LOUISVILLE - Churchill Downs Inc. lost its federal court appeal Tuesday seeking to fully deduct the costs of dinners and parties it hosted in conjunction with the Kentucky Derby and Breeders' Cup.

The 6th U.S. Circuit Court of Appeals in Cincinnati upheld a federal tax-court ruling that allowed the horse-racing company to deduct 50 percent of the expenses from its federal income-tax returns.

The Louisville-based company is the parent of the namesake track in Louisville that hosts the Kentucky Derby.

The Derby-related functions cost more than $131,000 in 1994 and more than $93,000 the following year. The lion's share of expenses both years came from the “Sport of Kings” Gala, an invitation-only reception, dinner and entertainment for members of the media and other guests. The 1994 expenses also included the Derby Winner's Party after the race; the 1995 expenditures also consisted of a press hospitality tent.

When the track hosted the Breeders' Cup in 1994, its contract obligated it to host events to promote the day of racing. The expenses totaled $145,385 for a media reception cocktail party and dinner, a brunch and a breakfast for media.

The track deducted the full amounts of the expenses on its 1994 and 1995 federal income-tax returns as “ordinary and necessary business expenses.” The commissioner of Internal Revenue agreed the expenses qualified as business expenses but said the company could deduct only 50 percent because the costs were associated with entertainment. In its ruling, the federal tax court agreed with the commissioner.

In seeking the full deduction, Churchill Downs argued that the expenses were not entertainment-related because the pre- and post-race events generated publicity and media attention for its races.

No horse racing was conducted at the dinners and other events, which were held away from the track, the appeals court noted. Nor did the events give guests an opportunity to learn more about the races, it said.

“Rather, Churchill Downs concedes that the events were planned simply as social occasions,” appeals Judge Eugene Siler Jr. wrote for the three-judge panel. “Nor were the events open to the gaming public that attends Churchill Downs races and wagers on them.”

Churchill Downs also argued that the expenditures should be fully deductible because they were meant to promote the horse races.

The appeals court rejected that argument.

“Regardless of whether Churchill Downs incurred these expenses in order to promote an upcoming event open to the public, the goods and services purchased with these expenditures were not made available' to the general public ... but rather only to a few invited guests,” Justice Siler wrote.

An attorney for Churchill Downs could not be reached immediately for comment on whether the company plans to appeal.

Audit cites foster care expenses
Million-dollar homes are hot
Recorded racial slur puts Caton off streets
Ansley 'incompetent' for trial
Bar association backs both in judge race
Child support operator sued
Demolition halted MetroParks wants building
Different approaches touted
Experts in church law study how new sex-abuse rules fit
Hospitality pitch heads to suburbs
New anti-prostitution plan: Impound johns' vehicles
Obituary: Deloris Young, social worker
Singers merge voices for concert
Tristate A.M. Report
BRONSON: Bush's visit
HOWARD: Some Good News
KORTE: City Hall
SMITH AMOS: Feeling the heat
Committee to promote tax shift
Eateries commit to open at new malls
Meeting targets Mason, Deerfield
No-nude trial OK with court
Taft endorsement divides Warren GOP
Upgrades get Y in shape
Appeals court rules Churchill Downs can't deduct parties
Election signs have rhyme, reason
Harlan man pleads guilty to murdering his parents
Kentucky News Briefs
N.Ky. gets 2nd shot at state's tuition plan
Opening of gun museum delayed
Quorum lacking in vote to dispose of weapons gases
Religious leaders urge caution on Iraq attack
Supreme Court refuses to hear death row plea
Suspect charged in mail bombing