MINUTES OF THE ASSEMBLY COMMITTEE ON TAXATION Sixty-Eighth Session June 30, 1995 The Committee on Taxation was called to order at 1:15 p.m., on Friday, June 30, 1995, Chairman Jeannine 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 Mrs. Maureen E. Brower Mrs. Joan A. Lambert Mr. Mark Manendo Mr. John W. Marvel Mr. P. M. Roy Neighbors Mr. Brian Sandoval COMMITTEE MEMBERS EXCUSED: Mr. Morse Arberry, Jr. Mr. Larry L. Spitler GUEST LEGISLATORS PRESENT: None STAFF MEMBERS PRESENT: Mr. Ted Zuend, Deputy Fiscal Analyst OTHERS PRESENT: Mr. William H. Cavagnaro, Las Vegas Metropolitan Police Department Ms. Celia G. Kupersmith, Executive Director, Regional Transportation Commission, Reno Ms. Stephanie Tyler, Regional Transportation Commission, Washoe Mr. Nick Shukla OTHERS PRESENT, CONT. Mr. Sam McMullen Mr. Charlie Joerg, Nevada Manufacturing Housing Association Ms. Carole Vilardo, President, Nevada Taxpayers Association Mr. Mark Schofield, Clark County Assessor Mr. Michael Pitlock, Executive Director, Department of Taxation Chairman Jeannine Stroth announced the meeting as officially a subcommittee and asked the Committee Secretary to mark the members present as they arrived. She announced Senate Bill 556 was on the agenda; however, that bill had not been received from the Senate so the bill would not be heard today. SENATE BILL 336 - Requires that proposal for imposition of ad valorem tax for additional officers be submitted to voters of areas where metropolitan police department has been created. First to testify was William Cavagnaro, Lieutenant and Legislative Liaison of the Las Vegas Metropolitan Police Department. The bill was designed to allow the metropolitan police department to go to the Clark County voters and areas of the city they were responsible for to ask for an increase in the ad valorem tax. The increase was to be used for more police officers. Mr. Cavagnaro stated the bill was a one-time ballot question. It was set for the next county-wide general election, to be held in November 1996. ASSEMBLYMAN PETE ERNAUT MOVED TO DO PASS S.B. 336. ASSEMBLYMAN BRIAN SANDOVAL SECONDED THE MOTION. However, Chairman Stroth pointed out a quorum was not present. Assemblyman Joan Lambert asked how a motion could be recognized without a quorum present and Assemblyman Pete Ernaut explained the motion was pending. Ms. Lambert referred to Section 5 of the bill. She thought it had to specifically talk about exceeding the 106 percent cap, because it was a special item rather than the normal provision to let the voter override. It was stated in S.B. 336 because it was metropolitan and different entities were doing it. Ms. Lambert noted every time metro needed money, it was very complicated. Her assumption was correct, according to Mr. Ted Zuend. Because it was a voter override, it was not included in the maximum ad valorem revenue. Metro did not have a tax rate like all the other entities. Since a quorum was not present, Chairman Stroth closed the hearing on S.B. 336. SENATE BILL 566 - Makes various changes concerning public transportation. Testifying in favor of S.B. 566 was Celia Kupersmith, Executive Director of the Regional Transportation Commission (RTC). Her testimony appears as (Exhibit C). Ms. Kupersmith explained the bill would apply only to counties with 400,000 or less in population. It would allow the RTC to contract with private taxicab companies to provide an alternative form of public transportation. They could use their smaller vehicles at a lower cost than the traditional fixed-route large buses in the neighborhoods. S.B. 566 would also allow RTC to provide short-distance route deviations to serve major destinations, such as hospitals, doctor offices, and schools that were within half a mile on either side of the bus route. S.B. 566 also saved RTC money. Ms. Kupersmith informed the committee the RTC board of directors had recently passed a fare increase along with a cut in service; it was the first time in the history of the organization that service levels had to be reduced. They were, therefore, looking for ways to conduct business without necessarily spending as much money. Also, in the event RTC actually owned a vehicle that was used for only taxicab and dial-a-ride service, the tax-related language in S.B. 566 allowed the same fuel tax exemptions RTC currently enjoyed for their large buses. But Ms. Kupersmith assured the committee owning the vehicles was not in the foreseeable future. The key component of the bill was the ability to be able to contract with local taxicab companies. RTC had been able to garner support from the taxicab owners and the motor bus companies, as well as the Department of Transportation, the Department of Motor Vehicles, and the Carson City Regional Transportation Commission. Passage of S.B. 566 would save Washoe County taxpayers money, while still providing transportation services. Ms. Lambert referred to Section 1. In the event RTC actually owned the vehicles, she wondered if they would use diesel, special fuel, or gasoline. It was highly likely they would use gasoline, Ms. Kupersmith apprised. But if RTC proceeded with a program to convert their activities to compressed natural gas, it was possible they would have the smaller vehicles operate with that. She pointed out there was one "C&G" powered car in their fleet. RTC did not have an exemption from the gasoline tax, which they did not mind. They spent the gasoline tax on fixing potholes and roads. Ms. Stephanie Tyler from Washoe's Regional Transportation Commission was next to testify. She spoke in behalf of Bob Cromwell, who represented Reno Cab and Carson City Cab. He was in another meeting and requested her to convey his support for S.B. 566. Testifying in favor of S.B. 566 was Mr. Nick Shukla, a citizen of Washoe County. He had been attending the public hearings of the Regional Transportation for several months. Currently, the buses in Washoe County made 17 round trips each day. That translated into 119 trips on a weekly basis. Mr. Shukla attended a meeting the previous evening and discovered RTC was reducing its services to four bus trips per day and no service on Sunday. That translated into 24 trips on a weekly basis, an 80 percent reduction in the bus service! That reduction in bus service created an undue hardship on his family and others in the area. S.B. 566, however, would provide an alternate means of transportation, plus a cost-savings to RTC at the same time. It was a good way for the local community to come together to save taxpayers money and provide other options and services, also. Seeing no further testimony on S.B. 566, Chairman Stroth closed the hearing. She opened the hearing on Senate Bill 569. SENATE BILL 569 - Makes various changes relating to tax on transient lodging and county fair and recreation boards. Representing the Reno/Sparks Convention and Visitors Authority (R.S.C.V.A.) and also the Northern Gaming Industry Association was Sam McMullen. Mr. McMullen defined S.B. 569 as a way to enhance the enforcement of liens based on failure to pay room taxes. It contained the same language in both the city and county statutes. He directed the committee's attention to Section 1, line 11 of the bill. Basically, the change said a lien could be filed within 6 months after the date on which the tax became delinquent, or 6 months after it was determined to be due and owing. Mr. McMullen thought there must have been a lawyer who said delinquency was the day the tax was not paid. "So if it took two years to do an audit, you could go back only 6 months in taxes. That, of course, is an illogical result," professed Mr. McMullen. The new language in S.B. 569 would clear that up. Mr. McMullen then addressed Section 1, lines 28 - 32. In Washoe, a situation existed where the collection was delegated to the Reno-Sparks Convention Visitors Authority, different from what was done in Las Vegas. He criticized people who "really thumbed their noses" at their collection efforts. The language in S.B. 569 provided ordinance for the local government to revoke or suspend the business license if the tax became delinquent. Mr. McMullen testified the feeling was if the business license was threatened, the tax would be paid. The second portion of the bill related to the members of the R.S.C.V.A. They were appointed from the tourism industry. Mr. McMullen wanted to amend S.B. 569 to delete all the italicized language in Section 3, lines 34 - 37. He then directed the committee's attention to Section 3, lines 26 and 27. Mr. McMullen desired to add an introductory clause on line 26 that said: "The member must be selected from the list . . ." There was a conflict in interpretation with regard to appointment of representatives and Mr. Howard of the Reno-Sparks Chamber of Commerce requested Mr. McMullen to clarify that section. Mr. McMullen offered to work with Ted Zuend to ensure the appropriate language was taken to the bill drafter's office. ASSEMBLYMAN ERNAUT MOVED TO AMEND AND DO PASS S.B. 569. But Mr. McMullen interrupted Mr. Ernaut to continue his detailed discussion of the bill. "Excuse me! You will find the sections in NRS 268, which are the city provisions, to be the mirror image of those for the county (basically pages 5 and 6)." Carrying on, Mr. McMullen referred to Section 8, which allowed for the staggering of the terms of the tourism members. Currently, all three of them were appointed at once and their service expired at the same time. They hoped to stagger the terms so more continuity of the tourism representatives could be retained. Assemblyman Price asked for a clarification on some of the "repealers" being done, e.g., the procedure for rental space (NRS 244A.659). Mr. Price elaborated on the law regarding the county fair and recreation board determining the rental or lease space for commercial advertising (the signs) proposed in a county recreational facility. The board was required to comply with NRS 244A.661, which stated they shall, in an open meeting by a majority vote, declare its intention to lease the property. Mr. Price asked Mr. McMullen why he would want to "do away" with a procedure where business was required to be conducted in an open meeting. Mr. McMullen saw the repealers, but did not have in front of him the particular sections Mr. Price had elaborated upon. Mr. Price attempted to continue his discussion on all the repealers when Mr. McMullen interrupted him saying, "The hope was there would be new language to allow the lease of advertising space without an auction setting." Sign-by-sign they had to auction the space in the new bowling stadium. They requested the procedure not be a requirement. "You know how I feel about open meetings," declared Mr. Price. "This is repealing a section that requires the bids to be made in an open meeting so the public and press have the opportunity to know what is going on. Somehow I do not think that is good public policy." Mr. McMullen asked Chairman Stroth to allow Mr. Price to review the other repealers, for he wanted to hear the sections to ensure he did not "speak off the top of his head." Assemblywoman Joan Lambert echoed the same concerns Mr. Price had. She wanted clarification on Section 6, which dealt with government purchasing. NRS 244A.667 had been repealed. Mr. McMullen supposed it was connected to Section 7. He thought the issue was because the aggregate "signage" altogether could have exceeded the bid limits. Out of an abundance of caution, they auctioned that way. Although theoretically it could happen differently, what fundamentally happened was each individual sign was sold to a different company. That is what Mr. McMullen theorized the concern was, but appealed for time to examine the point more closely. Assemblyman Roy Neighbors questioned Section 3, lines 26 and 27. Mr. Neighbors admitted he had been reading something else and had missed the explanation. Mr. McMullen reiterated the intent was to clarify the member had to be selected from a list presented by a chamber. Altering the course of the meeting, Assemblyman Ernaut ceased the opportunity to move S.B. 336, which had been argued earlier in the meeting. (His previous efforts had been thwarted due to a lack of a quorum.) Thus, he switched the discussion from S.B. 569 to S.B. 336 and made another attempt to move the bill. ASSEMBLYMAN ERNAUT MOVED TO DO PASS S.B. 336. ASSEMBLYMAN SANDOVAL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** Not one to squander time nor opportunity, Mr. Ernaut asked for Senate Bill 566 to be reconsidered. ASSEMBLYMAN ERNAUT MOVED TO DO PASS S.B. 566. ASSEMBLYMAN LAMBERT SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** Next, Mr. Ernaut requested Senate Bill 106 be considered, which had not been heard in committee. Mr. Ernaut believed it was Senator Adler's bill. SENATE BILL 106 - Proposes to exempt from certain sales and use taxes auditory devices and appliances. ASSEMBLYMAN ERNAUT MOVED TO DO PASS AND RE-REFER TO WAYS AND MEANS. ASSEMBLYMAN BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** Mr. Ernaut requested Senate Bill 490 be considered. SENATE BILL 490 - Expands definition of "manufactured home" for purposes of various provisions of Nevada Revised Statutes and as used in Sales and Use Tax Act. Testifying in favor of S.B. 490 was Mr. Charlie Joerg, who represented the Nevada Manufactured Housing Association. He referred the committee to his handout, a ballot question and Senate Bill 260 (Exhibit D), and to a fiscal note prepared by the Department of Taxation (Exhibit E). In 1987, the Nevada Legislature determined manufactured homes should be 40 percent exempt from sales and use tax because that was the portion attributable to labor. Unfortunately, a second type of manufactured house had been left out. There were two types of manufactured houses, Mr. Joerg explained. One was built to a Housing and Urban Development (HUD) code and one built to Uniform Building Code (UBC). HUD-coded homes were referenced in statute in Chapter 489.113, while UBC homes were referenced in NRS 461.080. The bill passed in 1987 referred to those homes in Chapter 489.113; therefore, the Department of Taxation determined in a subsequent audit there were a lot of taxes owed (because they had not collected the tax on the UBC homes). S.B. 490 corrected that inequity and oversight in the 1987 session. Mr. Joerg saw no reasoning to treat one type of manufactured house differently than the other. Senate Finance Committee chose not to look at the bill. Speaking next was Mr. Michael Pitlock, Executive Director of the Department of Taxation. He confirmed he had prepared the fiscal note (Exhibit E), but he did not have it with him. Ms. Carole Vilardo, President of the Nevada Taxpayers Association, testified she supported S.B. 490 because there was no difference in the homes. ASSEMBLYMAN ERNAUT MOVED TO DO PASS S.B. 490 AND RE- REFER IT TO WAYS AND MEANS. ASSEMBLYMAN MANENDO SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** Assemblyman Joan Lambert wanted to reconsider Senate Bill 452, which had been indefinitely postponed. But Ms. Stroth advised Mary Henderson had decided to withdraw her request due to unanticipated technicalities. In behalf of the assessor, Mr. Price asked the committee to reconsider Assembly Bill 671, which had been indefinitely postponed. ASSEMBLY BILL 671 - Provides exemption from property tax for certain tangible personal property used in business. Testifying for A.B. 671 was Mr. Mark Schofield, Clark County Assessor. He contacted the various agencies that would be impacted in Clark County and had been assured there would be no opposition to the bill by those agencies. There was, however, one exception: they wanted the effective date to be July 1, 1996. There was some discussion regarding the fiscal note. Ms. Vilardo informed she had spoken with some mining people who informed her it was not their intent to have cyanide removed as a consumable. She thought the department could write regulations to ensure cyanide would, in fact, not be exempt. Ms. Vilardo underscored this was a policy decision that would eliminate reporting inequities. Mr. Michael Pitlock, Executive Director of the Department of Taxation, vigorously agreed there was tremendous confusion amongst taxpayers regarding the definition of consumable supplies. For example, coal kept in inventory by the coal fire generation plants: was it a consumable supply? Mr. Pitlock asked Nevada Power if they included coal as such on the information reported to the department. They did not report any consumable supply! That had reinforced in Mr. Pitlock's mind there was a problem in how consumable items were defined. He reiterated he was more than willing to work with assessors through the regulatory process to try to develop some very clear definitions that would clearly identify to the taxpayer what should be included as a consumable and what items should not be. Mr. Pitlock agreed he did not want people counting paper clips, rubber bands, and so forth. Millions of dollars worth of coal or a significant amount of inventory of cyanide, though, should be treated differently. The key was finding a definition that would include one and exclude the other and still be in compliance with the statute. Ms. Lambert thought coal could be considered something used to manufacture power rather than consumed in business. Mr. Pitlock contended an argument could be made on either side. That was why he asked the industry how they reported it. He repeated that Nevada Power reported nothing as a consumable supply! Ms. Stroth addressed the portion of A.B. 671 that considered exemption of supplies to be consumed in the process of manufacturing. She wondered if the definition of mining production was different from that of manufacturing. It seemed to Ms. Stroth manufacturing should include producing. Was it just a vocabulary problem? What was the difference in the process of manufacturing versus the process of production? They were both used to come up with an end product. She asked Mr. Pitlock if he wanted to work on the bill more in regulation. Mr. Pitlock recognized the problem with definitions. A reasonable first step was to attempt to deal with it through an administrative process of regulation as opposed to passing a bill that would have a fiscal impact, particularly on the smaller counties. He confirmed he harbored concerns regarding the fiscal impact. Ms. Lambert speculated if it was possible, through regulation, to consider cyanide as a raw material used to manufacture something, thus eliminating the fiscal impact on the small counties. Mr. Pitlock thought it was possible, but added he wanted to review the history of the legislative intent that brought the exemption in to begin with. The bottom line, as Ms. Lambert saw it, was the passage of A.B. 671 would leave it "up in the air" as to whether there was a large fiscal note, mainly because regulation may not exempt cyanide. Mr. Pitlock concurred. As well, he believed there was miss-reporting going on, thus there would be a greater potential fiscal impact than the actual because the law was not being appropriately administered. Ms. Vilardo accentuated the reason for wanting the law on consumables was it was not just a question of definition, it was a question of the whole personal property tax! It was a self-audited, self-reported honor tax that was not well- defined. When Ms. Vilardo wrote a booklet entitled "Understanding Nevada's Business Personal Property Tax," she talked to every assessor and learned they did not have staff to audit each company. Gaming, automobile dealers, manufacturers, and mining were audited; most other industries were not. Ms. Vilardo submitted even by definition, not all equity would be received. Personal property was not an easily administered tax; it was easy to evade. A constitutional change was needed. Mr. Schofield alleged the audit procedure for personal property varied from county to county. He proclaimed the bill addressed one thing only: the abolition of the assessment of supplies, which was inconsistent across the state and handled differently by each assessor. Regarding fiscal impact, Mr. Schofield pointed out the inventory tax and household furnishings tax had been eliminated several years ago, yet there had been no significant adverse effects; it had been absorbed over a period of years. He continued with various illustrations, and reiterated his arguments. Mr. Ernaut proclaimed to the Chair he would vote to get the bill out of committee and to Ways and Means just so it did not die. He argued there was a question in everybody's minds regarding the fiscal note and cyanide. "If this was such an amazingly important issue, why was it so late in the session? The fiscal note did not come out until June 7!" Mr. Ernaut agreed with Ms. Vilardo: a constitutional amendment might be required to do it the "right" way. Ms. Lambert commented she did not see why it had to go to Ways and Means because it was local government money. ASSEMBLYMAN ERNAUT MOVED TO RESCIND A.B. 671 (which had previously been indefinitely postponed). ASSEMBLYMAN BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** ASSEMBLYMAN ERNAUT MOVED TO DO PASS AND RE-REFER A.B. 671 TO WAYS AND MEANS. ASSEMBLYMAN BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** The Chair noted Senate Bill 569 had a pending motion; the committee was awaiting the answer to Mr. Price's question regarding the "repealers" on the bill, e.g., the elimination of the procedure calling for business to be conducted in an open meeting, etc. Stepping forth was Mr. Sam McMullen, acknowledging there were question marks regarding S.B. 569. It appeared to him repealing the statutes would "throw it back under the standard provisions for county governments lease of property, or possibly the purchasing." He said the Las Vegas Convention Visitors Authority confirmed the sections spoken to in the bill referred to fair and recreation boards. L.V.C.V.A. did not have advertising in their facilities. The specific problem related only to the National Bowling Stadium and the sale of advertising in there. Mr. Price wanted assurance the requirement for open meetings and bidding was retained. Mr. McMullen thought it was covered under the local government purchasing act and suggested A.B. 569 might need to better clarify the sections being repealed and ensure there were open, public meetings and bids regarding advertising. Mr. McMullen requested the opportunity to seek an amendment to clarify the language, and requested from the committee a motion to amend and do pass. He assured he would provide an amendment in a written form for the committee's approval. ASSEMBLYMAN SANDOVAL MOVED TO AMEND AND DO PASS A.B. 569. ASSEMBLYMAN LAMBERT SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT. ******** Chairman Stroth adjourned the meeting at 3:00 p.m. RESPECTFULLY SUBMITTED: Carolyn Grabski, Committee Secretary Assembly Committee on Taxation June 30, 1995 Page