THE THIRD DAY

                               

Carson City (Thursday), June 5, 2003

    Senate called to order at 9:27 a.m.

    President Hunt presiding.

    Roll called.

    All present.

    Prayer by the Chaplain, Pastor Albert Tilstra.

    God of our fathers, deliver us from futile hopes and from clinging to lost causes. Where we cannot convince, let us be willing to persuade, for small deeds done are better than great deeds planned. We know that we cannot do everything. But help us to do something. May Your will be done here, and may Your programs be carried out, above party and personality, beyond time and circumstance for the good of this great State.

Amen.

    Pledge of allegiance to the Flag.

    Senator Raggio moved that further reading of the Journal be dispensed with, and the President and Secretary be authorized to make the necessary corrections and additions.

    Motion carried.

MOTIONS, RESOLUTIONS AND NOTICES

    Senator Raggio moved that the Senate resolve itself into a Committee of the Whole for the purpose of considering various revenue plans and the unresolved issues of the Seventy-second Legislative Session, with Senator Raggio as Chairman and Senator McGinness as Vice Chairman of the Committee of the Whole.

    Motion carried.

IN COMMITTEE OF THE WHOLE

    At 9:47 a.m.

    Senator Raggio presiding.

    Various revenue plans and the unresolved issues of the Seventy-second Legislative Session considered.

    The Committee of the Whole was addressed by Senator Raggio; Charles Chinnock, Executive Director, Department of Taxation; Senator Mathews; Senator Care; Senator Townsend; Senator Amodei; Richard S. Combs, Deputy Fiscal Analyst; Senator Nolan; Senator McGinness; Senator Cegavske; Senator Coffin; Senator Titus; Senator Rawson; Senator Hardy; Senator Tiffany; Senator Washington; Senator Carlton; Russell J. Guindon, Deputy Fiscal Analyst; Senator O'Connell; Senator Rhoads; Senator Shaffer; Senator Neal and Jeremy Aguero.

    Senator Raggio:

    I have been meeting with our staff to get things in order so we can work more efficiently and to get some information from those individuals who would have to implement some of these matters. This has necessitated the delay in starting. You have been given a list on the potential components of a tax revenue plan approved by the Senate Committee on Taxation. The sheet is titled, “Estimated Revenue Generated from Increase in Rates of Selected Taxes,” dated June 3, 2003. Attached is the background information on all of these potential components.

    Assuming we are able to meet our major goals, the Governor indicated he might request to add bills on which there was a consensus, but may have fallen through the cracks during the regular session. This does not mean bills not agreed to can be added. I am not certain of the Governor’s intentions.

    The net profits, or business income tax, was discussed yesterday. Information was brought to our attention that should be understood. There is a document from the Department of Taxation titled “Business Income Tax.”

    This is a work session of the Committee of the Whole. If there is any misinformation, information the committee would need to know or would impact any component that the committee is discussing, those individuals should come forward with such information.

    Charles Chinnock (Executive Director, Department of Taxation):

    Our first concern was to have sufficient time to implement a business income tax. Looking at the basis of our concerns is the number of accounts we would have to administer on early implementation. At the beginning of the regular Legislative Session, we were talking about 140,000 businesses, and we have since received updated information from the Internal Revenue Service (IRS) that there are over 200,000 businesses with which we would have to work. To implement any major tax would be difficult because our current Automated Collection Enforcement System is limited. We testified this Session that if there was a major tax we would need to receive appropriations to implement new technology and to have time to implement the new technology. Then we could implement a new and more complex tax. We have been discussing a couple of dates. One was July 1, 2005. After we received our cost estimate and indications from vendors, we realized we would need to move the implementation date to January 1, 2005, for a major tax.

    Senator Raggio:

    You said, “No doubt the best way to implement the net profits tax would be to make it effective as of January 1, 2004, with first collections on January 1, 2005.” Even if you tried to implement this, there would have to be some kind of “bridge” funding to accommodate the full funding of our budget.

    Mr. Chinnock:

    Yes, if January 1, 2004, were the date, they would begin reporting their income; January 1, 2005, would be the date they would begin to file their returns.

    Senator Raggio:

    Do you have a major issue in determining a manner in allocating or apportioning income for interstate and international businesses?

    Mr. Chinnock:

    The issue is how do you determine the income that was earned in Nevada with a corporation that is interstate or international but is doing business here. If you look at California or other states' regulations, there are substantial laws and regulations to define how it would be accomplished. Once the statute is established, there is another issue in turning it over to the Nevada Tax Commission so they can write the regulations for its implementation. Without sufficient time, it would be difficult for the Nevada Tax Commission to write the necessary regulations for implementation.

    The next issue addresses our programmers. Presently, we have four programmers. We did put more programmers into our budget, but they would be tasked to do the other taxes and implementing new technology which would make it difficult for our programming section.

    We would have to have some understanding as to the application of the business tax and the need to have some definitions on income and deductions. Reference has been made to the complexity of this procedure. We could use a certain line item off one of the forms for a corporation, partnership or a sole proprietorship. We could consider looking at other states and see how they handle income and deductions. If it became very complex, our current technology would not be sufficient and provisions would be needed.

    Statutes and regulations need to be addressed on apportionment and implementing the business income tax through the Nevada Tax Commission.

    Senator Raggio:

    There are various forms of business entities that file on different IRS forms. You indicate that a definition would be necessary to determine income. Your suggestions are the net income would be business income less all ordinary and necessary business expenses. Your memo indicates that for various types of business entities the IRS definition is different for each entity.

    Mr. Chinnock:

    You are correct in order to be sure we picked up from the business income form the various incomes, especially on the sole proprietors. We did not get into the personal incomes or wages. We need to be careful where we do that and what we select from the different forms. We see this as an annual filing. Businesses have different fiscal years. Sole proprietorships’ fiscal years coincides with the calendar year. There are different filing requirements with the IRS. We would propose to coincide our returns and filings with the IRS.

    Senator Mathews:

    Did you prepare a “white paper” for all the broad-based taxes?

    Mr. Chinnock:

    Throughout my testimony, I have presented several booklets. I do not have a separate “white paper” on every tax.

    Senator Mathews:

    What prompted this “white paper?”

    Mr. Chinnock:

    Each time the Department of Taxation was aware there was a tax that might be considered, we would discuss implementation issues and timeframes. This one was not singled out but was the most recent.

    Senator Care:

    Would the complications make any difference if we had a net profits tax in the statute and it stated, “not all businesses have to file just those that meet the threshold.” The problem then would be if you could spot-check businesses that did not file but you believed they had met the threshold. Does the number of businesses you have listed present a problem? Are the problems you have detailed the same regardless of a universal business tax (UBT) or gross receipts tax? How difficult would it be to enforce a provision, “no business may hire an independent contractor, unless the contractor has proof of having paid the last quarter’s business license tax (BLT)? This is to prevent the sole proprietor or a one-person corporation from not paying the BLT.

    Mr. Chinnock:

    Referring to the threshold, with approximately 140,000 to 200,000 businesses in the State, we would have a large task. The other issue with respect to the net income tax was the complexity of the task. I am not certain how this would be structured, what deductions and what additions would be included. If there were sufficient restrictions, there might be a way we could implement that in a shorter timeframe.

    Senator Care:

    How difficult would it be to have a provision that could be enforced which says you cannot hire someone unless that person has paid the last quarter’s BLT?

    Mr. Chinnock:

    We would administer the program through our audit program. Such a program could be established.

    Senator Townsend:

    Would you give the Committee dates of implementation with which the Department is comfortable?

    Senator Raggio:

    We have a chart showing the cost of implementation. Would you go through the chart for the committee?

    Mr. Chinnock:

    I submitted a memorandum dated May 30, 2003, to the chairmen of the Senate Committee on Taxation and the Senate Committee on Finance. When they were submitted, these were the tax proposals as we saw them. We had Senate and Assembly approved tax proposals and various versions of other taxes that had been discussed. We composed a spreadsheet that showed the cost, the manpower and the date of implementation for the various taxes.

    Senator Raggio:

    Are the estimates still viable?

    Mr. Chinnock:

    Yes, they are still viable.

    Senator Raggio:

    Would that change depending on the combination of taxes?

    Mr. Chinnock:

    Yes, if there were new taxes requiring programming changes. The Senate plan had less new taxes and the Assembly plan had more new taxes. We indicated we could accommodate them, but it would stretch our capabilities.

    Senator Raggio:

    Was the business income tax included in your list?

    Mr. Chinnock:

    I was not aware of the business income tax when the memorandum was submitted.

    Senator Raggio:

    Do we have the numbers and the personnel that would be required?

    Mr. Chinnock:

    It would be the same as the Senate version for the service tax, a total of 90,000 accounts; 35 people would be needed in 2004, but in reality, a total of 81 people would be needed.

 

    Senator Amodei:

    I have compared you present figures with ones you gave us earlier in the session. There seems to be a migration in the numbers. Would you explain the change in the cost of the implementation numbers?

    Mr. Chinnock:

    We are aware of some changes, but most of the taxes are not changed. The service tax was reduced. In our initial information, there were 120,000 accounts to implement which was reduced to 90,000 accounts. The rest of the taxes should be close to the prior information. There was some restructuring of the support group. In earlier presentations, our support personnel within each of the taxes was included.

    Senator Amodei:

    Do you have an opinion as to the ease of implementation of the broad-based taxes?

    Mr. Chinnock:

    Early implementation on any broad-based business tax would be difficult. Any broad-based business tax takes regulations. If there would be a desire to implement the tax within six months, there would need to be restrictions to make it possible to implement the tax with our present information technology.

    Senator Amodei:

    Would our fall back position be the numbers and the information obtained in the information provided to us today?

    Mr. Chinnock:

    Are you asking if we stand by our numbers?

    Senator Amodei:

    I have a concern about the implementation of these taxes. Which of the taxes would be the easiest to implement? If we go by this, are we not breaking faith with the Department in terms of cost and timing issues for implementation?

    Mr. Chinnock:

    I believe we can implement on the timeframes presented. The broad-based business taxes are more difficult to implement. The taxes on page 3 of the handout would be easy to implement.

    Rick S. Combs (Deputy Fiscal Analyst):

    Earlier in the regular session, there was a combined cost estimate from the Department of Taxation relating to the business license tax and the business license fee. It included the expansion of both of those provisions to sole proprietors, and the figure is significantly higher than the present figure for just the business license fee.

    Mr. Chinnock:

    You are correct. In our present plan, we do not show an expansion to sole proprietorships. The business license fee is shown.

    Senator Raggio:

    It would be helpful to add the business income tax to the list you have provided to give us the full-time-equivalents and the cost associated with implementation. Look over your proposal plan and see if there could be any adjustments made.

    Senator Nolan:

    Which plan would be the easiest transitional tax for us to impose to enable your Department to gear up and prepare for a more broad-based tax?

    Mr. Chinnock:

    The easiest would be the payroll and property taxes.

    Senator Nolan:

    Would the room tax be difficult to implement?

    Mr. Chinnock:

    The room tax would be administered through the local level. There is an infrastructure in place for this to be accomplished. There is one person who could oversee the room tax.

    Senator Mathews:

    Would the Senate or the Assembly tax plan be easiest to implement?

    Mr. Chinnock:

    The costs would be the same. I commented earlier the Assembly’s tax plan had more new taxes and would be more difficult to implement.

    Senator Mathews:

    Why is this being called an income tax when we referred to it as net profits tax?

    Mr. Chinnock:

    I was aware of an issue on the tax. I did a workup to be ready in the event of questions.

    Senator Mathews:

    Why was this not done for the other broad-based taxes?

    Mr. Chinnock:

    The Department did a booklet and presentation on every tax for the taxation and finance committees in both Houses.

    Senator Raggio:

    Could you provide us with workups on the other taxes?

    Mr. Chinnock:

    I will make them available to you.

    Senator McGinness:

    During our discussions concerning the payroll tax and the discontinuation of the BLT, you stated you could make the transition without any new employees. Is that still possible?

    Mr. Chinnock:

    We determined, if you implemented a payroll tax and discontinued the BLT, it would be a “wash” as far as the number of personnel.

    Senator Cegavske:

    Were you referring to a “wash” as to implementing and administering the tax or the amount of revenue it would produce?

    Mr. Chinnock:

    It was a “wash” in the manpower needed to administer the tax. The amount of revenue from the business tax would be $80 million, and depending on the implementation of the payroll tax, the revenue could be $100 million or over $200 million a year.

    Senator Raggio:

    I propose we start compiling a matrix for a revenue plan. My suggestion would be to look at the taxes on the list the Senate Committee on Taxation had a unanimous opinion on and include them in the tax plan. We could plug in a rate whether it was the rate in the tax plan that was being considered or not. We then can look at the other components such as a broad-based business tax, gaming tax, room tax and others. Are there any other suggestions?

    Senator Cegavske:

    Did we receive a list of what was passed out of the Senate Committee on Taxation?

    Senator McGinness:

    We did provide that information. The committee started out with a 35-cent tax on cigarettes and then went to 40 cents. I agree with the Chairman we should put the “easy” taxes together. We could offer a couple of different rates then ask staff to give us the scenarios. Once we get down to a payroll tax or a net income tax, then we can go back and forth. Everyone has opinions concerning removing some of the collection fees.

    Senator Raggio:

    Let us start with the reduction of the cigarette stamp fee. The current fee is a 3-percent collection allowance to the dealers and every 1 percent brings in $400,000 a year.

    Mr. Combs:

    I would advise that you come to a decision as to whether you want to reduce the allowances or eliminate them without regard to the revenue they generate. The revenue would change based on what rate you place on the cigarettes or whatever the reason is for the allowances.

    Senator Raggio:

    Let us start by determining figures that have a majority vote.


    Senator Coffin:

    Since each of the first four allowances affects all industries or a specific industry, we may want to determine the tax burden each of them would bear.

    Senator Raggio:

    Whatever figure we determine as common ground can be changed later depending on the larger components.

    Senator Coffin:

    The Senate Committee on Taxation ran into problems by using that method.

    Senator Raggio:

    Starting with the broad-base taxes the discussion would not go far.

    Senator Titus:

    We give people the fee or allowance to compensate them for doing the work of collecting the taxes and sending it on to the State. All of the taxes are going to rise, but the difficulty in collection and filing the reports and sending it in is going to be the same. I would suggest 1 percent of the new tax, which would be 3 percent of the tax at present. What was the committee’s rationale concerning the percentage?

    Senator Townsend:

    The committee reasoned there was a cost in producing the stamp. The rest are collection allowances, and the individuals who collected those fees had the use of the money; therefore, the cost was offset.

    Senator Rawson:

    There is a basic cost for the tax collection. If the tax is raised that would not change the basic fee.

    Senator McGinness:

    If the cost of the cigarettes is increased, and the cigarette stamp fee is reduced some of that will come back as increased revenue. I agree with Senator Titus. There is a cost to the sales tax collection, and the reason we reduced the rates is because it was a revenue generator. I was not comfortable with some of the zero rates. We should allow the retailers some opportunity to cover the costs of getting the form together.

    Senator Raggio:

    The tax committee’s proposal was to zero out the allowances on tobacco, liquor and the collection of retail sales tax. How much Committee support is there for zeroing out those items? We are leaving out the cigarette stamp fee collection.

    Senator Townsend:

    I would suggest cigarette stamps, all other tobacco, liquor, and State/LSST sales tax collection allowances be reduce to the rate of 1 percent across-the-board.

    Senator Raggio:

    Is there anyone who does not support the proposal? There is unanimous support for at least reducing all of those collections to a 1-percent collection allowance.

    Senator Coffin:

    There needs to be an incentive for early payment of the sales tax. Senator Townsend said that there is a tremendous float in some businesses of holding the entire sales tax amount up to 60 days before it is remitted. We have had suggestions from various sources to place an incentive for paying the tax early. If the rate is reduced to 1 percent then it should be paid within 10 to 15 days of the end of the month or electronically filed sooner. Those suggestions were discussed. There is a little labor involved in filing the returns.

    Senator Raggio:

    Based on the interest rate on savings accounts, the float does not mean too much.

    Senator Coffin:

    The float would mean a lot if you are dealing in millions of dollars or hundreds of thousands of dollars in an interest bearing account.

    Senator Care:

    There was a recommendation from the Task Force that the sales and new tax collection allowance be permitted only when the tax is remitted in a timely manner.

    Senator McGinness:

    The cigarette tax allowance is 3 percent; tobacco collection is 2 percent; liquor tax is 3 percent; but the sales tax collection is only 1.25 percent. A 0.5 percent would leave opportunity for collection and gives the State the opportunity to gain revenue.

    Senator Raggio:

    A suggestion has been made that the allowance on cigarettes, tobacco and liquor would be 1 percent; on the sales tax collection the allowance would be 0.5 percent.

    Senator Townsend:

    I would suggest all be the same, 0.5 percent across-the-board.

    Senator Raggio:

    The issue now before us is an alternate suggestion; all allowances be reduced to 0.5 percent.

    Senator Mathews:

    Most retailers sell cigarettes and other goods. I am in favor of one allowance for all.

    Senator Raggio:

    The alternate suggestion before us is that all collection allowances are reduced to 0.5 percent.

    Senator Mathews:

    I believe we should stay at 1 percent. The retailers are the only group that the State is asking to pay the tax and collect it as well.

    Senator Rawson:

    Could we add “if timely” and define an appropriate time.

    Senator Raggio:

    Who does not support reducing the allowances to the same level of 0.5 percent collection allowance? Senators Cegavske, Rhoads, Mathews and O'Connell are in opposition; therefore, the majority of the Committee members are in support of all allowances being 0.5 percent. The other suggestion was “if made in a timely manner.”

    Senator Coffin:

    What we do not know is whether any of the four categories encounter more difficulty in preparing their returns.

    Senator Mathews:

    No, it is all reported on one sheet.

    Senator Coffin:

    I would suggest taxes be submitted within 15 days of the end of the month. Are all the tax collections due at the end of the next month?

    Mr. Chinnock:

    Yes, the taxes are due at the end of the next month. We presently have a business process which identifies those taxes submitted timely or on time and those taxes submitted late. If we were to implement a system that also measured taxes submitted early, it would be a difficult procedure. This could not be accomplished without a change in our business process and a delay to some future time.

    Senator Coffin:

    If a person submits a return on the 29th or 30th day of the month and it is received on the 31st day after the close of the month, you know whether they have submitted timely, correct?

    Mr. Chinnock:

    Yes.

    Senator Coffin:

    If the 15th day was timely and it came in on the 17th day, would you not know it was timely?

    Mr.Chinnock:

    No, because 75 percent of our returns go through a lockbox operation. We would need to look at every postmark because of the statuary definition of timely is based upon the postmark. In the process of having three different time periods: early, timely and those taxes that are late, in terms of archiving, we would need to image every envelope with a postmark.

    Senator Coffin:

    I am suggesting the 15th day and the 30th day after the month for which the tax is due. The tax would be either late or early. Do you always look at the postmarks?

    Mr. Chinnock:

    We only look at the postmarks for those taxes which are late.

    Senator Rawson:

    We are talking about timely being not late. If it is not timely, it is late. If it is late, the 0.5‑percent allowance does not apply.

    Senator Titus:

    If the tax is paid late, they are not entitled to the allowance.

    Senator Raggio:

    Would there be a penalty if the tax were paid late? Would the penalty remain?

    Mr. Chinnock:

    Yes, there is a penalty for late payment, and it would remain in effect.

    Senator Raggio:

    What is the penalty?

    Mr. Chinnock:

    The penalty is 1 percent a month.

    Senator Townsend:

    I would suggest we consider the business license fee and the Secretary of State fees.

    Senator Raggio:

    Do we have a proposal?

    Senator Townsend:

    I would move that the business license fee proposed at $100 annually and the Secretary of State fees, which were in A.B. No. 536 of the 72nd Session, be put into this proposal.

    Senator Raggio:

    What was the proposal for the one-time business license fee of $25?

    Senator Townsend:

    The proposal was to raise the fee to $100 per year.

    Senator Raggio:

    How many members on the Committee do not support that concept? Senators Tiffany, Hardy, Amodei, Washington, McGinness, Neal, Cegavske and O'Connell do not support the concept. We have a majority but not a two-thirds vote on the proposal.

    Senator Hardy:

    If there are going to be additional business taxes then we need to see them.

    Senator Raggio:

    We are trying to do a matrix. None of these proposals are set in concrete. By working with a matrix, we can revisit these proposals. I have been given a suggestion that the business license fee be $50 annually. Who would be in opposition to that suggestion? There does not seem to be any opposition.

    Senator Tiffany:

    Do we ever get to a point where the fee is too low?

    Senator McGinness:

    If the fee goes below $50, the administrative costs do not make it worthwhile to collect.

    Senator Raggio:

    Many businesses file in this State but do not do business here. Would they be in this group? Would they be the bulk? The answer seems to be, yes.

    Mr. Combs:

    Our estimates were approximately $20 million a year with a fee of $100; therefore, it would be $10 million on a fee of $50. There would be many people paying the fee because of the manner in which that provision was handled in S.B. No. 298 of the 72nd Session and A.B. No. 536 of the 72nd Session. There is also the issue of the sole proprietors as well as the businesses that actually pay the BLT. Clarification is needed as to whether you wanted us to remove the direct sellers. It will not affect the estimate because we have not been including them since it is difficult to track them.

    Senator Raggio:

    The understanding was the fee would not be imposed on direct sellers.

    Senator Titus:

    Who would be a direct seller?

    Mr. Combs:

    There is a definition in chapter 612 of the Nevada Revised Statutes (NRS). It was the easiest way to make sure we were covering the same people who are not required to pay unemployment insurance. A question was asked yesterday. Could an independent insurance salesman fall under the definition? After reevaluating the issue, we discovered the independent insurance salesman would fall under this definition. It could be anyone who does not have employees and works from their home.

    Senator Raggio:

    We should make a notation as to what can be anticipated in revenue collections. If the fee were $50 annually, then the revenue would be $10 million.

    Senator Coffin:

    There are many realtors who have offices, who are sole proprietors with no employees and have a cubical. We would have to exclude them as well. If we are excluding direct sellers, what we are saying is, we would exclude anyone who does not have an employee. The term “works out of their house” should not be included. Do the Avon ladies pay a local business license fee?

    Mr. Combs:

    It would be determined by the various county and city ordinances. Section 612.142 of NRS has been referenced in the bill language that has been drafted. Senator Coffin is correct; if it is not a retail store and is in another location, it would be exempt.

    Senator Coffin:

    The explanation makes the case for everyone to be taxed at a minimal amount. If you are in business, you should pay for a business license.

    Senator Care:

    The legislative intent was for sympathy for the Avon ladies, but as more people work from home, the test should be income. We do not have the capability to determine the income of the people who are direct sellers. It would be necessary to get all direct sellers. Many have a hefty income and escape the fee altogether.

    Senator Raggio:

    I thought, that by developing a database, there was some desire to gain revenue from all the tens of thousands of companies that file to do business in this State. They do not do business here but file because of the business climate. If the fee gets down to a nominal amount, it would mean very little.

    Senator McGinness:

    We were trying to capture those people through the Secretary of State fees. One thing Mr. Combs read that would set those direct sellers apart is, “services are not in the nature of a single transaction that is not part of a continuing relationship.” Even if someone were operating an insurance business out of his home, the policy would be a continuing relationship which is renewed.

    Senator Coffin:

    There is not a direct seller alive that does not maintain a continuing relationship with their customer. Once a customer base is established, they continually call on them. This broadens the tax base.

    Senator Raggio:

    The suggestion is a $50 business license fee annually with no exemptions.

    Senator Washington:

    I would be opposed to that suggestion because people become direct sellers to avoid the fees. Most direct sellers work from their homes. They do not maintain a large inventory.

    Senator Raggio:

    We are not talking about a large amount of money, $50 a year. Is there any other committee members opposed? There a two opposed.

    Senator Carlton:

    Would there be a penalty for noncompliance?

    Mr. Combs:

    The Department would not be able to implement a penalty at the start. It would take time for people to learn about the law. There needs to be a system in place to track this procedure. The Department has testified there would be little cost benefit in tracking down all the Mary Kay ladies. After the first year, there would be a penalty. It would be the same as the fee for not paying.

    Senator Raggio:

    We will now consider the Secretary of State fees. What are the fees?

    Mr. Combs:

    The proposal was brought forward by the resident agents as a method that would, rather than imposing a flat increase on all Secretary of State commercial recording fees, not keep people from but would likely encourage people to organize in the State. The Senate Committee on Taxation voted to double the securities fees. The Secretary of State’s Office indicated the fees could be doubled and would not be out of line with what other states charge. The Governor’s proposal had a 50-percent increase in notary fees with which the committee agreed.

    Senator Raggio:

    Are there any Committee members who would not support those proposals? We will include those proposals. Did someone raise a question about the resident agent fees? Are they included?

    Senator McGinness:

    S.B. No. 298 of the 72nd Session went through the Senate Committee on Judiciary. Resident agents proposed to lower the fees on the front end so we would be competitive with other states. Money could be generated when the list of officers changed.

    Senator Amodei:

    We should check. As a result of the securities amendments, it was our understanding, when the original bill was processed and from the conference committee report for S.B. No. 536 of the 72nd Session, the net effect of the conference report plus the original bill would be approximately  $50 million a biennium. The numbers before us are approximately $19 million less. The bill was comprehensive because it included the notary, resident agents and the increase in the security fees.

    Mr. Combs:

    Mr. Guindon can explain a minor change made because of the $100 fee.

    Russell J. Guindon (Deputy Fiscal Analyst):

    S.B. No. 298 of the 72nd Session would allow us to generate more money from the filing fees and the various changes they undergo with the Secretary of State’s Office. The annual filing fee was changed so that all the limited-liability partnerships and limited-liability companies pay $125. In the resident agents’ bill, the business license fee was to be $50, which was raised to $100 at the end of session. They tried to maintain the fee as an annual renewal since the business license was being raised $50; the $125 was lowered to the original $85 fee. The Committee should be aware that by reducing the fee to $50 you may want to restore the $125 fee for the limited-liability partnerships and limited-liability companies to maintain a competitive package which the resident agents proposed.

    Senator Amodei:

    If the conference committee report for S.B. No. 536 of the 72nd Session would have been adopted, it would have restored that fee back to $125 because the reduction was about $10 million for the biennium. That concern was addressed in the conference report.

    Senator Raggio:

    What would be the suggestion? Since we have adopted the $50 annual fee for a license, the fee under discussion should be augmented with respect to the annual filing fee.

    Mr. Guindon:

    We would want to raise the annual filing fee with the Secretary of State’s Office to $125.

    Senator Raggio:

    Is there any objection?

    Senator Rawson:

    Would that bring revenue to approximately $50 million a year?

    Mr. Combs:

    The business license fee would be $10 million. We need to calculate what the Secretary of State’s fee line item would bring. It will be higher than the numbers on your sheet, but the total will not come to $50 million.

    Senator Raggio:

    We will discuss the live entertainment tax (LET). At present, this is collected as a casino entertainment tax. Is there a proposal to enter this into the matrix?

    Senator McGinness:

    The Senate Committee on Taxation decided to include this tax because the same entertainer appearing at a casino, where the tax is paid, could also be appearing at the Silver Bowl, the Thomas and Mack Center or the Lawler Events Center where the tax would not need to be paid. Therefore, it was changed to a LET to capture that revenue.

    Senator Raggio:

    What was the rate?

    Senator McGinness:

    The rate is 10 percent, the same as the casino entertainment tax.

    Senator Raggio:

    Is the tax on the admission charge and any products sold during the time the live entertainment is occurring?

    Mr. Combs:

    The proposal includes merchandise, food and drinks under the definition of an admission charge. It would apply to the ticket or admission charge plus food, drinks and merchandise.

    Senator Raggio:

    Is the casino entertainment tax collected only during the time that the entertainment is occurring?

    Mr. Combs:

    Yes. The tax on the drinks, food and merchandise is collected if they are sold at specific times surrounding the actual performance of the entertainment.

    Senator Raggio:

    Would the tax be based on the admission charge at places such as the Lawlor Events Center or the Thomas and Mack Center?

    Senator Townsend:

    The definition of live entertainment would include entertainment that took place inside a casino, outside of the casino but on the casino’s property, any live entertainment promoted by an unrestricted licensee or a licensee controlled by the State Gaming Control Board. The State Gaming Control Board has a mechanism for collecting revenues from gaming establishments, and the LET on non‑gaming enterprises would be collected by the Department of Taxation.

    Senator Raggio:

    Would this apply on an admission charge or during the time the live entertainment is being provided? Would it be on the same basis as the casino tax?

    Senator Townsend:

    Yes, that was the proposal.

    Senator Raggio:

    How would the tax apply in cases such as a Celine Dion concert, rodeos or boxing?

    Senator Townsend:

    The tax would be applied across-the-board without exemptions.

    Senator Titus:

    I support that concept. When this tax goes into effect, will the casino tax be removed?

    Mr. Combs:

    The casinos would immediately, on the effective date, start collecting tax on the new definition of live entertainment. The reason for the delay until January 1, 2004, is the Department of Taxation would be required to collect the tax for non-casino properties, and they would not be able to get on-line by July 1, 2003. There have been discussions concerning the issue of two regulatory agencies for the same tax. There would be a refined definition of entertainment that would be consistent with the definition in the bill the Nevada Tax Commission would be responsible for constructing. The definition would apply to casino and non-casino events.

    Currently, the State Gaming Control Board is not required to submit their regulations for review by the Legislative Commission, but the Nevada Tax Commission is required to submit their regulations for review. The way the bill is drafted it would require the State Gaming Control Board to submit their regulations about this particular tax to the Legislative Commission for review. This would insure the regulations of the two agencies are consistent.

    Senator O'Connell:

    The taxation committee made the tax broad because we were concerned about gentlemen’s clubs offering free admission and then inflating the cost of any thing sold within the club.

    Senator Rawson:

    I need clarification on nonprofit events. There is a significant nonprofit community that puts on plays and other events, would they be exempted from this tax?

    Mr. Combs:

    There is no specific exemption for nonprofit events. If there is no admission charged, then the tax would not apply. In the event a show is being put on for charity reasons and there is an admission charge, then the Committee would need to exempt that type of activity.

    Senator Rawson:

    Nevada has a very large nonprofit community that uses these types of events for their annual fund raising. I am concerned about this issue. Events such as National Finals Rodeo (NFR), boxing and racing are competitive events. Many of these events have signed contracts well in advance of the event which could produce an insolvent situation. We need to consider these issues.

    Senator Care:

    Did the taxation committee discuss the threshold question? When considering an entertainment tax you must consider whether the event is open to the public. This might address the trade show issue. There are conventions that are closed to the public at which entertainment takes place, but they are not soliciting the public to come. Was there any discussion between the difference in college and professional sporting events for the purpose of imposing an entertainment tax? My definition of live entertainment is expansive. A live event is not restricted to just music, concerts or plays but encompasses racing cars and sporting events as well. We should be discussing events that if the public wishes to attend, they must pay a tax.

    Senator Nolan:

    I see the LET as problematic. It may not be the expense of the tax but the collection may be a problem for organizations holding a once-a-year fundraiser. I am a board member of Las Vegas Events, which is a collaboration of businesses and hotels that finance these types of events to be promoted in the southern Nevada community. There are events, taking into consideration the overall ticket price, that would consider another venue. We were able to capture the National Finals Rodeo (NFR) from Oklahoma City about 12 years ago by a small margin. Not all events would be affected by a tax. People might be willing to pay extra for the environment of southern or northern Nevada. There should be a way to petition for an exemption if the venue can demonstrate the event would be a loss and there would also be a loss of additional ancillary revenue.

    Senator Rhoads:

    About 10 years ago, I introduced a bill that would have increased the price of rodeo tickets to help the high school and county rodeo programs. I was to meet with the Reno Rodeo people. When I attended the meeting, the CEO from Denver and their attorneys threatened to move out of Las Vegas because of the increase in tax. Recently, the Dallas cowboys met with NFR people from Denver to discuss building a 100,000-room pavilion to entice the Las Vegas rodeo to Dallas. This tax would have a negative effect on keeping the NFR in Las Vegas. I would vote for other taxes.

    Senator Shaffer:

    I believe events such as air shows and bowling tournaments should be included.

    Senator Neal:

    Would it be easier to exempt the 501(c)(3) organizations?

    Senator Raggio:

    Should all the organizations that are filed as 501(c)(3) be exempted? We will add it to our list of concerns.

    Senator Cegavske:

    I was concerned about having the collection of the tax done by two different agencies. Could this be collected by the agency that presently collects the sales tax?

    Mr. Chinnock:

    Implementing the tax by January 1, 2004, in concert with gaming would make it easier. If the Committee decided the Department of Taxation should have control, we could do so at some future time.

    Senator Cegavske:

    Are you saying it would be easier to implement this with the gaming revenues than to include it with the sales tax or adding the tax on to an admission ticket?

    Mr. Chinnock:

    Yes, because we are not collecting sales tax on some of these events, now. We are talking about a process of discovery. We are going to use the sales tax and look at it as well.

    Senator Coffin:

    Many events are interstate competitive. There is a mechanism for granting an exemption for a short term from certain taxes. This is an enticement for people to come to our State. We could put the same principal in place here. We could start with this statute and exempt the events we know are in jeopardy of being lost to other states. We could create the mechanism in existing statute. Then either the Economic Development or Tourism Commissions could research these events and bring a list to a future Legislature for consideration of any additional exemptions.

    Senator O'Connell:

    I would like to respond to a concern Senator Rawson raised. The nonprofit organization that is sponsoring the event does not charge for admission, but if the entertainer or event is trying to sell any product that is not sold through the organization then there is a tax on the product. If the proceeds were not going to the nonprofit organization, then it would be taxed.

    Senator Washington:

    If we impose the 10-percent rate on products and there is currently a 7.25-percent sales tax, would that be 10 percent in addition to the sales tax; therefore, it could be 17.25 percent as opposed to 7.25?

    Senator Care:

    The current casino entertainment tax statute would dovetail with what ever we do. The statute gives a list, which we could debate, but in the second part for example, “Entertainment is also not subject to the casino entertainment tax if the entertainment is presented in or about a swimming pool, water park or on a natural or artificial beach.” Are we referring to those exemptions now being taxed?

    Senator Rhoads:

    I support the suggestion the LET should not include competitive events.

    Senator Rawson:

    Would there be any consideration to clarify that 501(c)(3) organizations are not included because they are normally not taxed?

    Senator Raggio:

    With those types of broad exemptions, is there any way to really ascertain the potential revenue from this source?

    Mr. Combs:

    I am not sure the amount of data Jeremy Aguero has complied on competitive versus noncompetitive events and whether exempting those would leave a base to be worthwhile.

    Senator Titus:

    I would oppose exempting competitive events. Any event could say they would leave the State if you tax us. If you exempt competitive events, then we will have the problem of defining what is a competitive event?

    Senator Nolan:

    Nevada competes for special events. There would be some events just by their nature and volume that when they contract and see the overall price, it might have significant results. I would be in favor of exempting the 501(c)(3) organizations and allowing organizations to apply for an exemption if they could demonstrate the tax in a competitive environment would deter the event from coming into our State.

    Senator Townsend:

    All the points made are important. If the issue of competitiveness is one concerning the rate, then we should stay with the no exclusion policy. We should keep it broad-based and lower the rate to a figure that is acceptable to everyone. If the goal is to stay broad-based and keep the rates as low as possible then we should keep within our goal. Every time we attempt to do the right thing in any one item and reduce any of the proposals, the difference needs to be made up elsewhere because we have $360 million in revenue responsibilities in the first fiscal year of the budget.

    Senator McGinness:

    Currently, the casino entertainment tax is at 10 percent. We found going below 8 percent would cause a loss of revenue on this proposal. We need to stay at the 10 percent rate to gain some revenue.

    Senator Raggio:

    What is the committee’s consensus? Shall we keep the 10 percent rate with no exemptions, keep the rate at 10 percent with some specific exemptions across the board or lower the rate and apply to all without exemptions?

    Senator Townsend:

    I move we leave the live entertainment rate at 10 percent with no exemptions except for the 501(c)(3) organizations.

    Senator Raggio:

    It would include boxing, rodeos, auto racing, basketball and football. Who of you are opposed to the motion? Senators Care, Coffin, Washington, Shaffer, Rhoads, Nolan and McGinness are opposed.

    Presently, the cigarette tax is 35 cents per pack. There have been various proposals to increase it to 65 cents per pack of cigarettes. The Governor’s recommendation was to increase the tax to $1.05 per pack.

    Senator Townsend:

    I move we increase the cigarette tax by 70 cents.

    Senator Raggio:

    Are there any Committee members opposed to the increase of 70 cents? Obviously, this proposal does not have majority opinion.

    Senator Care:

    On taxes like alcohol, cigarettes, restricted slots and the BLT, we should look at the last year these figures were set and make adjustments for the consumer price index. The tax on cigarettes would rise from 35 cents to 55 cents; then we can add more. My proposal would be to increase the cigarette tax to 65 cents.

    Senator Raggio:

    Are you recommending a 30-cent increase?

    Senator Care:

    Yes.

    Senator Townsend:

    The previous motion was a 70-cent increase, which took the total to $1.05. Are you recommending a 65-cent increase, which would take the total to 90 cents?

    Senator Care:

    I would like to change the motion to what was proposed in S.B. No. 382 of the 72nd Session. A 40-cent increase was proposed, which would increase the cigarette tax to 75 cents over a 2‑year period. We proposed a 25-cent increase in the first year and 15-cent increase in the second year.

    Senator Raggio:

    Was your motion a 25-cent additional increase in the first year and 15-cent increase in the second year? Who on the committee objects to the proposal? Senator Townsend opposed the proposal. Can the revenue be calculated for the increase?

    Mr. Combs:

    This would require a volumetric adjustment to be factored in. Therefore, I will bring the Committee this information later. A total of $39.8 million would be generated the first year with an increase in the cigarette tax of 25 cents. To determine the revenue for the second year with a 15-cent increase we need to apply the formula, for every 10 percent increase we assume there is a reduction in volume of 4 percent. I will bring the Committee the figures.

    Senator Nolan:

    We assume a percentage loss of those who use tobacco products as the price is increased. There are hundreds of Internet web pages selling brand-named cigarettes from $1.50 to $2.20 a pack. We will not be losing people in the way of revenue who will cease using the products, but we will lose them to another source over which we have no control. This has happened in retail businesses in every industry. Is it possible to calculate that factor in as well? I would caution us to consider this when projecting revenues because it is a legitimate market to which people have access.

    Senator Titus:

    I request calculations be done for an increase of 50 cents, 25 cents and 25 cents over a 2-year period.

    Senator Raggio:

    The next topic for discussion is the sales tax. This tax would be limited to the portion that is the local school support tax (LSST). What is the present rate on the local school support tax?

    Mr. Combs:

    The LSST is 2.25 percent.

    Senator Raggio:

    What does each 1 percent produce?

    Mr. Combs:

    A 0.25 percent would generate approximately $65.6 million in the first year because of the loss of a quarter of the year and $92.4 million in the second full year.

    Senator Raggio:

    The proposal is to add 0.25 percent to the sales tax for this purpose.

    Senator Townsend:

    I recommend we discuss the liquor tax and slot tax to get a base.

    Senator Raggio:

    A 10-percent increase in tax, per gallon, per type of liquor would generate over $2 million a year. Were we considering a 50-percent increase?

    Senator McGinness:

    The Task Force recommended an 89-percent increase, the committee proposed 100 percent, I would suggest an 89-percent increase.

    Senator Raggio:

    What would the increase generate in revenue?

    Mr. Combs:

     It would be approximately $18 million in the first year and approximately $18.6 in the second year.

    Senator Care:

    On the theory we will not revisit this tax again for some years, the easy figure to use would be a 100-percent increase, which would generate $20 million a year in additional revenue.

    Senator Raggio:

    An issue to keep in mind is that a large volume of liquor sold is “border sales.” There are people coming from Oregon and California to buy liquor. How do we compare with our border states? Would people accept an 89-percent increase in Nevada over the rate imposed in California? It is a concern to those selling liquor to tourists.

    Senator McGinness:

    During the committee hearings, we did not look into the rates of surrounding states. We did have testimony that 5.5 cents would be added to a six-pack of beer.

    Senator Raggio:

    Liquor is the larger issue. We will have committee staff research the comparison with California’s rate.

    Senator Titus:

    I thought it was illegal to buy liquor without a stamp. I would not want to be encouraging illegal behavior.

    Senator Raggio:

    There may be restrictions on other items but not liquor being brought across state lines.

    Our next tax for discussion is the quarterly restricted slot tax. Presently, the rate is $61 per machine for the first 5 machines and $106 per machine for 6 to 15 machines per quarter on establishments with not more then 15 slot machines, which is considered restricted slots. In this situation, a 10-percent increase would bring $700,000 a year. Does the Committee have a proposal?

    Senator Care:

    The Task Force, the Governor and S.B. No. 382 of the 72nd Session recommended a one-time increase of 33.3 percent, per machine, which is my proposal.

    Senator Raggio:

    What would be the revenue generated by that proposal?

    Mr. Combs:

    The revenue generated would be $2.3 million in the first year and $2.4 million in the second year.

    Senator Raggio:

    What are the feelings of the Committee? Are there any opposed to the increase?

    Senator Cegavske:

    If the convenience stores can only have up to a certain number of machines, I would ask the Committee to make the increase of $106 per machine starting with the 7th machine.

    Senator Raggio:

    Where they now have five machines, they are paying $61 a machine. The proposal would be to make a third increase on that, those having more than five machines the percentage increase would be the same, but they already pay the $106 per machine. The proposal does take into consideration those that are five machines or less.

    Senator Cegavske:

    My suggestion was to bring it up one more machine.

    Senator Raggio:

    It is open for discussion. The proposal will remain as a 33.3 percent increase for restricted slots that are now fixed fees. The amount of revenue generated is $2.2 million in the first year and $2.4 million in the second year.

    Senator Townsend:

    The proposals left for discussion are: the local school support tax, the gaming percentage fee tax, the BLT, the state room tax, the bank franchise tax, the real property transfer tax, the payroll tax, the service tax and the net profits tax. These items are either new taxes or generate a large amount of revenue. It would be in the Committee’s interest to get a tabulation on revenues raised so far.

    Senator McGinness:

    I have been able to obtain information on liquor tax rates in surrounding states. The excise rate per gallon of liquor in Arizona is $3.00, and California is $3.30. Using the 89 percent rate discussed, Nevada would be at $3.87.

    Senator Raggio:

    The Governor has sent an additional item within his proclamation, which is S.B. No. 191. The bill addresses the No Child Left Behind Act and other matters pertaining to the non-Titled I schools in the State. There have been some amendments proposed by the Assembly. This is one of the matters we are trying to resolve to make sure that we have a full agreement. This has been accomplished in principal. There is a bill being drafted for that purpose; therefore, we will set aside the matter for today.

    Last evening, the Speaker and the Majority Leader in this House met with representatives of the two sectors having the most concern with any potential revenue plan. The Governor met with them as well. The message was that the gaming industry and the business sectors have been far apart on what they have been willing to recommend or accept. The message to them was, at this stage, you never know what might be the result of a legislative process. Some felt there were items under consideration which were out of the question, and therefore, they did not have to be concerned. In the legislative process items which may seem dead suddenly have a new life. The suggestion was made for them to reach an accord about their concerns which then could be considered by the respective committees in this process. The message was delivered with the understanding that we are in a first special session. Time is valuable, and if there were items that can be considered that might help the process, these committees would be interested in them. Jeremy Aguero will advise this Committee and the select committee in the Assembly as to what is being proposed.

    Jeremy Aguero:

    I served as the coordinator for the technical working group for the Governor’s Task Force on Tax Policy, but I am here to review some estimates that have been presented. The tax regime I am discussing with you has three parts.

    Senator Raggio:

    Did you work with both the business sector and gaming industry representatives?

    Mr. Aguero:

    They gave input to the information I will present. The first part is a franchise fee. Those groups view it as the stabilizing element of the tax. This imposes a quarterly rate of $0 for companies with less then $20,000 of gross business receipts.

    Senator Raggio:

    Is the principal component a net profits concept?

    Mr. Aguero:

    Yes. The tax is a net profits tax with a stabilizing element and a capping element. The net profits portion of the tax is somewhere between 3 and 7 percent using a graduated rate.

    With the franchise fee, the taxpayer would approach the tax and look at the first element I have previously mentioned. They would look at the total of their business receipts for the year and would determine and make quarterly payments of between $0 for businesses with less than $20,000 of gross business receipts to $2,500 per quarter for businesses with greater than $10 million worth of gross receipts.

    The first element is based on the fact a business exists. Each business has tax liability. It is not based on their business receipts. It uses them to create different thresholds of industries. The second element is the business profits tax. The business profits tax has three tiers. The first tier is from $0 to $50,000 worth of profit, which would be taxed at 3 percent.

    Senator Raggio:

    Are you referring to net profit defined for that particular business by the Internal Revenue Service Code?

    Mr. Aguero:

    Yes. Whatever the net profit would be, it would be as reported to the federal government and would be the exact net profit upon which they would pay these factors to the State of Nevada.

    Senator Raggio:

    This could not be implemented until January 1, 2005.

    Mr. Aguero:

    Yes. The first tier a business would calculate is a flat fee. Businesses that have a lesser amount of business activity will pay a smaller quarterly fee. Businesses with a larger amount of business activity will pay a larger quarterly fee. Businesses that have less than $20,000 worth of business receipts will pay nothing.

    Senator Amodei:

    How is the business activity in this plan measured?

    Mr. Aguero:

    It is measured in terms of business receipts or revenue.

    Senator Raggio:

    The principal part of this proposal is a net profits tax, which cannot be implemented until January 1, 2005. This is a flat fee based on receipts. Let us discuss the net profits tax component.

    Mr. Aguero:

    The centerpiece of the tax is a net profits tax. Net profits are defined for all businesses with activity in the State of Nevada exactly as it is defined for federal income tax reporting purposes.

    Senator Raggio:

    A business entity would use their net profit definition under the IRS Code that would be the net profit on which the tax would apply. What would be the rate of tax and the threshold for each rate?

    Mr. Aguero:

    The first tier of business profits up to $50,000 would be taxed at a rate of 3 percent; from $50,001 to $100,000, the tax rate is 5 percent; for all business profits in excess of $100,000, the tax rate is 7 percent.

    Senator Raggio:

    There are three rates, which apply to the federal definition of net profit. Any business entity would be allowed to make deductions based on the IRS Code for any type of business to reach the profit on which this rate is applied, am I correct?

    Mr. Aguero:

    Yes.

    Senator Raggio:

    What adjustments would be permitted?

    Mr. Aguero:

    There are three types of adjustments. The first type of adjustment is for businesses that pay an industry specific tax. This would include mining, insurance, construction industries and gaming. They are not exempt from the tax but would be required to separate the portions of their business that are currently taxed under those industry specific regimes versus the portions of their business that are not taxed under those regimes.

    Senator Raggio:

    Give the Committee an example about gaming.

    Mr. Aguero:

    Gaming revenues are split approximately 50 percent for gaming operations and 50 percent for non-gaming operations at $9 billion each. This figure is gross business receipts not profits. The $9 billion upon which the 6.25 percent gross gaming tax is applied would not be subject to this tax regime, but the revenues and expenditures from food, beverage, rooms, entertainment and anything else which is part of what they do would be subject to the net profits tax and the balance of this regime.

    Senator Raggio:

    How would the insurance and construction industry be affected?

    Mr. Aguero:

    The insurance industry is currently subject to the insurance premium tax. Any revenues generated from that portion of their business would all be exempt from this regime. The construction activity deals specifically with the existence of the real property transfer tax to the extent that income is derived from the sale of real property upon which the real property transfer tax is applied at the gross level. Those revenues, less those expenses that gave rise to that portion of that company’s income, would not be subject to this tax.

    Senator Raggio:

    Explain how mining would be affected?

    Mr. Aguero:

    Mining pays the net proceeds of the mining tax for all their operations that are subject to that portion of the tax they would not be subject to this portion of the regime.

    Senator Rhoads:

    They would subtract the expense columns and pay on the balance.

    Senator Care:

    Is this tax different from the net profits tax proposed by the teachers two years ago?

    Mr. Aguero:

    I believe, it is different.

    Senator Care:

    The non-gaming side would have fallen under the net profits tax. I do not recall discussing the mining or insurance industry.

    Mr. Aguero:

    I do not recall.

    Senator Raggio:

    Is there a franchise business tax that all businesses pay?

    Mr. Aguero:

    Yes.

    Senator Raggio:

    Is it proposed that whatever they pay would also be deducted from this net profits tax?

    Mr. Aguero:

    Yes.

    Senator Titus:

    Would a banking franchise tax be the same as the mining, gaming and construction industry? Do they pay a banking fee not a net profits tax?

    Mr. Aguero:

    Yes. They are part of the regime.

    Senator Raggio:

    Let us discuss the franchise or business fee.

    Mr. Aguero:

    The franchise or business fee is a quarterly rate. It ranges from $0 for small businesses with business receipts of less than $20,000 to a flat fee of $10,000 per year, or $2,500 per quarter, for businesses with revenues in excess of $10 million annually. The effect of this is to establish a base upon which stability could be achieved. This tax on the base of 107,000 businesses would generate approximately $102 million per year and would provide the base upon which everything else would generate more revenue.

    Senator Raggio:

    Go through the tiers so the Committee will know what would be the flat quarterly rate. You said, up to $20,000 in gross receipts, the business would pay nothing.

    Mr. Aguero:

    The businesses with $20,000 to $50,000 would pay $150 a quarter. From $50,001 to $100,000, they would pay $200 per quarter. Businesses with $100,001 to $500,000 would pay $250 per quarter. Businesses with $500,001 to $1,000,000 in total business activity would pay $325 per quarter. Businesses with $1,000,001 to $1.5 million would pay $375 per quarter. Businesses with $1,500,001 to $2.5 million would pay $625 per quarter. Businesses with $2,000,001 to $5 million would pay $750 per quarter. Businesses with $5,000,001 to $10 million in total business activity would pay $1,250 per quarter. Businesses with more than $10 million in business activity would pay $2,500 per quarter. These revenues would be credited against any company that incurred net profits tax liability.

    Senator Raggio:

    Would they have the right to take that as a credit against whatever the computation is on the net profits tax?

    Mr. Aguero:

    Yes.

    Senator Raggio:

    Is there a cap?

    Mr. Aguero:

    Yes. The third element of the tax regime is a cap, which effectively limits the liability of any specific business in any specific year. It states the total liability from all the taxes we have discussed cannot exceed 0.25 percent of total business receipts.

    Senator Coffin:

    The quarterly rate on the gross flattens out so fast the percentage of payment by the larger businesses are considerably less than the smaller businesses. Would the BLT be in addition to or part of the total?

    Mr. Aguero:

    It was my understanding the idea behind having it fall off is because larger industries would have a tendency to bear a greater burden from the net profits tax.

    Senator Coffin:

    Have you worked out the allocation of profits on large businesses multistate?

    Mr. Aguero:

    We know how profits are distributed. The tendency is for the top 1 percent of businesses to have between 54 and 60 percent of the total amount of taxable income in any year.

    Senator Raggio:          

    What would be the net profits tax yield in January 1, 2005?

    Mr. Aguero:

    Based on preliminary information, the combined regime would yield between $200 million and $250 million per year.

    Senator Raggio:

    What do you mean by combined regime?

    Mr. Aguero:

    The combined regime would be all these items taken in combination: the franchise tax fee, business profit tax, as well as the capping.

    Senator Raggio:

    What would the net profits tax yield on its own?

    Mr. Aguero:

    In a normal tax year, the yield would be between $125 million and $150 million. In the mid‑case scenario, the yield would be approximately $131 million.

    Senator Raggio:

    How much would the quarterly franchise tax yield annually?

    Mr. Aguero:

    The franchise tax would yield approximately $102 million annually.

    Senator Raggio:

    Are the businesses that have a net profit entitled to deduct the amount they pay on the franchise tax? If you get $131 million from the net profits tax and take a credit for what you paid on the franchise tax, there would be a net difference of $30 million. How do you arrive at the figure of $131 million? You would only get the larger of the amounts.

    Mr. Aguero:

    The reason is that they are additive. A gross profits tax under the rates we have discussed without any credits or deductions would yield $250 million per year. We subtracted the cost of the adjustments, credit for the paid flat tax and the revenue cap of 0.25 percent.

    Senator Raggio:

    The figures have been adjusted.

    Senator Rhoads:

    What will this do to the high volume, low margin industries such as groceries, automobile dealers and agriculture?

    Mr. Aguero:

    The high volume, low margin industries would take advantage of the business profits tax regime. By having high volume, they are disparately impacted by the 0.25-percent gross receipts tax. They would fall under the business profit tax paying 3, 5 or 7 percent depending on their profit, which would be less than what their gross tax liability would have been.

    Senator Care:

    Were your discussions limited to determining an agreeable formula? We had testimony from Mr. Chinnock that there were 210,000 businesses. You referred to 107,000 businesses. What type of businesses did the figure include?

    Mr. Aguero:

    We considered corporations and partnerships. It is important to distinguish the difference between the number of business licenses issued and the number of business entities existing. For example, if I owned 10 McDonalds, it may be considered one business or 10 businesses depending on how it is viewed. If Mr. Chinnock believes the number is 210,000 businesses and the tax would be imposed on each individual business, the yield would be greater. The high range considered was 160,000, and the low range was 85,000 businesses. We choose a middle figure as a starting point.

    Senator Neal:

    Is the UBT and the gross receipts being referred to as the business profits tax?

    Mr. Aguero:

    This proposal does not include the UBT or the gross receipts tax.

    Senator Neal:

    Explain what you mean by tiers?

    Mr. Aguero:

    The tiers are a way of measuring business activity in the State. It is determined by using gross receipts, but it is not a percentage fee applied to the gross receipts. It is a rate measuring the size of the business activity.

    Senator Neal:

    What do you mean by, this could not exceed 0.25 percent of business receipts?

    Mr. Aguero:

    The 0.25 percent is used as a base in the UBT, the gross receipts tax, or the Governor’s Task Force proposal. In this proposal, it is a ceiling. It is stopping how much a business can pay opposed to establishing how much you would pay. It affects those businesses that are low volume, high profit.

    Senator Neal:

    What happens if a business is high volume, low profit?

    Mr. Aguero:

    A business that is high volume, low profit would use the business profits tax.

    Senator Neal:

    What companies would this benefit?

    Mr. Aguero:

    Services industries such as doctors, lawyers and accountants who have a relatively small practice and little expenses would benefit. The alternative would be companies benefiting from the business profits tax such as automobile dealers, petroleum distributors, grocery stores and others that have high volume but marginal profits.

    Senator Neal:

    How would the tax affect a cattle ranch or agriculture?

    Mr. Aguero:

    Could you give me an example?

    Senator Rhoads:

    A typical ranch might gross $500,000 in a normal year and net $10,000 or $20,000.

    Mr. Aguero:

    You would benefit from the business profits tax.

    Senator Amodei:

    What coordination does this have with the Department of Taxation for implementation?

    Mr. Aguero:

    I have not spoken to the Department of Taxation; therefore, none.

    Senator Amodei:

    What would a return look like?

    Mr. Aguero:

    To the extent the BLT existed, the proposed quarterly franchise fee would be paid in conjunction with the BLT. Each year or when a company paid its business profits tax to the IRS, it would do a second calculation and subtract what was paid for the franchise fee.

    Senator Amodei:

    In the first two regimes, the franchise tax business is measured as a function of receipts, and in the final regime, business is measured as a function of receipts, but in the middle tier, business activity is measured as a function of profits, is this correct?

    Mr. Aguero:

    Yes.

    Senator Raggio:

    Mr. Chinnock can you shed any light on the implementation or forms that would be necessary for this procedure?

    Mr. Chinnock:

    I would need time to go over this information.

    Senator McGinness:

    Has there been a new concept introduced to the Committee concerning the real estate transfer tax being industry specific to construction?

    Mr. Aguero:

    Based on the parameters provided to me that it is born by the construction industry, it is my understanding real property transfer tax is joint and severally liable, and that it is negotiated in the transaction to the extent the tax is actually paid by the construction industry, that it would be a credit.

    Senator Nolan:

    Is the method by which a business would pay optional, or does it depend on where their net or gross profits fell?

    Mr. Aguero:

    It does not become optional. There is a minimum and a maximum they are required to pay. Businesses operating as profit maximizing firms would not opt to pay greater taxes.

    Senator Nolan:

    Is it possible for businesses whose profits vary to fluctuate between a net profits tax and a gross profits tax?

    Mr. Aguero:

    Yes, it could fluctuate. If a company had no profits one year, they would pay the minimum, the franchise fee. In the following year, the company had profits of 90 percent of its business activity, they would pay the 0.25 percent cap.

    Senator Neal:

    Could Mr. Chinnock give us an idea of the obligation the Department of Taxation would have to implement this?

    Senator Raggio:

    This is a proposal, but the revenue from the business tax and the net profits tax would not begin to come in until January 1, 2005. We still need to fund our budget. There needs to be a bridging type of revenue until we reach that point in the collection process. The fixed franchise tax is effective immediately on all businesses unless they have receipts of less than $20,000. Does everyone pay this tax?

    Mr. Aguero:

    The intention is to have the tax become effective as soon as possible.

    Senator Raggio:

    If the Committee wanted to establish this concept, we would need to have the revenues to meet the needs that occur until that point.

    Senator Care:

    When the industry specific taxes, credits or adjustments; mining, construction and insurance industries file a return in Nevada is it based on the return filed with the IRS? When filing their federal return do they apply these credits to their overall obligation? If they take these credits on the federal level and we turn around and give them credit when they file with the State, are they getting the credit twice?

    Mr. Aguero:

    No, because they would need to back it out. For those industries, filing the return would be different from all other industries. They would need to segment out taxes paid for different departments. There was no intention of allowing a double deduction. If it was simply done, yes, there is a line item on the 1120 form, which corporations file for example, that is taxes and fees.

    Senator Mathews: 

    For businesses that are not mining, insurance, gaming or construction, do they get a federal credit?

    Mr. Aguero:

    A federal credit for taxes paid?

    Senator Mathews:

    Yes, state taxes paid.

    Mr. Aguero:

    In this regime, there is no additional credit for other taxes other than the ones I have mentioned.

    Senator Mathews:

    I need something in writing with firm numbers to review.

    Senator Raggio:

    If we are going to consider this proposal then Mr. Aguero can return with a sheet for the Committee.

    Senator Mathews:

    I need to see the numbers before I can consider the proposal.

    Mr. Aguero:

    It is necessary to draw the line between what we did for the Governor’s Task Force on Tax Policy and the work we are doing here. These are totally unrelated efforts. I was asked to put this together within the last 24 hours.

    Senator Titus:

    Can a company deduct payments that it has made for other taxes from its bottom line on which it owes federal tax?

    Mr. Aguero:

    Generally, yes.

    Senator Titus:

    Is the figure they use as their net to pay the federal tax the same as the State would be using to calculate the State tax?

    Mr. Aguero:

    Yes.

    Senator Titus:

    Would this not allow them to deduct the State tax before they calculate the federal tax?

    Mr. Aguero:

    States compensate for this by requiring an adjustment.

    Senator Titus:

    Are you referring to a regulation that the Department of Taxation would impose?

    Mr. Aguero:

    Every state that has a net income tax deals with the situation differently.

    Senator Raggio:

    If there were Committee interest in this proposal, it would be better to ask Mr. Aguero to return tomorrow. Tell us when you could return with a handout?

    Mr. Aguero:

    I could have a handout prepared by 8 a.m. tomorrow.

    Senator Coffin:

    If you had a $100,000 gross in insurance commissions before the various taxes are deducted then you would pay $800 a year?

    Mr. Aguero:

    Yes.

    Senator Coffin:

    The business license tax and fee would be in addition to that. Therefore, the business would pay approximately $1,000 a year even though your adjusted gross income might be $50,000 because of various expenses incurred.

    Mr. Aguero:

    It would depend on whether the business could take advantage of the cap.

    Senator Coffin:

    You have the business profits components. If the business was between $50,001 and $100,000 in profit and had 3 percent, would I add the 3 percent to the $800 a year?

    Mr. Aguero:

    You would calculate the 3 percent and subtract the $800 from it, not to exceed 0.25 percent of the total.

    Senator Coffin:

    Is the business profits tax a credit?

    Mr. Aguero:

    No, the business profits tax is a tax. The franchise fee would be taken as a credit to the extent you had liability in excess of the fee.

    Senator Coffin:

    If there were $50,000 net profit on which I paid federal income tax, I would take 3 percent of $1,500 before I paid my federal income tax. I would deduct it as a state tax, leaving approximately $48,000. I would pay $700 instead of paying $1,500. If my gross was $100,000, my gross receipts cap is $250. Would my tax be reduced to $250?

    Mr. Aguero:

    The franchise fee becomes the floor. Therefore, you would pay the franchise fee.

    Senator Coffin:

    Would it be the franchise fee minus the credit? What is the franchise fee?

    Mr. Aguero:

    No, you would pay the franchise fee. The franchise fee were the rates depending on the total amount of business activity reported in the State of Nevada. Whether you were at $100,000 or $500,000, you would be paying $800 because of the measure of business activity.

    Senator Coffin:

    Would I pay an $800 franchise fee because my floor was based on gross business receipts? Would my profit or loss be ignored?

    Mr. Aguero:

    Yes. This creates a stabilizing factor.

    Senator Coffin:

    Would the cap apply in my case?

    Mr. Aguero:

    It would not apply.

    Senator Coffin:

    Why not have a flat tax on the portion relating to business profits? Most states take a flat percentage on the federal income tax.

    Mr. Aguero:

    I have no opinion on that.

    Senator Coffin:

    Could we create a matrix to know the difference in revenue if we used a flat rate?

    Mr. Aguero:

    If we looked at the gross business income, the gross income in the State of Nevada is approximately $3.7 billion. We would multiply whatever rate is determined by $3.7 billion, and it would give us the revenue.

    Senator Coffin:

    Has the proposal been written to yield a certain dollar amount as the result? Would this be inserted into a total tax package?

    Mr. Aguero:

    Yes. There was no discussion of how this would factor into an entire tax package.

    Senator Mathews:

    Who was involved in getting to this point?

    Senator Raggio:

    The people who came forward with this proposal were from the Las Vegas Chamber of Commerce and the gaming sector. They had reached a tentative accord and wanted to suggest it to the Committee.

    Senator Mathews:

    When we came to the 19th Special Session, it was my understanding we had advanced beyond taking any plans from outside sources.

    Senator Raggio:

    The Assembly took the payroll tax off the table. The Senate took the gross receipts tax off the table. We were heading for another impasse. We asked the two business sectors if there was a proposal they could put forward. The Committee is not required to implement this proposal. We still must get a bill that passes both Houses.

    Senator Mathews:

    I am still concerned because this Special Session was supposed to be in the hands of Legislators.

    Senator Raggio:

    Is the Committee interested in seeing something more on this proposal? There are seven Committee members not interested. Let us consider the sales tax that would go toward the local school support.

    Senator McGinness:

    A 0.25 percent would yield $65.6 million in the first year and $92.4 million in the second year in revenues. I would propose to include 0.25 percent in the sales tax effective October 1, 2003. It would offset the local school support tax, which would then allow that 0.25 percent to come into the General Fund.

    Senator Cegavske:

    The Senate Committee on Taxation discussed exemptions. How would the exemption list affect the sales tax revenue?

    Senator McGinness:

    The exemptions we discussed were not huge exemptions. They will generate some additional revenue to the General Fund, but eliminating the exemptions will not help in balancing the budget.

    Senator Raggio:

    Who is opposed to the proposal of an increase of 0.25 percent sales tax? Senators Wiener, Neal, Coffin, Care, Carlton, Schneider and Titus are opposed. Therefore, we will not put the proposal on our matrix. Our next item for discussion is a state room tax.

    Mr. Combs:

    This would not be imposed until the second month of the fiscal year. A 1-percent tax would generate approximately $30.1 million for 11 months of the first year and $34.1 million in the second year for a full year.

    Senator McGinness:

    I would ask that a 1-percent increase in the state room tax be considered.

    Senator Raggio:

    What does 1 percent yield in revenue?

    Senator McGinness:

    It would yield $30.1 million in the first year and $34.1 million in the second year.

    Senator Amodei:

    The room tax was created by the State in 1983 at a 1-percent rate. The State retains 3/8 of the room tax for tourism development and the remaining goes to local entities. Since the inception of the room tax, various counties have raised the rate they assess for room tax from 7 percent to 10 percent. The Convention and Visitors Authority was concerned about this because they wanted the future rate revenues available for future convention and visitors activities. In Clark County, 5 percent of their 9 percent in the resort areas goes to the Convention and Visitors Authority, 3/8 of 1 percent goes to the State, 1 percent goes to the county, 1 percent goes to transportation, 1 5/8 goes to the school district. There is another tier that is within 35 miles; 4 percent goes to the Convention and Visitors Authority, 3.8 percent to the State, 2 percent to the county outside the 35-mile range, 1 5/8 goes to the school district.

    In Washoe County the rates are: 11 percent in Sparks, 12 percent in Reno, 13.5 percent in downtown Reno, and 12 percent in the unincorporated portions of Washoe County. Sparks is using 6 5/8 percent for the Reno-Sparks Convention Visitors Authority, 3/8 goes to the State, 1 percent goes to the bowling stadium, 2 percent the convention center, 1 percent to the city center project. Some of the rural counties have as much as 5 percent going into the county general fund.

    There are 17 states, which have a room tax ranging from 9 percent in Vermont to 1 percent in South Dakota. Some of the concerns, after this was presented to the Senate Committee on Taxation, were that the room tax rate was not asking for any of the future, potential increase for the State. It was offered in S.B. No. 382 of the 72nd Session. The room tax was created by the State 20 years ago, and we have not returned to the revenue source. I believe asking for a 1‑percent increase is not an irresponsible action to take.

    I have a copy of an article from the Las Vegas Review Journal, dated Thursday, June 5, 2003, depicting the average rise in the strip’s room rates. Travelers are substituting overseas trips with visits to Las Vegas. Rates for Las Vegas hotel rooms are warming up in June as Americans substitute trips to U.S. destinations. Average room rates are the clearest barometer of demand for Las Vegas as a destination. They increased to $146 for the week of June 23, up 16 percent from the same week in 2002 and 2001.

    Senator Raggio:

    How many on the Committee would not support a 1-percent increase in the state room tax? Those in opposition are Senators Mathews, Rhoads and Raggio. We will add a 1-percent room tax into the matrix. The reason I do not support the increase in room tax is because Reno’s rate is already 13.5 percent.

    We shall now discuss the BLT.

    Senator McGinness:

    The Senate Committee on Taxation did not consider the BLT because we were waiting to see if it could be part of a bridge program. In the event one of the large proposals could not be implemented until January, 2004, or July, 2004, we were considering the BLT could go up to $140 or $160 temporarily. The Task Force indicated it should go to $300 and then recede. Perhaps, this should be held until the end to use as a bridge process.

    Senator Raggio:

    Let us consider the bank franchise tax.

    Senator McGinness:

    The bank franchise tax was proposed in the last meeting of the Senate Committee on Taxation, but the committee members choose not to consider the proposal.

    Senator O'Connell:

    I wish the record to reflect I will not be voting on this proposal.

    Senator Rawson:

    There was discussion of a 7-percent bank franchise tax during regular session.

    Senator Care:

    I have heard 7-percent and 5-percent figures. What is the basis for those figures?

    Senator McGinness:

    I have no vested interest in this tax. In California, the bank franchise tax is 8 percent. California set up a separate franchise fee because banks by federal law are not permitted to pay a net profits tax. The committee tried to stay away from industry specific taxes, and this is a good example.

    Senator Titus:

    I agree. If we decide to implement a tax that would include banks, but if not, then we should look at a separate bank franchising tax.

    Senator Coffin:

    There was discussion about exempting industries that pay an industry-specific tax or using them to credit the tax dollars. A bank franchise tax is industry specific and was not prospectively added into the calculations given to us by Mr. Aguero. It seems you would tax them and back all or a portion out.

    Senator Raggio:

    At this point, we will pass on the bank franchise tax. The next item for consideration is the real property transfer tax.

    Senator McGinness:

    There are a number of proposals. One proposal for the real estate transfer tax is $1.10 per $500 of value.

    Senator Raggio:

    Is this collected for the State’s purposes at the present time?

    Senator McGinness:

    No. There is also a real estate transfer tax proposal with a $100,000 exemption. This committee has not looked favorably on exemptions, and by not exempting the first $100,000, you will get the rate down and still have revenues of $24 million in the first year and $48 million in the second year. I would move to include the real estate transfer tax of $1.10 per $500 of value.

    Senator Carlton:

    I respectfully disagree. I support the $100,000 exemption for the first-time homebuyer to purchase a home. We are aware of how difficult it is for people to save for the down payment. When purchasing a second home, the money from the first home can be applied. I would be opposed to eliminating the exemption.

    Senator Raggio:

    What would the real estate transfer tax be on a $100,000 property?

    Mr. Combs:

    The transfer tax would be $220 on a $100,000 property.

    Senator McGinness:

    The average home in Clark County is above $100,000. By exempting the first $100,000, the second $100,000 is going to be taxed at a higher rate of $1.80 per $500 of value.

    Senator Raggio:

    The proposal is to add a real property transfer tax component with no exemptions. Senators Titus, Carlton, Schneider and Coffin object to the proposal. Our next item for consideration is the payroll tax. The proposal is a 1-percent tax on gross wages. What would be the revenue received?

    Senator McGinness:

    When the proposal came out of committee, we had 0.5 percent on capped wages and 1 percent on wages over the cap. There has been criticism on both sides of this issue. I believe it should be one rate for all wages or just put a rate on the capped wages.

    Mr. Combs:

    Using the gross wages and salaries, given such a tax could not be imposed until January 1, 2004, you would lose the first six months of the first fiscal year. A 0.5-percent rate would generate approximately $81.5 million in the first year and $171.8 million in the second year.

    Senator Raggio:

    Would this be on gross wages? Would it be imposed on all businesses?

    Mr. Combs:

    Yes. We would advise structuring the tax in the same manner as unemployment insurance premiums. This would be the easiest method in structuring the tax. It would make it difficult to administer if exemptions are permitted.

    Senator Raggio:

    The rate is 0.5 percent on all payrolls without exemptions.

    Senator McGinness:

    Part of the plan was that the implementation of the payroll tax would eliminate the BLT, the per-employee head tax. The 0.5 percent would yield revenue of $81.5 million in the first half‑year and $171.7 million in the second year. If the rate is raised to 0.7 percent, the yield would be $114 million in the first half year and $240.5 million in the second year. The payroll tax is a dynamic tax. We could eliminate the BAT and the real estate transfer tax, and then roll the payroll tax back to the percentage that would be needed.

    Senator Raggio:

    Was there concern in the construction and mining industries because of their high payroll?

    Senator McGinness:

    It would not impact those industries any differently if we used the lower rate. This would be the total of all wages. The criticism was we would be letting those people with high wages escape the tax.

    Senator Raggio:

    Does this affect gaming?

    Senator McGinness:

    Yes. We could make a policy decision to exempt gaming employees from this tax.

    Senator O'Connell:

    Eliminating the real estate transfer tax would be helpful to the construction industry.

    Senator Raggio:

    We have put into the matrix a real property transfer tax and by passed the BLT.

    Senator O'Connell:

    It was the understanding of the Senate Committee on Taxation that the construction industry would be hard hit by both taxes.

    Senator Hardy:

    The issue is paying twice on the same revenue.

    Senator Raggio:

    If a construction company building roads has a billion-dollar payroll and has a 2- or 3-percent profit, there is no transfer of property involved.

    Senator Hardy:

    If you separate construction, it would be true, but what we are discussing is construction/development. It is impossible to separate them. When you have a development company that is also involved in construction, you have the cost of doing business as a construction company and development.

    Senator McGinness:

    Construction and gaming currently pay the BLT. With the imposition of the payroll tax both industries could disappear.

    Senator Raggio:

    We have a proposal of 0.5 percent on total payroll.

    Senator Titus:

    I oppose a payroll tax. A tax on wages would discourage companies from giving raises and hiring more employees. It would encourage more automation, and people would lose jobs. A payroll tax would be counterproductive to the unemployment problem in the State.

    Senator Amodei:

    At present, the $100-head tax generates $80 million a year. It has been suggested to raise the head tax to $200. I became convinced when staff said the payroll tax was the most stable tax, did not require multiple returns and was not difficult to administer. Then I heard it has the potential to remove the head tax that would be an $80 million windfall before a business would start paying this to the State and imposing a real property transfer tax. This sounds as though it would keep money in the employees’ pockets and give employers an $80 million head start on paying the tax.

    Senator Raggio:

    One company could have a payroll of $1,000,000 and have a profit of $100,000. Another company could have a payroll $1,000,000 and have a profit of $500,000. There in lies the difficulty. We have been concerned on the gross profits tax on the same situation. Some companies have high receipts and low margin; some have high receipts and a large margin.

    Senator Amodei:

    The head tax does not consider any of those issues. It is $100 per employee. You could have a company that makes $1 million, has two employees, pays $200; or a company making $1 million and has 300 employees, pays $30,000. The head tax does not consider any of those factors. We need to examine what is currently in place. Perhaps, we should double the head tax because that would yield $160 million a year with zero infrastructure required. The head tax has been working for 13 years.

    Senator Nolan:

    I agree with my colleague. The problem exists in that the Assembly has said they would not consider a payroll tax.

    Senator Raggio:

    How many on the Committee are opposed to a payroll tax being part of this proposal? Senators Titus, Tiffany, Hardy, Carlton, Coffin, O'Connell, Wiener, Mathews, Washington and Neal are opposed.

    The service tax is next for consideration.

    Senator McGinness:

    This would be a dynamic tax base but difficult to administer. We would not be able to institute this tax until July 1, 2004. A 0.5-percent service tax with no exemptions to the taxable base would yield $324 million in the second year.

    Senator Coffin:

    I was not in favor of this particular sales tax on services proposal. There was another proposal that reduced the sales tax by 2 points a 40 percent reduction down to 5.5 percent and created a service tax, which the committee voted for. We had a chance to help business trades help the general mercantile businesses of the State by reducing sales tax, and the opportunity passed. The services mentioned are a variation of other plans presented.

    Senator Raggio:

    We will ask staff to compile what we have added to our matrix revenue plan. The gaming tax, the BLT and the net profits tax are the remaining issues.

    Senator O'Connell:

    Was it clarified that the convention shows would be exempt from the LET?

    Senator Townsend:

    The issue of trade shows is a very important one. One draft of the LET was not clarified relative to the live entertainment and swept in all convention space that was leased by vendors or lessees. In our current casino entertainment tax, there is an exemption for trade shows. It would be my understanding, where the conventions have live entertainment to which it sold tickets to its conventioneers, that would be exempt, but if the tickets were sold to the public, then it would be covered by the LET.

    Senator Raggio:

    Was this part of the revenues figures?

    Senator Coffin:

    The problem with trying to tax live entertainment in conventions is there are hundreds of companies hiring entertainment, and it would be impossible to determine how they are being paid. It should be removed.

    Senator Raggio:

    Is there a proposal on the service tax?

    Senator McGinness:

    The committee approved the service tax with some exemptions. We should consider this in the morning.

    Senator Care:

    There are three ways to proceed. We can do an across-the-board service tax, an across‑the‑board tax with exemptions or tax only specific services. I had a proposal to tax high‑end services and specify in statute what they would be, for example: banking, to exclude ATM and personal checking; management consulting fees; legal fees; accounting fees; and security and commodities brokers fees. It is a complex subject. To lessen the burden for the average Nevadan, we should target the services the high-end businesses would recruit.

    Senator Raggio:

    Are there any other issues to be discussed? Tomorrow is the last day the Governor has allocated for this Special Session. We should be prepared to make some hard decisions and be mindful of what the Assembly is doing. There must be a two-thirds vote in both Houses to get a tax plan passed.

    On the motion of Senator Townsend, the Senate did rise and return to the Senate Chamber

    Motion carried.

SENATE IN SESSION

    At 6:33 p.m.

    President Hunt presiding.

    Quorum present.

UNFINISHED BUSINESS

Signing of Bills and Resolutions

    There being no objections, the President and Secretary signed Senate Resolutions Nos. 1, 2, 3; Assembly Concurrent Resolution No. 1.

    Senator Raggio moved that the Senate adjourn until Friday, June 6, 2003, at 7:45 a.m.

    Motion carried.

    Senate adjourned at 6:34 p.m.

Approved:                                                                  Lorraine T. Hunt

                                                                                   President of the Senate

Attest:    Claire J. Clift

                Secretary of the Senate