MINUTES OF THE ASSEMBLY COMMITTEE ON TAXATION Sixty-eighth Session March 28, 1995 The Committee on Taxation was called to order at 1:15 p.m., on Tuesday, March 28, 1995, Chairman Stroth presiding in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Bob Price, Chairman Ms. Jeannine Stroth, Chairman Mr. Pete Ernaut, Vice Chairman Mr. Michael A. (Mike) Schneider, Vice Chairman Mr. Morse Arberry, Jr. Mrs. Maureen E. Brower Mrs. Joan A. Lambert Mr. Mark Manendo Mr. John W. Marvel Mr. P.M. Roy Neighbors Mr. Brian Sandoval Mr. Larry L. Spitler GUEST LEGISLATORS PRESENT: Assemblywoman Barbara Buckley STAFF MEMBERS PRESENT: Ted Zuend, Deputy Fiscal Analyst OTHERS PRESENT: Janice Wright, NV Dept. Of Taxation David Horton, Committee to Defend the Constitution Tom Johnson, NV Sentinel and NV Freedom Coalition Mr. Brad Lawrence, Nevada State Treasurer ASSEMBLY BILL NO. 169 - Authorizes organization to acquire land held in trust by county treasurer for delinquent taxes for development of affordable housing for low-income families. Chairman Stroth announced we would be hearing this measure as a work session and stated she understood Mrs. Lambert had a question or some comments she wished to bring to the attention of the committee. Mrs. Lambert explained she heard a different bill (A.B. 143) in another committee that allowed the counties to acquire property by eminent domain for different purposes. The county would then be able to donate that property to a 501-C3 project allowing them to provide land for low income or affordable housing. As she recalled there was some concern, if this goes to a tax sale right now, the residual left after the tax lien is paid goes to the owner of the property. If we are going to have the county donate this property to a 501.C3 would that mean the owner of the property would no longer acquire the residual. She did not feel that would be fair and would not support that line of thinking. Chairman Stroth asked Mr. Zuend to respond to that question. Mr. Zuend pointed out he has distributed a memo dated March 24, 1995, generally covering all the testimony by Carson City Treasurer Al Kramer. (Exhibit C) He called the committee's attention to the second page of the memo where he addressed the issue brought up by Mrs. Lambert explaining it comes down to a policy decision. He agreed with the statment by Mrs. Lambert on the legislation currently existing under Nevada law when property is transferred to a university system or local government, the owner would lose any residual value for the transfer. He feels that is why there is an additional ninety day period for reconveyance within this section of the statute. The ninety day period is in addition to the regular two year redemption period for all property that has back taxes owed upon it. The other provision he noted, is that courts have typically held these transfers to local governments are legal and have upheld them without the property owner benefiting. Legislative Counsel in a previous opinion pointed out that, if the property was given to a non-profit organization, that may change the terms of a court decision and could result in a more favorable decision for the former owner. He cautioned he is only speculating inasmuch as it is not a transfer to a government we are talking about. Mr. Neighbors stated he is having trouble with the bill as he feels it is bad tax policy. He does not see where they have defined "nonprofit organization requirement or 501-C3". Historically when property is made available through non payment of taxes, the county clerk makes the property available for sale, it is bid and only the one who lost the property would get more money Mr. Sandoval asked Mr. Zuend about the provisions for sale notice; he stated he was a little concerned about that. The bill says, " in the manner provided by law". He asked about the notice procedure provided by law, pointing out he was referring to page l, lines 13, 14 and 15. Mr. Zuend responded that in the statutes there is a two year redemption period. During that period the treasurer seeks to find out who the last owner was and establish that he or she has a two year redemption period to pay the taxes and reclaim the property. When a notice is posted that the property is going to a tax sale, the owner no longer has any ability to redeem the property at that point. This particular section is giving an additional notice covered in section 4, which provides an additional ninety day period when the sale is to one of those organizations, for taxes only, in the context of this section. Basically, there would be two notices given; there would be the two year redemption period that applies to all property before the treasurer can do anything with it and presumably this property would have already been subject to that period. If the intent then is to sell the property to one of these organizations, which now includes the university, community college system and local government and if this bill were approved the nonprofit organizationwould be included.. Under those terms you are now selling it only for taxes, basically, because that is the only requirement, that is, payment of taxes, interest and penalties, etc. This section also gives an additional ninety day period where once again the treasurer is to contact the owners and go through the notification process. He explained he spoke with Mr. Mark Aston, Clark County Treasurer, about this and was told they simply send out a certified letter and hope they get it back signed and certified that it found the right owner. It is just a certified letter, there is no advertisement in the newspaper or legal notice. Mr. Neighbors interjected the sales they have had in Nye County have been advertised in the legal notices and recorded in the courthouse. There followed considerable, general discussion surrounding the provisions of this bill as it relates to the advertising and/or legal notice requirements, with comments and/or questions from various committee members. Testifying next for information purposes was Mr. Al Kramer, Carson City Treasurer who explained the method they use is for the notice to go out in the newspaper after the property owner has not paid their taxes for a given year. At the point in time when the owners are subject to lose the property, his office sends out a certified letter not only to the person of record but also to the lien holders on the property after a title search is done. Before the sale is made, there is another notice in the newspaper announcing the sale on a particular parcel. Mr. Price confirmed they used local newspapers and was assured that is the method Carson City uses. Mr. Price then inquired as to the provisions for any lien holders being notified or other persons who may have money coming to them. Mr. Kramer verified when they do a title search through an escrow company, they will notify them of the people who have an interest in that property. If the property is within a planned unit development, condominium complex, etc.,the homeowner's association will get a certified letter on the proposed sale. Mr. Neighbors questioned, for clarification, if somebody owns a piece of property and if for some reason they are not able to redeem it at the end of the tax period, is that person put on notice before they can put it up for sale. Mr. Kramer said once taxes on property have not been paid, the assessors' office in January of the third year, will advertise for a sale to take place in May of that year. That finishes up the redemption period and puts the people on notice that it is coming up for sale. It was brought to the members' attention that after the property is finally sold, and the county owns the property at that time, the person who did not pay the taxes gets the difference between the penalties, taxes and sales price. Under this proposed law, that would not be the case. Mr. Kramer in attempting to elaborate on similar situations that have arisen in Carson City explained the last time they had a tax sale was so long ago no one could remember when, however, he feels confident the county of Clark or city of Las Vegas have used this remedy for non-payment of taxes on many occasions. Mr. Marvel then asked Mr. Zuend if this property is picked up through a tax delinquent sale by a nonprofit, it is still off the tax roll. Mr. Zuend stated it would depend upon whether the nonprofit is tax exempt. He pointed out not all nonprofit organizations enjoy a tax exempt status. The language in this bill has a very broad definition of `nonprofit' which was covered in the memo he had prepared. Brenda Erdoes had advised him that the most basic definition of nonprofit is that no part of the net earnings of the organization may benefit a private individual and it does not necessarily have anything to do with 50l.C3 status. It is just that it is not a profit making organization. Mr. Marvel inquired as to the intent of the sponsor of this bill and was advised by Ms. Buckley this is a Clark County bill and she was working with them on it. She explained the committee would deci de whether they wanted it to be a 501-C3 organization or nonprofit. The intent of the bill was to get at those organizations whose board is not benefiting and are nonprofit, however, the bill is discretionary. It only gives the county the ability to pass along these properties if they deem it is feasible. Where she would envision it happening is only in those situations where it makes sense for the general good of the community. She pointed out in Clark County they have some properties that are very run- down, the neighbors are complaining that it is the worst house on the block. The county does have nonprofit organizations who could come in with volunteers from the community, fix those properties up so the neighborhood is not blighted and put families in the homes so it is no longer a blight on the community. The nonprofit may still pay property taxes - it depends on whether they have a separate exemption, not just by virtue of the 501-C3 which does not do it but pursuant to another statute, which allows them under certain guidelines, to pay taxes. The property may very well be put back on the tax roll, they would be paying property taxes on it as well as giving an opportunity for the property to be fixed up. Also allowing the approximately 80-thousand people in Clark County who are in need of affordable housing to be given an opportunity. Chairman Stroth invited questions or comments from anyone and responded to a question by Mr. Sandoval who asked if there were any provisions outside of a bill to provide some type of deed restriction that would prevent a nonprofit from obtaining property, developing it and then further down the line selling it. He would like to be assured that if a nonprofit does develop property for affordable housing that it stays that way. Mr. Zuend replied this measure does not cover that issue at all other than setting up provisions of when they have to develop the property but that is the only section dealing with this particular situation. Mrs. Lambert interjected she feels we currently have the ability to do what this bill is proposing under chapter 279B. She called attention to Section 6, page 2, lines 16 through 19 where it spells out you do not have to pay the delinquent taxes using a program for the rehabilitation of abandoned residential properties . . . pursuant to chapter 279B of the NRS. There is already the ability to transfer properties. She asked if this provision has ever been used and was advised by Mr. Zuend that he has talked to the Clark County Assessor Mark Aston but he did not get into that issue with him. He did say there have been transfers to local governments under his tenure but only six regular tax sales and he did not indicate a number on the nonprofit issue. Mr. Ernaut relayed his three concerns with this bill: #1 the noticing requirement which has now been discussed to his satisfaction, #2 the fact that these properties may indeed be taken off the property tax rolls. This seems to be a specious argument for the bill inasmuch as if we are taking the property because no one paid the taxes just to pass it on to a nonprofit organization and take it off the tax rolls again for perpetuity does not appear to be good government. He does not, however, feel that is the case. #3. Most importantly, this is enabling legislation that allows a county commission to make that discretionary call and, even though, he is a staunch supporter of property rights, any property owner that has not in any way contacted the county treasurer in two years and ninety days, is probably a negligent owner. He does not feel we are taking away that property owners right to grievance through the courts if there was an extreme example. There being no further testimony or discussion on the bill, the hearing was closed. A MOTION WAS INTRODUCED BY MR. ERNAUT FOR A DO PASS. SECONDED BY MR. MANENDO. Prior to the vote being taken, Mr. Sandoval stated he could support the motion on the bill providing there is an amendment to place a deed restriction on the property so it will be kept as affordable housing for perpetuity. MOTION INTRODUCED BY MR. SANDOVAL, SECONDED BY MR. MARVEL TO AMEND THE MOTION TO INCLUDE A PROVISION THAT THE PROPERTY WOULD REMAIN IN NONPROFIT STATUS FOR AFFORDABLE HOUSING, SECONDED BY MR. MARVEL. Prior to the vote being taken, Mr. Price interjected his concerns about the motion revolves around the possibility of a small piece of residential property that may be conveyed for low-cost housing and twenty years from then when the surrounding property is worth fifty times more than it was - what happens then? You would be creating a real problem by tying up what could be extremely critical and expensive property in an attempt to accommodate one low cost residence. Mr. Ernaut suggested we may want to add a provision saying any profit made by the sale of such property would revert back to the county general fund. That would keep nonprofit organizations from going into business of turning these properties around for profit. He agrees there should be some safeguards. Mrs. Lambert clarified for the committee her feelings on this proposal and stated she would be voting against it. She feels it has been made clear we already have the mechanism in our law to take care of this type action, under chapter 279B and no one could even tell us if it had ever been used. Therefore, she will be voting no. VOTE ON THE AMENDMENT TO THE MOTION TO AMEND AND DO PASS, PASSED BY A MAJORITY VOTE WITH ASSEMBLYMEN MARVEL AND SCHNEIDER VOTING NAY. VOTE ON THE MAIN MOTION, AS AMENDED, FAILED WITH ASSEMBLYMEN MARVEL, BROWER, NEIGHBORS, PRICE, SCHNEIDER AND LAMBERT VOTING NAY. There was no further action on the bill at this time. Chairman Stroth advised those present we have been requested that no action be taken on A. B. 257 by Speaker Dini, primary sponsor, until he can provide further information. Committee bill draft introductions were taken up next in the following format: BDR 32-947 Motion for introduction by Mr Neighbors, seconded by Mr. Ernaut. BDR 32-961 Motion for introduction by Mr.Marvel, seconded by Mr. Arberry. BDR R-956 Motion for introduction by Mr. Neighbors, seconded by Mrs. Lambert. BDR 20-1822 Motion for introduction by Mr. Price, seconded by Mr. Ernaut. BDR 32-954 Motion for introduction by Mr. Price, seconded by Mr. Neighbors. BDR 43-371 Motion for introduction by Mr. Price, seconded by Mr. Arberry with concurrent referral to Ways and Means. BDR 35-370 Motion for introduction by Mr. Price, seconded by Mr. Schneider. BDR 32-369 Motion for introduction by Mr. Price, seconded by Mr. Schneider. BDR 32-368 Motion for introduction by Mr. Price, seconded by Mr. Neighbors. There being no further business, the meeting was adjourned at 3:15 pm. RESPECTFULLY SUBMITTED: Nykki Kinsley, Committee Secretary APPROVED BY: Assemblyman Bob Price, Chairman Assemblyman Jeannine Stroth, Chairman Assembly Committee on Taxation March 28, 1995 Page