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Tribal tax case deserves its day in court

• Published April 15, 2009

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The dispute over the tax status of Great Wolf Lodge should be allowed to go to trial.

Owners of the destination resort at Grand Mound have asked a federal judge to short-circuit the process. In essence, the owner of the hotel and indoor water park has asked the judge to force Thurston County Assessor Patricia Costello to drop the lodge from the property tax rolls.

Costello believes the lodge should be taxed. But officials at the state Department of Revenue have determined that the hotel should be off the tax rolls because majority ownership in the hotel belongs to the Chehalis Indian tribe, and therefore qualifies for a federal exemption from taxation.

The ultimate outcome of this dispute is important to other taxpayers because if Great Wolf is off the rolls, the tax burden — approaching $1 million — shifts to other property owners.

CTGW LLC. a partnership with the tribe owning 51 percent — is owner of the hotel.

The lodge itself is on Indian trust land and all parties agree that the 39 acres are not subject to taxes. The question is whether the improvements — the hotel and water slide complex — are taxable.

Costello contends that because the improvements are nearly half-owned by a nontribal company, they shouldn't be exempt. As an independently elected official, Costello said, she is not bound by the tax determination of the Department of Revenue. Costello said she's under no legal obligation to abide by the Revenue ruling.

Costello further argues that as a Delaware-based limited liability company, CTGW is not a uniquely tribal business exempt from paying property taxes on the buildings.

Interestingly enough, even Revenue officials agree that Costello is not bound by the state agency's tax determination. In a recent letter, Brad Flaherty, head of Revenue's property-tax division, said the agency "did not consider the letter (outlining Revenue's determination) to be an order" under state law.

That hasn't stopped hotel owners from trying to force Costello to follow Revenue's ruling.