Michael Britt, a Red Rock senior vice president, noted that both small and large businesses support the change they’re seeking to restore Congress’ “original intent” in the tax law.

“Red Rock is among them and believes that all clear-thinking organizations should support a bill that will spur countless construction projects and create thousands of good paying jobs, including union jobs,” Britt said in an email.

As for the union urging lawmakers to withhold support for the fix, Britt said: “We are surprised to see anyone opposed to such bipartisan, common-sense legislation.” 

The Culinary Union represents service workers all over Las Vegas and has been organizing Station Casinos for a decade. It has unionized six of the chain’s properties. The company has been disputing the results in two elections ― at the Palms and the Green Valley Ranch Resort.

Arguello-Kline dismissed the company’s appeals as mere stalling tactics.

“They’ve been fighting and delaying the bargaining,” she said. “This company, they’re sending a clear message to workers that they don’t respect them and they don’t respect the democratic system.”

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