MINUTES OF THE ASSEMBLY COMMITTEE ON TAXATION Sixty-Eighth Session June 8, 1995 The Committee on Taxation was called to order at 1:15 p.m., on Thursday, June 8, 1995, Chairman Bob Price 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: None STAFF MEMBERS PRESENT: Mr. Ted Zuend, Deputy Fiscal Analyst OTHERS PRESENT: Ms. Barbara Reed, Douglas County Treasurer Mr. Alvin Kramer, Carson City Treasurer Ms. Carole Ann Vilardo, President, Nevada Taxpayers Association Ms. Ande Engleman, Nevada Street Press Association OTHERS PRESENT, CONT: Mr. Jim Sanford, Co-Publisher, The Mason Valley News (Yerington) Ms. Karen Garaventa Baggett, Deputy Director, Nevada State Commission on Economic Development Mr. Pat Coward, representing the Economic Development Authority of Western Nevada Ms. Patricia Justice, Legislative Representative, Clark County Ms. Lucille K. Lusk, Legislative Liaison - NV Concerned Citizens (NCC) Ms. Janine Hansen, Nevada Family Educational Foundation Mr. Monte C. Fast, Executive Director, Friends in Service Helping (FISH) Ms. Paula Berkley, Girl Scouts, United Way Ms. Bobbie Gang, Nevada Women's Lobby Mr. Michael Pitlock, Executive Director, Department of Taxation Mr. John Bartlett Ms. Janice Pine, St. Mary's Health Network, Inc. Chairman Bob Price opened the meeting with Senate Bill 309. SENATE BILL 309 - Revises provisions governing delinquent taxes. First to testify was Ms. Barbara Reed, Douglas County Clerk Treasurer, who was in favor of S.B. 309. The county Fiscal Officer's Association put together S.B. 309; however, she announced a conflict with Assembly Bill 375. The dates did not work. Ms. Reed requested S.B. 309 be put aside and desired A.B. 375 to be returned from the Senate and/or amended to get the two bills to work together. The county treasurers had concerns with some of the dates. "Yes," acknowledged Chairman Price, "you are referring to Mr. Carpenter's (assembly) bill. Did we somehow miss you from being here to mention the problem with the dates when we held the hearing?" "Actually, I came in (to testify)" she replied, "but it (the bill) was all amended and sent out before any of the county treasurers were able to speak on it." The original bill, as they understood it, was to be amended differently than how it turned out. When the bill came out in the final amended form, it was not what they expected. The problem was with the last date being due in April: that actually ran it into the new year. The state needed more time to certify and the county treasurers had to get the bills printed and mailed. The first installment was due July-end; they were concerned the taxpayers would just be getting their bills and some of them would be showing delinquencies. The county fiscal officers put together S.B. 309 primarily because they wanted to be able to send a courtesy notice to the taxpayers in each county to provide them an opportunity to realize their taxes had not been paid-in-full (e.g., if they had an impound account and believed their taxes had been paid, they would have notice if there was a problem). This would also save them the embarrassment of having their names published in the newspaper. As well, there was also concern because the due date followed the income tax due-date. They preferred the due date be the end of March instead of April. Lastly, they wanted to change the publication from four times in the newspaper down to one. Assemblyman Joan Lambert mentioned there was a third bill, A.B. 499, that received an amend and do pass from Government Affairs. It allowed for a notice on delinquent taxes to be sent out and for publishing only once in the newspaper. Assemblyman John Marvel wondered if S.B. 309 could be amended to satisfy the treasurers' concerns. But Ms. Reed stressed her opinion that A.B. 375 was the one she "liked" and would prefer A.B. 375 be amended to move the last date up to the end of March instead of the end of April. Chairman Price was puzzled about the specific reason Ms. Reed wanted to reduce the publishing of the names from four times to one. She responded the law required that once the list of delinquent taxpayers was published, it had to be published all four times; therefore, if someone came in and paid their taxes after the first publication, their names could not be removed from being printed in the newspaper again (three more times). This had resulted in confusion, embarrassment, and problems for taxpayers; hence, the treasurer would like to be able to send the courtesy notices, which proved to be very effective. Still, Chairman Price was baffled by Ms. Reed's contention of it being impossible to delete the names from the published list of the delinquent taxpayers when they paid their taxes. Ms. Reed insisted the law prohibited the removal of the name from being removed: once the name was published, it had to go the full cycle. Chairman Price reasoned that could be corrected by changing the law, but Ms. Reed countered saying, "That would create a GREAT expense to the counties, because instead of the newspapers typesetting once for publication, they would have to typeset every week to remove the names. So the cost for the counties would be four times as expensive as what it was currently." Mr. Price thought the lists said a lot for public information. Perhaps the cost the newspaper imposed to remove a name from the publication list might be borne by the taxpayer. Next to testify was Mr. Al Kramer, the Carson City Treasurer. He informed it was the Attorney General's opinion that dictated once the name printed, it printed every time: it was not necessarily law, just an interpretation by the Attorney General. However, that aside, the preferred would be to get the notification letter mailed first and S.B. 309 allowed for that. S.B. 309 was scheduled to become effective October 1995, but A.B. 375 was scheduled to become effective July 1996. Mr. Kramer's suggested amendment (Exhibit C) adjusted the dates as far as S.B. 309 was concerned. However, he "sat on the fence" regarding the date issue. Speaking next in support of S.B. 309 was Ms. Carole Vilardo, President of Nevada Taxpayers Association. She contended it was much less expensive to do an initial mailing first; probably a good 6,000 people could be eliminated from the publication list. The mailed letter provided the taxpayer an opportunity to pay taxes due before the newspaper published the tardy list and at a cheaper rate. The bottom line was to get the money in. As an association and speaking personally, she felt it made a lot of sense. Ms. Vilardo urged the Committee to consider the bill and favorably support it. Testifying in opposition to S.B. 309 was Ms. Ande Engleman, in behalf of Freedom of Information. The U.S. constitution, Article 1, Subsection 9 required every state, from time-to-time, to publish all the receipts and disbursements of its taxes -- clearly specifying it be published and be public information. That was why all across the United States, the assessors' lists were published with everybody's name listed who owed taxes. Nevada ALSO had in its constitution that each taxpayer should be treated equally, meaning that everyone who paid their taxes on time had the right to know who was not paying their taxes on time! Ms. Engleman's concern was access to the information, whether it was published or whether she could walk into the treasurer's office and get the complete list of delinquent taxpayers before any notice was sent out. That information should be available to the public, she asserted, and it should not cost them anything. Assemblyman Morse Arberry's concern was the current method: he emphasized he "did not like the way it was done now, period! Because I am always in there (the newspaper)." He wondered why it had to be published in the newspaper; if someone was concerned with somebody's delinquent taxes, why could they not go down and look at the records? "Mr. Arberry," replied Ms. Engleman, "this bill was controversial in the Senate." It passed out by one vote and that was by Senator Raymond Shaffer who approached her afterwards and announced, "I am sorry, but my name was published in the newspaper last time and I am tired of it, so that is why I voted for this bill!" She predicted a big slow down in the collection of taxes if S.B. 309 passed. Why should the delinquent taxpayer be treated more gently than the regular taxpayer? The regular taxpayer would not be getting a personal mailed notice. "In your history," questioned Mr. Arberry, "do you feel that because it is publicized in the newspaper, it makes any difference? I mean, do you think that all of a sudden, when people see their name in the newspaper (other than elected officials, who panic because the press is calling them about their name being there), but the regular non-elected person just runs down (to pay their taxes) because their name was in the newspaper. Like, who cares?" Mr. Arberry requested actual statistics on the effectiveness of the method. Ms. Engleman said a number of states had adopted the publication of delinquent taxpayers list because it proved so effective; it worked well at collecting taxes. She was on the Internet and saw Ohio had debated doing the same thing with their income taxes. But after the debate, they discovered a number of legislator's names would be on the list and the bill suddenly died. Assemblyman Maureen Brower asked Ms. Engleman for suggestions for how a person might be better served in another fashion (other than newspaper publication)? If Ms. Engleman were to rewrite the law, she thought there ought to be a penalty to a mortgage company or the entity that did not send the taxes in on time. They were making money off of the mortgagee's money by holding it for their private purposes of gathering interest. The biggest complaint heard was the mortgage company did not get the tax monies in on time. (Ms. Brower interjected perhaps the mortgage company's name be published instead of the individuals.) As well, Ms. Engleman announced she thought the list should be published and the names should be REMOVED when the taxes were paid, e.g., not have the names reappear on the published list after the taxes were paid. It did not make sense to Ms. Engleman the list be published more than once UNLESS YOU DO REMOVE THE NAMES. Assemblyman Roy Neighbors announced he was from Nye county and he thought everybody knew how Nye county felt about the constitution. He wondered, though, why he had a constitutional right to know whether someone paid their taxes or not. For example, as county manager he thought he could get the hospital out of trouble one time by printing the names of all the people who owed the hospital. But he had been advised by legal people he could not constitutionally do that. Why did not everybody have the right to know who the "deadbeats" were in town who were not paying to keep the hospital going? There were privacy laws in the state to keep all information regarding patients in hospitals as confidential information. The country was founded largely upon no taxation without representation and Ms. Engleman stood staunch on the contention that people who did not pay their taxes on time become a burden upon those who did, and the citizens had a right to know this! She added another example of the right to know: taxpayers had a right to know who were not paying child support if those people were on welfare; some states even published those names at the present time! Chairman Price invited Mr. Jim Sanford, co-publisher of The Mason Valley News in Yerington; the Fernly Leader; and the Dayton Courier. As well, he was the parliamentarian for the Nevada Press Association. Mr. Sanford announced the board of directors of the Nevada Press Association voted unanimously to oppose S.B. 309. Regarding A.B. 499, he had testified at the subcommittee hearing and, going by the notes he had taken, it had been decided a mail notification of delinquent taxes would be sent the day after they were due and then, two weeks later, a publication would appear one time in the newspaper. Regarding the requirement to publish the delinquent tax list at all, Mr. Sanford was confident Ms. Engleman had covered the public's right to know quite well. If one checked back historically, the law had been in effect and a requirement in the state of Nevada for over 100 years. He had to believe that fact was evidence of how well it worked. What good did it do to levy taxes that could not be collected? He believed the delinquent tax list helped the counties in Nevada collect. He had no statistics, but the embarrassment factor did work. As well, the publication did not cost the non-delinquent taxpayer one penny. The delinquent taxpayer paid for the publication cost at the time they ultimately paid their bill, or at the time the county came in possession of that property. Currently, taxpayers were sent a notice in January of every year; Mr. Sanford received one. He knew he was supposed to pay his taxes by a certain date; hence, there was ALREADY mail notification when taxes were due. But he did not think it made sense to publish the same names four weeks in a row. What did make sense was to send the mail notification out, wait a period of time, and then publish the list once. Some people would rush in and pay; then the list would be published again in 30 days without their names on it. That would show you who paid and who did not. Assemblyman Neighbors challenged Mr. Sanford's statement of "what good did it do to levy taxes if they could not be collected." After a three year period, the tax became a lien on the real property. There were instances, too, where very large taxpayers would examine the penalties and if they could invest the money and make more than the penalty, they did not care if their names were on the list or not. Mr. Sanford concurred that many large corporations waited until every third year to pay taxes because they could invest that money to make more money. The state of Nevada had then lost the use of their money for three years. Chairman Price interjected that most people did not realize how far delinquent some of the very big companies got. Most of those companies tended to publish in the smaller areas so big city people did not see their names. Changing the subject, Mr. Price wondered if Mr. Sanford's newspaper preparation was done by typesetting or by desktop publishing. Mr. Sanford confirmed it was desktop publishing; thus, it was not a major expense or difficulty to remove the name off the delinquent list when a taxpayer paid their tax. There being nobody else to speak for or against S.B. 309, Chairman Price closed the hearing. No motion was made and no action was taken. The hearing on Senate Bill 337 was opened. SENATE BILL 337 - Revises provisions governing exemptions from property tax for certain businesses relating to conservation of fossil fuels. First to testify was Ms. Carole Vilardo, President of Nevada Taxpayers Association, who spoke in support of S.B. 337. She explained the bill was a result of the interim committee on taxation and revenue, which was chaired by Senator Dean Rhoads. It was an attempt to take two different provisions in law (two statutes) which were benefits of economic development, e.g,. renewable sources of energy such as solar energy, wheeling power, etc. The interim committee discussed one of the state of Nevada's policy statements regarding attracting and doing things to benefit economic development were tax exemptions. The exemptions were not gifts or social programs; they were attempts to attract businesses that fit within the model of what state economics wanted for expansion: a non-polluting industry, an industry that paid 100 percent of the state average wage (over $11/hour), and provided medical insurance. By having those criteria in place -- even though the tax base was reduced with the exemption -- the state had attempted to ensure the people would not use social services to the same degree as those with lower paying jobs. The law did not require the exemptions be given. The company had to go before the Economic Development commission, who would have to be satisfied they met the criteria. Once the criteria had been met, the commission would certify it as such. Then the Department of Taxation and the assessors would receive that certification, which specified to what level and for what time frame. Ms. Vilardo summarized S.B. 337 as an attempt by the interim committee to create a standardization for those companies that might come in to the state of Nevada and apply for an exemption for renewable energy sources, which was allowed under the constitution. She urged its passage: she thought it simplified things for the development authorities and assured that, even though the state may lose part of the tax base, the tax base was not impacted by having a wage level of people who might come into Nevada and impact the social services the taxes had to fund. Assemblyman Larry Spitler remarked he had conversed with the Nevada Taxpayers Association in terms of exemptions in general. One thing that he found irritating was the notion this was the only way we could sell our state. Nevada did not have a personal income tax, and had very low taxes in other areas. But people kept coming for legislation for more and more tax exemptions. Mr. Spitler liked the idea of exemptions, but thought in a state that had a very low tax base in almost every area, it simply "killed us." While the statement was always that exemptions brought in higher paying jobs, etc., there was still an infrastructure demand that was "bursting at the seams." It was bothersome to Mr. Spitler. He wondered if there was any tax that did not have "2,000 exemptions" to it. Ms. Vilardo explained the crafting of exemptions, such as those allowed for in S.B. 337 (where there was a sales tax abatement which required approval by the Economic Development department, plus the deferral on the business tax), were very difficult exemptions to get. They were not huge, across-the-board exemptions. They had not been costing the state a lot of money in relationship to what they brought in. Mr. Spitler interrupted Ms. Vilardo to request specific data of who we had brought in and what their contribution to the tax base was, as well as who had gone their limit and were now at a full, taxable rate. The sales tax for business (the five year "spread out") was not an exemption, Ms. Vilardo explained. The liability was maintained. Instead of paying it at one time, a company could make arrangements to pay it over a period of time as prescribed by statute. The specific numbers were available from the Commission on Economic Development. She agreed with Mr. Spitler that Nevada generally had a business- favorable tax climate. However, every state was competing for new business. That was why Nevada needed to look for those incentives to attract the type of businesses desired. The infrastructure need was a major concern. When a higher paying job company came into the state, people could qualify to buy houses (versus a $5/hour employee). The homeowner became a part of the tax base (property tax). In addition, a higher paid employee had a greater disposal income to generate sales tax. The interim committee felt very strongly that if we were going to allow these exemptions for business, there had to be a returned obligation from the business that the wages would be high and medical insurance would be provided. The language in S.B. 337 married three statutes into one. Just the same, Mr. Spitler felt it worrisome in what he termed a "very erratic tax policy." He went as far to say that Nevada almost had a "lack of a tax policy." The state of Nevada chiseled away and created a greater unstable tax base, according to Mr. Spitler. Ms. Karen Baggett, Deputy Director of the Nevada State Commission on Economic Development, introduced herself. She informed Mr. Spitler that she possessed a list of all the companies since 1984 that had applied for and received a tax deferral certification from the Commission on Economic Development. This list she promised to provide for the Committee. In 1994, Ms. Baggett informed there were only seven companies that qualified for the deferral; in 1995, thus far there were only six. Deferrals were different from abatements. The deferrals were over four years and the criteria was very strict. The Commission, along with the Lieutenant Governor, felt very strongly against bringing in low-paying job companies that would tax other parts of the state's systems. They worked with the companies to ensure they would be good corporate citizens. They requested input from surrounding areas about impacts that might be negative. Mr. Spitler wondered if any companies Nevada had provided assistance to went bankrupt; Ms. Baggett replied there was only one in the last eight years. She pointed out that before the company could have the deferral, they had to have a bond to indicate they would be liable for the deferred taxes. Testifying next was Mr. Pat Coward, who represented the Economic Development Authority of Western Nevada. They supported S.B. 337. The issue had been discussed extensively in the interim committee, as was previously mentioned. He reiterated the criteria, which was very stringent. He thought the bill was a positive measure and wholeheartedly supported S.B. 337. Chairman Price asked if there was more testimony for or against the bill. Seeing none, the hearing on S.B. 337 was closed. SENATE BILL 417 - Revises provisions governing collection of money for issuance of certain business licenses. Testifying in favor of S.B. 417 was Ms. Patricia Justice, representing Clark county. Basically, the bill would allow the county to deposit the checks received for business licenses into a trust account. When they were ready to issue the business license, they could transfer the money to a general fund. Currently, when Clark county received a check, it was just held (up to a year before deposit). For example, occasionally they received a check from a major casino that owed $11,000 but sent the county a check for $10,900. Under the current practice, the county was required to return the check for $10,900 and notify the casino they owed $11,000. By the time the casino sent in the proper amount, they might also owe an additional late fee. At the present time, Clark county issued about 70,000 business licenses a year; this yielded about $160 million to the county. There was no further testimony on S.B. 417. SENATE BILL 144 - Proposes to exempt property sold by or to certain organizations from taxes on retail sales. Ms. Lucille Lusk spoke in favor of S.B. 144. She represented Nevada Concerned Citizens, who was not tax-exempt and received no benefit from the legislation but thought it extremely important for the benefit of those who did. She supplied extensive background information (Exhibit D) to the Committee and reiterated the pertinent points of her handout. As far as she was aware, there was complete satisfaction with the definitions of church and charity and there were no disputes regarding the procedure put in place. As far as she knew, the only place where some folks had concern was in the educational area: the definition was so exclusive it eliminated many small all-volunteer, civic involvement type groups. She stressed a number of times these groups should be encouraged. Ms. Lusk referred to, and spoke extensively from, (Exhibit D). Ms. Janine Hansen, State President of Nevada Eagle Forum, spoke in favor of S.B. 144. She addressed the expense issue of applying for a 501(C)(3) status, as well as the difficulty. She encouraged the Committee to expand the definition of educational organization. Ms. Hansen offered the following amendment to cover some of the small organizations that were trying to provide a benefit community: "Instruction of the public and dissemination of information on subjects beneficial to the community." She presented a verbal laundry list of types of organizations that were trying to promote good in the community or to provide a benefit for people but were not covered under the bill. Mr. Monte Fast, the Executive Director of Friends in Service Helping (FISH) spoke next. He mentioned he was worried about the state trying to define what religion was about, but with that caveat he supported A.B. 144 and hoped to see it on the ballot. Also in favor of S.B. 144 were Boy Scouts of America (Exhibit E) and United Way of Northern Nevada (Exhibit F). Ms. Paula Berkley affirmed that the Girl Scouts were also in favor of the bill. Ms. Bobbie Gang, representing the Nevada Women's Lobby and Planned Parenthood of Southern Nevada, stated she supported the bill and thought the ballot question would be simplified by the language. Ms. Carole Vilardo was in favor of S.B. 144. However, she requested the Committee to consider the use of the word non-profit in front of the word educational in the definition. As well, she suggested deleting the references to 501(C)(3) in lines 26 and 27 of Section 10; and lines 9 and 10 of page 5. Speaking next was Mr. Michael Pitlock, Executive Director of the Department of Taxation. He agreed with Carole Vilardo the references to 501(C)(3) should be deleted because it broadened the scope too much. The Department of Taxation's support for S.B. 144 would continue only if the amendment Ms. Vilardo requested was made. Without that, they believed the exemption was "way too broad." He stated subsections 2 - 5 provided the criteria and guidelines his department would use to make the determination on whether or not a particular entity fell into the category for exemption. Assemblywoman Jeannine Stroth asked Mr. Pitlock what 501(C)(3) entity they would not want included in the bill. Mr. Pitlock deferred the question to Mr. John Bartlett. Mr. Bartlett believed the 501(C)(3) language covered the historical and adult athletic organizations and a much broader gamut of types of groups that were non-profits. They focused on the charitable, religious, and educational as being more in line with what they thought legislature originally intended in 1955 when they used that terminology ("charitable and religious"). Testifying in behalf of St. Mary's Health Network was Ms. Janice Pine. She stated all not-for-profit medical facilities would fit into any of these categories. This would have real consequences for any of the medical facilities and she requested lines 26 and 27 remain in the bill. If these lines were deleted, they wanted additional language. Mr. Pitlock suggested Ms. Pine look at the language under Section 10, Sub. 3, B1. The language on defining charitable organizations was fairly broad. It was not the Department of Taxation's intent to exclude charitable hospitals. Chairman Price noted the meeting had lasted much longer than anticipated and S.B. 144 would be heard again on Saturday, June 10 at 2:00 p.m. Ms. Lusk announced, in behalf of Ms. Bobbie Gang, the Woman's Lobby felt strongly about keeping in the 501(C)(3) references. Regarding Ms. Vilardo's request to insert the words "non-profit educational" on the ballot question, Ms. Lusk thought it was a good idea; however, she thought properly it should say "non- profit religious, charitable, or educational." Ms. Stroth wondered if it were possible to define which 501(C)(3) organizations might be included that would take into account the criteria being discussed. Chairman Price announced he had all the federal language in his office to refresh people's memories. Saying that, Mr. Price adjourned the meeting at 3:45 p.m. RESPECTFULLY SUBMITTED: Carolyn Grabski, Committee Secretary Assembly Committee on Taxation June 8, 1995 Page