Ketchum

Davis

CHARLESTON – Owners of Fountain Place Cinema in Logan deserve $393,176 in tax credits over 10 years, the Supreme Court of Appeals has ruled.

Four Justices decided Feb. 16 that the eight-screen theater qualified under the Economic Opportunity Tax Credit Act as a "destination oriented recreation and tourism" business.

The majority affirmed Logan Circuit Judge Roger Perry, who ordered state tax commissioner Christopher Morris to approve an annual credit.

Justice Menis Ketchum wrote that he found no fault with Morris for trying to protect the public purse.

"But the Legislature chose to use nebulous, broad and expansive terms without definitions when it created the tax credit," Ketchum wrote.

Supplying a definition where legislators didn't, he wrote that a destination oriented recreation and tourism business is one "to which people travel that emphasizes providing some pastime, diversion, entertainment or amusement."

That alarmed dissenting Justice Robin Davis, who wrote that any bar with a pool table or any gas station with arcade games could claim the credit.

A limited partnership built Fountain Place Cinema in 2006, for $3,931,763.

The partners applied for a 10 percent credit, at 1 percent a year for 10 years. Morris denied the credit, and an administrative law judge affirmed the decision.

On appeal to circuit court, Fountain Place prevailed.

Perry ruled that it qualified as destination oriented recreation and tourism, which he defined as "traveling from one location to another for the purpose of amusement or relaxation, when such travel provides a source of income to a business entity."

The Justices changed his definition but not his decision.

Ketchum wrote that about 200,000 patrons visit the theater each year.

"Fountain Place states that about 30 percent of those patrons are residents of the nearby Commonwealth of Kentucky," he wrote. "The tax commissioner contends that the only proper reading of the statute is that the destination must be the primary motivating factor for traveling to West Virginia.

"The tax commissioner says this means the statute requires Fountain Place to prove that the primary motivating factor for its Kentucky customers to travel to Logan was to see a movie at Fountain Place Cinema and not some other activity, such as shopping or eating."

He wrote that an ambiguous statute must be construed to achieve the intended goal.

He quoted from the statute that the credits were intended to encourage greater capital investment in business and increase economic opportunity.

Chief Justice Margaret Workman, Justice Brent Benjamin and Justice Thomas McHugh joined Ketchum.

Davis's dissent predicted "far reaching negative consequences for the state's financial stability."

"The majority's construction of the phrase is simply wrong because every movie theater in the state now qualifies as a destination oriented recreation and tourism facility," she wrote. "Clearly, the Legislature did not intend this financially crippling definition."

She wrote that a separate statute on tourism defines "entertainment destination center" as a multiplex theater and other facilities.

Under that statute, she wrote, a movie theater standing alone would not be considered an entertainment destination center.

Ancil Ramey and Frederick Williams, both of Steptoe and Johnson in Charleston, represented Fountain Place.

Attorney General Darrell McGraw and assistant attorney general Wayne Williams represented tax commissioner Morris.

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