MINUTES OF THE ASSEMBLY COMMITTEE ON TAXATION Sixty-Eighth Session June 24, 1995 The Committee on Taxation was called to order at 1:15 p.m., on Saturday, June 24, 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. Kathyrn A. McClain, Clark County Legislative Analyst Mr. Richard O. Kwapil, Attorney from Reno Ms. Carole Vilardo, President, Nevada Taxpayers Association Co-chairman Jeannine Stroth announced there would be a review of what was done on the floor regarding the committee's work session bills. SENATE BILL 483 - Makes various changes relating to collection of taxes. ASSEMBLYMAN PETE ERNAUT MOVED TO DO PASS S.B. 483. ASSEMBLYMAN MAUREEN BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** SENATE BILL 519 - Revises provisions governing taxation of property that is exempt from taxation when it is leased to entity which is not exempt from taxation. ASSEMBLYMAN JOHN MARVEL MOVED TO AMEND AND DO PASS S.B. 519, WITH THE CLARIFICATION OF CHANGING THE BRACKETS (which had been incorrectly done on the Senate amendment when it came to Assembly). ASSEMBLYMAN BOB PRICE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** SENATE BILL 324 - Reduces rate of tax on aviation fuel. ASSEMBLYMAN BOB PRICE MOVED TO DO PASS S.B. 324. ASSEMBLYMAN MAUREEN BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** SENATE BILL 337 - Revises provisions governing exemptions from property tax for certain businesses relating to conservation of fossil fuels. ASSEMBLYMAN ERNAUT MOVED TO DO PASS AND RE-REFER S.B. 337 TO WAYS AND MEANS. ASSEMBLYMAN LARRY SPITLER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT, WITH THE EXCEPTION OF ASSEMBLYMAN JOAN LAMBERT WHO DID NOT VOTE. ******** ASSEMBLY BILL 672 - Exempts certain property from taxation. Ms. Stroth announced A.B. 672 was re-referred back to Taxation for hearing. ******** SENATE BILL 311 - Proposes exemption from sales and use tax on sale of equipment and materials used in production of electricity from renewable resources of energy. Ms. Stroth referred to S.B. 311 as the "Reno Air Bill" and informed the new amendment had been received while they were on the floor. She had checked with all members, who okayed the wording of the amendment. They had just received it back from the Legislative Counsel Bureau; therefore, it would be on the floor in the afternoon or tomorrow. ASSEMBLY BILL 481 - Revises provisions governing financial administration of local governments. Ms. Stroth announced a conflict notice had been received on A.B. 481 (Mr. Marvel's bill). The committee had been holding the bill and thought it was not needed; therefore, Ms. Stroth did not think a conflict resolution would need to be addressed. The recap of the floor work session was completed and the first order of business was addressed. SENATE BILL 68 - Expands exemptions from tax on transfers of real property to include transfers made to corporation sole from another corporation sole. First to testify was Richard "Dick" Kwapil. He represented the Roman Catholic Bishop of Reno/Las Vegas corporation sole, a legal entity for the Catholic church in the state of Nevada. He spoke in behalf of S.B. 68, not to get any particularly favorable legislation for his client and church, but just to allow a corporation sole (a "creature" created by Chapter 84 of the Nevada Revised Statutes) to be treated the same as a private corporation (created by Chapter 78 of the N.R.S.) insofar as real property transfer tax exemptions are concerned. Mr. Kwapil's testimony is (Exhibit C). He explained a corporation sole had no stockholders, directors, or officers. The reason the term "sole" was used was because it was the individual in charge of a particular church -- whether it be Catholic, Episcopal, or Mormon. Upon the death or resignation of a leader of the church, the authorities of the church designated a successor in accordance with their rules and regulations. That successor immediately became the corporation sole. Therefore, it allowed a church to have perpetual existence. Recently, it had been announced in Rome that, because the state of Nevada had grown substantially, the Catholic church would be divided into two areas: the diocese in Reno (to cover the northern portion of the state) and a diocese in Las Vegas (to cover the southern portion of the state). That action would occur at the end of June. In order to accomplish the division in accordance with Nevada civil law, a new corporation sole had to be created and the articles of the existing corporation sole be amended to reflect one diocese or the other. There would be a new corporation sole for the diocese of Reno; the existing corporation sole, by the name of Diocese of Reno - Las Vegas, would be changed to Diocese of Las Vegas and would encompass five southern counties. Once there were two corporation soles, obviously there had to be conveyances of properties amongst them. He approximated about 75 conveyances of church property in the northern portion of the state -- not only churches, but schools, cemeteries, rectories, convents, and missions. The mere fact there would be a conveyance did not mean the property was going to be used any differently. A Catholic church in Reno was still going to be the Catholic church it was before the conveyance. When the Legislature adopted the real property transfer tax, it recognized exemptions for private corporations undergoing reorganizations. Mr. Kwapil referred to Subsection 10, wherein there was an exemption from such tax by an individual who owned 100 percent of the stock of a corporation; in Subsection 12, there was an authorization from such transfer for corporate reorganizations of private corporations. What was happening within the Catholic church was basically a reorganization under church law, but by creating a separate corporate entity. Therefore, Mr. Kwapil did not think it was unreasonable to create an exemption from the real property transfer tax in the language proposed by S.B. 68, which would treat a corporation sole the same way a private corporation was treated. In the last legislative session, the Legislature adopted exemptions to the tax for all transfer to or from an educational foundation, or to or from a university foundation. That was much broader than the language proposed by S.B. 68. If the bill were adopted, a corporation sole would still pay real property transfer tax on any property it purchased from a third party or sold to a third party; this only allowed the corporation sole to be treated as a private corporation was treated in the event of a reorganization. ASSEMBLYMAN JOHN MARVEL MOVED TO DO PASS S.B. 68. ASSEMBLYMAN JOAN LAMBERT SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** SENATE BILL 338 - Expands authorized uses of proceeds from supplemental vehicle privilege tax. Testifying in favor of S.B. 338 was Ms. Kathy McClain, Clark County Legislative Team. She explained S.B. 338 enabled legislation that allowed Clark County to pay living expenses for those residencies they took by condemnation for right-of-way for the beltway system. Also added was a "willing buyer/willing seller" program whereby they could use a percent of the supplemental vehicle privilege tax to start the program if someone had a house abutting the highway (it had to be adjacent to the highway and meet certain criteria). Under the program, Clark County could offer fair market value for the house. They could then sell the house to someone else who knew what they were getting into, e.g., a highway was planned where the house stood. The assumption was the house would be re-sold at a lower price. The bill was passed out of Senate Taxation (by a vote of five to two). Two Senators were not happy with the bill and it was amended. The amendment deleted the revolving account. By "kicking out" the revolving account, Ms. McClain explained the program was "killed" after the county bought one house. Ms. McClain suggested another amendment (Exhibit D). She elaborated upon the amendment she proposed. ASSEMBLYMAN MARVEL MOVED TO AMEND AND DO PASS S.B. 338. ASSEMBLYMAN STROTH SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** SENATE BILL 546 - Imposes additional requirements for enactment of legislation that imposes or increases public revenue. Testifying in support of S.B. 546 was Ms. Carole Vilardo, President of Nevada Taxpayers Association. She announced she appeared in order to explain the bill and some amendments that were required at the request of Senator Dean Rhoads, who chaired the interim committee on revenue in Taxation. Ms. Vilardo reminded everyone Question No. 11 passed on the 1994 general election ballot. That was what she termed the "Gibbon's Initiative," which provided for a two-thirds vote. The discussion before the Revenue and Tax committee relative to that particular legislation elicited a great deal of concern from the committee members that it would put minority in control of all tax issues coming before the legislature in future sessions. The committee adopted a recommendation which said, in effect, there would be two votes taken on each bill. The logic to this was it was felt the two-thirds was a frustration to the voting public; that question passed very, very handily on the November 1994 election ballot. What people wanted was to have extraordinary scrutiny and have some input on tax measures. If first votes were done in the house in origin, press always reported tax bills: that would give constituents enough time to provide their opinions to legislators and allow the legislators to take a second vote. That, therefore, was the genesis of the bill. What S.B. 546 did, as approved in the Senate with discussion about amendments that would be offered in the house, was to in all instances (except for the close of the legislative session, because no one knew exactly what date that would be) require two votes by each house -- simple majority -- on each question that involved a tax or an assessment. The bill was amended to take out the word "fee." One of the amendments being recommended was (Exhibit E). Ms. Vilardo elaborated on the amendments. If both S.B. 546 passed and the Gibbon's two-thirds initiative passed, the Senate had asked if that would mean there would be two votes taken on every tax bill and if a two-thirds majority be required, as well. The answer was "yes" to both questions. If both passed, they would be layered. For that reason, Senator Rhoads had requested the specific amendment which appeared as the last paragraph of (Exhibit E). Having delivered a very thorough explanation, Carole Vilardo urged the committee to pass S.B. 546 with the amendments suggested. Assemblyman Morse Arberry wanted to know why the language in Section 1, Subsection lines 8, 9, and 10, was removed. Those lines were: "The second vote on final passage of such a bill is void unless it is taken at least 10 calendar days before the adjournment . . ." But Ms. Vilardo corrected Mr. Arberry, informing him those lines had not been removed. She provided a detailed explanation of the area of his concern. Regarding the language of the bill on lines 8, 9, and 10, wherein the bill spoke to the second vote on final passage of a bill being void unless it was taken at least 10 calendar days before the adjournment sine die, Mr. Arberry pointed out no one knew when sine die was going to be! Ms. Vilardo agreed, but argued the legislators knew when they were winding down. If you knew there was no way you could have 10 days, you would invoke the second section of the bill and the house of origin would note it was an emergency. As well, you would have the ability to do that even if it were two months before sine die if you felt you needed that revenue stream immediately. That was the escape clause to allow what was necessary to be done. In some instances, the assessments were built into the Governor's budget and the bills coming through required passage because of that, Mr. Arberry pointed out. He wondered how the bill would effect those instances. Another example was if Wildlife wanted to raise the fishing fee. But Ms. Vilardo corrected Mr. Arberry, reminding him fee did not count because it had been deleted from the language. She would say the relationship would be more with courts; most everything else done was a fee (i.e., wildlife, boating, notary, motor vehicle, etc.). Assessments were usually connected with the Supreme or District court issues. Therefore, it would not be that frequent. But even if it were in a budget with an assessment that had to be passed immediately, it would go as an emergency resolution. Otherwise, it would require two votes and it would have to say "assessment." Assemblywoman Joan Lambert understood the language of S.B. 546 was to address a situation where it was close to the end of session, you could declare a particular resolution an emergency and just vote once. The resolution would need to be done in each house. But it was to be the house of origin who declared the emergency that negated the double vote in both houses. Ms. Lambert asked Ms. Vilardo to provide an example of what an assessment was. In reply, Ms. Vilardo stated Clark county had a bill in Judiciary to impose a $10 assessment on all fines levied for capital construction projects. As well, this session there was a Supreme Court assessment bill and a north Las Vegas library court assessment. In fact, the court bills were the only place where the word "assessment" was used this session. Regarding Section 4 on the ballot question, Ms. Stroth wondered if it was intentional to leave out the language regarding the 10 calendar days. Ms. Stroth's opinion was deleting the words about the 10 calendar days took away the intent of the bill. As well, she thought perhaps it would be better to also include the language "unless otherwise declared an emergency." Ms. Vilardo explained the intent was to have at least a 10 day spread to give the press enough time (to report), as well as garner input from the public. The analogy Ms. Vilardo used was the "300 percent pension" bill. By the time the press reported that, the public was so upset they made a point of contacting their legislators and letting their feelings be known. It was the idea of giving the public the feeling you are providing extraordinary scrutiny before a tax measure was acted upon. In 1991, there had been a great deal of feeling -- particularly in the business community -- the legislature had a cavalier attitude with the way tax increases were being passed. As a point of information, Mr. Neighbors stated we had definitions of emergency and open meeting laws, and asked Ms. Vilardo how emergency was defined in S.B. 546. "There is deliberately NO definition!" declared Ms. Vilardo. Mr. Neighbors repeated in disbelief, "There is no definition of emergency?! It is not defined anywhere?!" Ms. Vilardo attempted to elaborate. There was no definition because it could be more than just fiscal; the emergency could be an end of session situation. In almost all cases, if it passed but "Gibbon's" did not, the emergency would be because sine die was three days away -- or four hours away -- and a vote could not be taken. She provided scenarios from 1991 of what could be declared an emergency. Ms. Stroth referred to Section 4. If the language on the ballot was to inform the voters of what Sections 1 through 3 would do, the "10 days unless otherwise declared an emergency" phrase should still be included. She thought it reflected what was stated in Sections 1, 2, and 3. Ms. Stroth felt quite strongly about this. Mr. Price begged to differ with Ms. Stroth's conclusion because his opinion was constitutions were to define principals and not statute. Constitutions were not intended to be detailed items. Details, such as whether it be 10 days, should be handled in statutory. But Ms. Stroth argued it was not a constitutional amendment; the language in Section 4 informed the voter. The whole intent was to have the 10 day period in between the two votes. That was the important part: it was not the part about voting twice. Ms. Vilardo saw no problem with putting the clause about the 10 days in, but said she would hesitate to add the part where the 10 days could be negated by an emergency vote, because you would then defeat what was trying to be told to the public. Normally, Ms. Vilardo was in favor of giving the voters everything possible, but the problem she had was her own board supported "this over putting two- thirds into the constitution." It was extraordinary scrutiny, without telling the voters there was a "loop hole" in it! Further, she hoped the "loop hole" would be used just for what it was meant to be used for and that was an absolute emergency at the end of session and not as a normal course. Ms. Stroth agreed with Ms. Vilardo, but she still wanted to see the "10 days" language put into Section 4 in the amendment --and perhaps not the emergency part. Mr. Price reiterated it was his opinion that language was not needed, questioning what would happen if the legislature decided in the future they did not want 10 days: they wanted 8 days or 12 days! It did not come from the people as a referendum, Ms. Vilardo contended, so it would not have to go back as a vote of the people to be changed. The legislature could change it. Mr. Price declared he understood Ms. Vilardo's statement, but was concerned about the perception. He happened to be a legislator who believed the legislature could change something put in by the vote of the people. He thought there were good arguments for that, although many of his colleagues did not. "But do you think I would try to do something like that?!" he cried with great passion. "I think this is the same thing, even if it is a perception!" "I give up!" vociferated Ms. Stroth. Ms. Lambert proclaimed she would support S.B. 546 if people knew there was a "gigantic" loop hole on the ballot question. Otherwise, she felt it was "duping the public" and she was emphatic about wanting no part of it! She felt her concerns were justified because most tax bills, particularly the large tax increases, seemed to invariably appear at the "tail end" of a session. For example: Ways and Means might come to Taxation and say, "Hey, we need $20 million!" And it was always at the very end of the legislative session! Mr. Price was opposed to the "Gibbon's situation" or any time there was a super majority because the fate of the organization was put into the hands of the minority, e.g., if it required a unanimous vote, then one person controlled. He would vote to "get it out of committee, but would ponder it over when it reached the floor." Ms. Brower echoed the same concerns Ms. Lambert had. She asked Ms. Vilardo if there were anything that could be inserted to indicate there was an "out." "You can put the language `for an emergency' as Ms. Stroth originally suggested," replied Ms. Vilardo. However, she did not think it was a question of trying to "dupe" the public by not putting the language in, though Ms. Vilardo agreed it could be perceived that way; of that, there was no question. Ms. Vilardo stated if she were going to err, she was going to err so that "we can support this one (S.B. 546) and try to defeat the Gibbon's initiative" because of her board's position. The board's position was they did not mind the super majority, but they felt that particular super majority was too high. They did not want it in the constitution. Ms. Vilardo had no problem with the emergency vote, because she hoped there would be enough "Mrs. Lambert's and Mr. Neighbor's" who would question an emergency resolution coming down at the very end of session. She admitted she may be very, very wrong and stated she had no problem with putting the emergency language in the bill. In her own mind, she was not convinced it was going to pass; it was a shot in the dark. She said it was a huge vote on the Gibbon's two-thirds initiative. Mr. Marvel asserted his opinion was the language was not needed, and said he would be amenable to inserting it because it would allay the fears of some people. Ms. Stroth stood firm that if the Committee voted to add the part about "unless declared an emergency," she thought the language about the "10 days" was absolutely required; otherwise, it looked like there was only one vote required instead of two. Mr. Marvel agreed. Assemblyman Morse Arberry asked for a clarification on what was being done. He understood the insertion of the time limit language, but was unsure as to the rest of the amendment. Mr. Price clarified, "In addition, there would be some language to indicate the legislature would have the authority, by emergency action, to suspend the whole thing." He was not sure how to get it phrased in just a few words. "When you say the legislature," questioned Mr. Arberry, "do you mean it has to be taken to the floor first. Or would it be done by committee?" Mr. Price replied the ballot question would talk about requiring two votes, one in each house. And they would be 10 days apart, but in an emergency the legislature could suspend the rule and pass a bill from one house to the other. Mr. Marvel's understanding, though, was it would have be done on the floor. Because what was being alluded to was there had to be 10 days for an on-the-floor vote for any tax measure. You had to wait 10 days for the second vote. And, in the event you had an emergency, you would have to have the resolution passed by the floor. Mr. Arberry explained the reason he was asking the question was "because if we wait untl the end of session (like Ms. Lambert mentioned), but we declare it an emergency . . . and extended the session, we could not shut the session down until after we go through this twice . . ." Mr. Arberry was interrupted several times while he attempted to verbalize his concept of what the committee was trying to do. There ensued a debate. Mr. Neighbors made a valiant attempt to articulate the concept as he understood it and Mr. Price offered the following example: "Let us say today we decide we wanted to raise a tax. Since the perception is we are going to be out of here before 8 or 10 days, whichever house the bill originated in, the rule would be suspended on that bill, declared an emergency, and voted on, and then it would be sent to the other house. It is not unlike it was done now." Mr. Price began prognosticating, but was interrupted by Mr. Arberry. "Before you get that far," broke in Mr. Arberry, "I need you to take me to the next step! You said, `to the house of origin.' Does the next house have to wait 10 days?" "No!" replied Mr. Price. "They treat it as a normal bill. Only one house, and that is the house of origin, has to declare it an emergency. Not both houses." More debate continued and more discussion ensued. There appeared to be confusion amongst the committee members regarding the language. Finally, Ms. Stroth suggested Ms. Vilardo explain the intent again. But Mr. Price suggested the bill drafters be approached. With that, Mr. Price announced the meeting was adjourned; then he said the meeting was recessed. Whether the meeting was adjourned or recessed was unclear, but the meeting ended. RESPECTFULLY SUBMITTED: Carolyn Grabski, Committee Secretary Assembly Committee on Taxation June 24, 1995 Page