MINUTES OF THE SENATE COMMITTEE ON TAXATION Sixty-eighth Session March 21, 1995 The Senate Committee on Taxation was called to order by Chairman Sue Lowden, at 1:30 p.m., on Tuesday, March 21, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Sue Lowden, Chairman Senator Kathy M. Augustine, Vice Chairman Senator Ann O'Connell Senator Dean A. Rhoads Senator Randolph J. Townsend Senator John B. (Jack) Regan Senator Ernest E. Adler STAFF MEMBERS PRESENT: DeLynn Gillentine, Committee Secretary Kevin Welsh, Research Analyst, Fiscal Analysis Division OTHERS PRESENT: David Ziegler, Senior Research Analyst, Research Division, Legislative Counsel Bureau Janice Wright, Deputy Executive Director, Department of Taxation Verne Rosse, Deputy Administrator, Division of Environmental Protection, State Department of Conservation and Natural Resources David Emme, Chief, Bureau of Waste Management, Division of Environmental Protection, State Department of Conservation and Natural Resources Stan Warren, Lobbyist, Consultant, Sierra Pacific Power Company Doug Johnson, Market Planner, Sierra Pacific Power Company Stephanie Tyler, Lobbyist, Nevada Propane Dealers Association Deeann Parsons, Chief, Nevada State Energy Office, Department of Business and Industry Ken W. Platt, M.C.P., Grants and Projects Analyst, Nevada State Energy Office, Department of Business and Industry C. Joseph Guild III, Lobbyist, Southwest Gas Corporation Jay Taylor, Marketing Supervisor, Southwest Gas Corporation Helen Foley, Lobbyist, Western Ethanol Company John P. Sande, III, Lobbyist, Attorney at Law, Western States Petroleum Association Peter Krueger, Lobbyist, State Executive, Nevada Petroleum Marketers Association Daryl E. Capurro, Lobbyist, Managing Director, Nevada Motor Transport Association John Madoue, Executive Director, Associated General Contractors Nevada Chapter John Moore, Atlantic Richfield Company (ARCO) Petroleum Carole Vilardo, Lobbyist, Nevada Taxpayers Association Donna Wadey-Howell, Acting Chief, Registration Division, Department of Motor Vehicles and Public Safety Joan LeSage, Owner/Director, Educare Schools, Inc. Betty Brinson, Teacher and Director, Wee Express Pre-School Lou Ann Russell, Director of A+Learning Center, Child Care Alliance, Reno Association for the Education of Young Children Anthony E. Leciejewski, Owner/Manager, Anna's Little Learners, Inc. Lucille Lusk, Lobbyist, Nevada Concerned Citizens Senator Lowden called the meeting to order and introduced the following bill draft requests (BDRs). BILL DRAFT REQUEST 32-660: Makes changes concerning actions on parcels with delinquent taxes. SENATOR REGAN MOVED FOR COMMITTEE INTRODUCTION OF BDR 32- 660. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** BILL DRAFT REQUEST 32-595: Provide that sales tax be paid on items for rent or lease at time of rental or lease. SENATOR RHOADS MOVED FOR COMMITTEE INTRODUCTION OF BDR 32- 595. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** BILL DRAFT REQUEST R-612: Amend standing rules to require legislature to consider certain taxing principles when increases in taxes or fees are proposed. SENATOR REGAN MOVED FOR COMMITTEE INTRODUCTION OF BDR R- 612. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** BILL DRAFT REQUEST 32-609: Establish threshold for required use of electronic funds transfers in payment of sales and use tax. SENATOR ADLER MOVED FOR COMMITTEE INTRODUCTION OF BDR 32- 609. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** BILL DRAFT REQUEST R-608: Direct appropriation committees of 1995 session to require state agencies to use lock boxes unless such use is impractical. SENATOR REGAN MOVED FOR COMMITTEE INTRODUCTION OF BDR R- 608. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** BILL DRAFT REQUEST C-601: Amend constitution to allow "circuit breaker" for relief from property taxation to mitigate economic hardship on single family residents. SENATOR O'CONNELL MOVED FOR COMMITTEE INTRODUCTION OF BDR C-601. SENATOR RHOADS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** BILL DRAFT REQUEST 32-607: Increase statutory tax rate cap from $3.64 to $4 per $100. SENATOR RHOADS MOVED FOR COMMITTEE INTRODUCTION OF BDR 32- 607. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** BILL DRAFT REQUEST C-598: Establish minimum threshold to issue tax billings. SENATOR RHOADS MOVED FOR COMMITTEE INTRODUCTION OF BDR C- 598. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** BILL DRAFT REQUEST 32-602: Extend widows' exemption from property tax to widowers. SENATOR ADLER MOVED FOR COMMITTEE INTRODUCTION OF BDR 32- 602. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION PASSED UNANIMOUSLY. ***** BILL DRAFT REQUEST 32-732: Provide exemption for tax levy of certain taxing districts in certain cities from statutory limit on total ad valorem tax levy. SENATOR REGAN MOVED FOR COMMITTEE INTRODUCTION OF BDR 32- 732. SENATOR ADLER SECONDED THE MOTION. THE MOTION PASSED UNANIMOUSLY. ***** BILL DRAFT REQUEST 32-414: Provide exemption from property tax for electrical energy produced by wind. SENATOR REGAN MOVED FOR COMMITTEE INTRODUCTION OF BDR 32- 414. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR O'CONNELL VOTED NO.) ***** BILL DRAFT REQUEST 32-1022: Exempts from sales and use tax sale or purchase of equipment and materials used to generate electricity from renewable energy resources. SENATOR REGAN MOVED FOR COMMITTEE INTRODUCTION OF BDR 32- 1022. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION PASSED. (SENATOR O'CONNELL AND SENATOR AUGUSTINE VOTED NO.) ***** Senator Lowden opened the hearing on Senate Bill (S.B.) 123. David Ziegler, Senior Research Analyst, Research Division, Legislative Counsel Bureau testified and presented Exhibit C. SENATE BILL 123: Permits imposition of tax on retail sales for management of solid waste. (BDR 32-661). Senator Lowden asked, ". . . You mentioned Mesquite [City] came forward and testified they were having problems keeping up with the cost of managing solid waste. . . How would this impact them? . . . " Mr. Ziegler responded, "Mesquite has already closed their landfill and opened a new one. My understanding is that with loans they have financed it and they are squared away. This bill would not impact them. . . " Senator Augustine queried in regard to why Mesquite asked for this particular tax without voter approval. Mr. Ziegler stated he did not know the answer, but referred the question to Senator Rhoads. Senator Rhoads said Mesquite thought "people would probably turn [a tax] down and then dump their garbage out in the sagebrush. . ." Senator Adler, Senator Rhoads and Senator Augustine discussed the problems with putting the issue to the voters. Senator Regan agreed that because, ". . . centers were approximately 250 miles apart . . . people feel they would not drive 250 miles. They would just dump it in the desert. . . " Senator O'Connell asked for background stating why there is this mandate from the federal government. Mr. Ziegler explained, "The Resources Conservation Recovery Act or RCRA has been around for some time. I believe it was originally adopted in the 1970s and has been amended a number of times. The main concern in RCRA nationally has to do with protection of groundwater. A lot of the landfills around the country were found to be endangering groundwater. . . Something like 20 percent of superfund sites around the country are municipal landfills. There is a strong correlation between landfills and degradation or contamination of groundwater. . . " Senator Rhoads stated, ". . . They wrote the rule for areas that have 40 inches of rainfall a year. Everybody has to adapt [to] standards like that. . . which doesn't fit very well for a dry state. . . " Senator O'Connell asked if there are any states that are challenging this. Mr. Ziegler said he does not know, but Assemblyman Carpenter will be introducing a bill that would ease up on the federal mandate. Mr. Ziegler finished his discussion on Exhibit E, page 3. Senator Lowden asked if there are any other solutions that other states or rural areas have used. Mr. Ziegler gave some examples of alternative solutions. Senator Lowden closed the hearing on S.B. 123 and opened the hearing on Senate Bill (S.B.) 272. SENATE BILL 272: Establishes fee for issuance and renewal of certificate of compliance to suppliers of liquor located outside of this state. Janice Wright, Deputy Executive Director, Nevada Department of Taxation testified. Ms. Wright stated: . . . Senate Bill 272 is a Department of Taxation request to impose a $25 registration charge and an annual renewal fee of $25 on out-of- state liquor suppliers. This is not a tax on Nevada business. This is a charge for service on out-of-state liquor suppliers. Currently, the Department of Taxation is expending $25 for a certificate of compliance. This is issued to approximately 600 out-of-state businesses who supply liquor to the Nevada importers. The Nevada importers pay larger fees. In all other states that we have contacted, except for the ones that have state controlled liquor establishments, the fees are much higher. Typically, we have found that in California the fee is $50, in Arizona it is $1500 and the $25 is . . . a representation of the actual cost incurred. What is happening now is the state General Fund, which is generating revenue from all of the taxpayers of Nevada, is paying for this, but the group of people who are receiving the benefit are the out-of- state businesses. . . . We looked at that issue to say should Nevada taxpayers have to pay for something that is a benefit to out-of-state businesses and therefore we came forward with this bill. When the Department of Taxation issues a certificate of compliance, they send along a package . . . which includes, in addition to questionnaires, the information that those businesses need to be able to deal with Nevada importers. The cost of producing this, updating our program, and sending out an annual certificate is the $25 amount. We have found in New Mexico they charge between $300 and $1500. In Colorado, the original application is $275. It costs $275 in that state each year to renew it. . . States that do not have that are the ones that have the controlled liquor establishments. Those being Idaho, Montana, Oregon, Utah, Washington and Wyoming, because they have state-run liquor facilities. If you look at the license fees that are charged to Nevada businesses already in the statutes; they range from $75 to $250 to $500 and yet we are not taxing the out-of- state liquor suppliers we are only taxing in-state. Therefore, we have requested this bill and we would seek approval for it. . . Senator O'Connell inquired, "Why is it not effective upon passage and approval?" Ms. Wright responded, "That was the bill draft. Unfortunately, when I saw the bill draft I had an opportunity to talk to Jan Needham [Senate Bill Drafting Advisor] from drafting and there is a problem. When she went through and did the language for the bill . . . there was one section in the statute that she did not pick up on. I talked to her about that; [and] she said she would come out with an amendment that I believe she supplied to Kevin [Welsh, Research Analyst, Fiscal Analysis Division], and I have not yet seen that and I don't know if she has changed the effective date on that. . . " Senator Lowden asked for clarification on the amendment. Ms. Wright explained that there was another provision in the statute that would conflict. Senator Lowden also questioned Ms. Wright on the amount of the fee and why it is not more. Senator Augustine queried, "How many [out-of-state liquor suppliers] are we talking about?" Ms. Wright replied, "There are 600 out of state liquor suppliers currently. When you look at importers . . . there are only 25 that are importers for wine, beer and liquor. There are four of them that are just importers for beer. For wholesalers, there are 23 that are wholesalers for wine, beer and liquor; and just for beer, there are only two. We have one wine maker in the state of Nevada and we have five brewers, but we have 600 companies that are out of state liquor suppliers that sell to the Nevada importers." Senator Augustine and Ms. Wright discussed the bill. Senator Regan recommended the committee amend and do pass. SENATOR REAGAN MOVED TO AMEND AND DO PASS S.B. 272. SENATOR O'CONNELL SECONDED THE MOTION. Senator Lowden asked if there was anyone else who wanted to speak on S.B. 272. Since there was no response, Senator Lowden proceeded with the vote. THE MOTION PASSED. (SENATOR AUGUSTINE VOTED NO. SENATOR TOWNSEND WAS ABSENT FOR THE VOTE.) ***** Senator Lowden reopened the hearing on S.B. 123. Verne Rosse, Deputy Administrator, Division of Environmental Protection, State Department of Conservation and Natural Resources; and David Emme, Chief, Bureau of Waste Management, Division of Environmental Protection, State Department of Conservation and Natural Resources, testified. Senator Lowden asked if there has been an extension for entities to comply. Mr. Emme responded, "EPA [Environmental Protection Agency] is intending to propose an extension for small arid landfills. It has not been published in the federal register yet . . . We expect it to be published in draft next month. Then it would be published again as a final rule sometime before October." Senator Lowden said, "But you are pretty confident that we are going to have another year leeway; that it is not this October but next October to comply?" Mr. Emme responded, "Well the information we have from EPA in Washington [D.C.] is they intend to propose this." Senator Lowden asked, "Can you define what small means? Do you have any idea what they are talking about?" Mr. Emme responded, "Small is defined as a landfill that receives less than 20-tons of waste per day. That is roughly the size of . . . the city of Ely's landfill. . . " Senator O'Connell questioned, ". . . If the mandate was to address an area that receives 40 inches of rain or more . . . this is the reason for it because they are concerned about the underground water?" Mr. Emme said, "The regulations were primarily driven by a concern for groundwater protection. The 40-inches-per-year figure isn't accurate. The regulations were originally drafted to try to account for arid conditions and they offered certain exemptions from the design requirements . . . for landfills in areas of the country receiving less than 25 inches of rainfall. . . All landfills have to monitor groundwater. . . " Senator O'Connell stated her concern about the federal regulations. Mr. Emme said he tries to apply the regulations in a way that makes sense to Nevada. Mr. Emme explained that many of the counties have already gotten up to speed with this program. Senator Rhoads asked, "Could you or Mr. Ross indicate to us what the penalty is if some of these counties do not have it in place by October, 1996?" Mr. Emme said: The state law provides a penalty for $5,000 a day. The federal law, if we didn't have a state program, is $50,000 a day. What our interest is [in] getting compliance and something done with solid waste properly. We are not interested in penalizing . . . small communities. To avoid the citizen suit issues that [are] available in federal law, we propose that the counties put together a plan of coming into compliance . . . if we can give them an extended period and we will issue them a non-penalizing order to come into compliance on their schedule. Mr. Ross said they would determine solutions case-by-case for counties who are unable to come into compliance. Senator Lowden closed the hearing on Senate Bill (S.B.) 123 and opened the hearing on Senate Bill (S.B.) 269. SENATE BILL 269: Reduces rate of tax on alternative fuels. Stan Warren, Lobbyist, Consultant, Sierra Pacific Power Company, stated his support for S.B. 269 and introduced Doug Johnson, Market Planner, Sierra Pacific Power Company. Mr. Johnson stated that Sierra Pacific Power is in support of S.B. 269 to reduce the tax rate on clean alternative fuels. Mr. Johnson presented and discussed Exhibit D. Senator O'Connell questioned, "This does come out of the Highway Fund and if I am not mistaken then we are already subsidizing this by 4 cents? And you are wanting us now to go to zero?" Mr. Johnson said that is correct and what they are recommending. Senator O'Connell continued, "During the interim committee, did you have much testimony from the highway department as to what kind of an impact that we are talking about?" Mr. Johnson stated he was not part of that committee and he does not know. Senator O'Connell and Mr. Johnson discussed the impact this bill would have on the Highway Fund and results of a cost benefit study. Senator Townsend pointed out, ". . . The testimony we received [in the interim committee] had more to do with the environmental issue as opposed to the dollar issue. . . In . . . Washoe County, where we have the terrible inversion problem in the winter, 95 percent of the pollutants are attributed to the automobile. This was an attempt by Sierra [Pacific Power] to encourage the use of these fuels. . . " Senator Regan asked, " . . .Do you recall, what is the difference between the LPG (Liquid Petroleum Gas) and CNG (Compressed Natural Gas) tax rates now? Are they both paying the same rate?" Mr. Warren said they are in the same category. Stephanie Tyler, Lobbyist, Nevada Propane Dealers Association, was next to testify in favor of S.B. 269. Ms. Tyler expressed concern over the definitions of clean fuel. Senator Lowden asked if during the interim committee, anyone addressed the impact this bill would have financially. Ms. Tyler said they did not discuss that. Senator Augustine commented, "There is a fiscal note attached to this bill . . . It says that the revenue loss is about $55,000, but with the new special privilege tax that was imposed . . . I think this is more than making up for this amount. . . " Deeann Parsons, Chief, Department of Business and Industry, Nevada State Energy Office, testified, ". . . We were very involved in the S.C.R. [Senate Concurrent Resolution] 35 subcommittee and Senator Titus did want me to let you know that this bill was a result of a good deal of testimony and it was unanimously passed by the subcommittee." Ken W. Platt, M.C.P., Grants and Projects Analyst, Department of Business and Industry, Nevada State Energy Office, testified and presented Exhibit E. C. Joseph Guild III, Lobbyist, Southwest Gas Corporation, introduced Jay Taylor, Marketing Supervisor, Southwest Gas Corporation. Mr. Taylor testified: . . . I had the opportunity to attend the interim committee meetings. Considerable discussion on the environment, the tax issue and we felt pretty good about getting a recommendation to reduce the tax . . . I felt good until we found out that another interim committee was meeting and in their proceedings they had decided to recommend a 6.7 percent tax for propane only. We inquired to find out, why the 6.7 and then we found out the largest single user of bulk propane for vehicle fuel in the state was successful in a court effort and it has only been paying 6.7 cents, substantially less than the other alternative fuels . . . We believe the alternative fuels should be taxed as equals . . . Helen Foley, Lobbyist, Western Ethanol Company, testified: About 5 years ago, Clark County was determined to be in the top 10 of the least compliant counties in the nation . . . During the last 5 years, they say they are flirting with compliance . . . 75 percent of the usage of ethanol is supplied by Western Ethanol Company in southern Nevada. It is very important to realize that without dramatic effects on any of the vehicles in southern Nevada, the only thing we had to do is pull up to the gas station and use a mixture . . . and now we have been able to comply. We want to make sure that when we are considering any type of tax reduction or restructuring that we also include ethanol and simply not look exclusively at those types of fuels that are used for fleets. . . John P. Sande, III, Lobbyist, Attorney at Law, Western States Petroleum Association, testified against S.B. 269. Mr. Sande said the marketing of fuel should be on a level playing field. Mr. Sande suggested the committee consider that the fuel taxes are dedicated for highway uses. Mr. Sande said he thinks the committee should look at a cost benefit analysis to see how much reduction in pollution there will be for the reduction in taxes. Mr. Sande recommended two amendments. The first, take out the wording that states methanol is a clean alternative fuel. Second, include within the definition of alternative fuels reformulated gasoline. Senator Lowden asked if Mr. Sande could provide information on ethanol and if he was involved with the interim committee. Mr. Sande said they were involved in the interim committee and he would provide the information Senator Lowden requested. Senator O'Connell questioned, ". . . I would like to ask you a question about the cost benefit study. I had inquired [earlier] . . . if there had been any studies done. . . Do you have any information for us that you can share as far as what differences we are looking as far as lowering the standard at all? I think that would be very helpful to the committee" Mr. Sande responded, "Yes, I think there is a lot of information on the various types of alternative fuels and how much reduction you get in certain areas . . . I will try to get some information as to the various alternative fuels and what they are doing in other states." Senator Augustine and Mr. Sande discussed the cut in tax and the possible future needs for the tax. Peter Krueger, Lobbyist, State Executive, Nevada Petroleum Marketers Association, testified against S.B. 269. Mr. Krueger stressed the highways have to be funded and the people using the highways should pay their fair share. Mr. Krueger stated that there is already a good definition for alternative fuels and it should not be changed. Daryl E. Capurro, Lobbyist, Managing Director, Nevada Motor Transport Association, testified in opposition to S.B. 269. Mr. Capurro said no one is against clean air; however, the highways have to be funded. Mr. Capurro thinks that any credit for the use of alternative fuels should be taken from the General Fund and not the Highway Fund. Mr. Capurro stated that the tax raises the largest amount of money that funds the highways. Senator Augustine asked for an estimate of what a 1-or 2-mile stretch of highway costs to pave or build. Mr. Capurro said it depends upon what standards to which they are being built. Mr. Capurro said Senator Augustine would have to contact the Nevada Department of Transportation to receive the figures for which she asked. John Madoue, Executive Director, Associated General Contractors Nevada Chapter, testified against S.B. 269. John Moore, Atlantic Richfield Company (ARCO) Petroleum, confirmed John Sande's remarks and stated he thinks the bill discriminates against the petroleum industry. Carole Vilardo, Lobbyist, Nevada Taxpayers Association, stated: . . . Nevada is one of about 30 states that has a dedicated highway trust fund for which specific revenues . . . earmarked to go into the Highway Fund for the purposes of building roads. You have here a question of taking what constitutionally is a policy of using user fees to build highways in Nevada and you are expanding it out for another use and that is clean air. In the [19]91 session on the assembly side, . . . [they] introduced a constitutional resolution to attempt to change the usage of the Highway Fund to include those things related to clean air and pollution. The bill did not get out of committee on that side. There was a great deal of dialogue at that time. If the committee chooses to process this bill as an exemption from those revenue sources, the caution and concern that we have, this is one fuel aspect right now. You have heard from Mr. Sande and Mr. Capurro [talk] about other fuels that are being looked at . . . [In] the interim committee on highway financing . . . conversation came up about the taxation of fuels. One of the concerns is . . . the fact that these vehicles on the roads are causing wear and tear on the roads and that is one of the revenue sources that we get. What will we get as a revenue source for highways considering the policy decision that has been made, constitutionally, when we are in electric vehicles?. . . Once you provide this type of exemption, what happens when the other fuels come in? What do we do? Where have we opened the door and where does it stop? If this committee feels that the policy decision of clean air is such that they must act, then I would ask the committee . . . that there be a death date on this. . . If this is to help with purposes of conversion of engines, there is a [certain] amount of dollar value to that. At the end of that period, . . . that exemption should end. . . Senator O'Connell asked when we started subsidizing fuel, but Ms. Vilardo could not answer her question. Mr. Capurro stated, "The most recent change to this section regarding exemptions was in 1991; however, there was originally an exemption for ethanol . . . which was eliminated in the [19]91 session . . . What you have now is the exception for CNG and LPG, at one time it included ethanol." Senator Adler said, "That was in 1991, and that 23 cent amount is lower than the actual gas tax rate because of some calculations and compression of the gas as well. So it is a lower rate than gasoline . . . " Donna Wadey-Howell, Acting Chief, Registration Division, Department of Motor Vehicles and Public Safety, stated she could provide the committee with the revenue information the senators are requesting. Senator Augustine closed the hearing on S.B. 269 and opened the hearing on Senate Bill (S.B.) 254. SENATE BILL 254: Exempts child-care establishments from business tax. Senator Adler testified: . . . I introduced this bill last session. It didn't go too far. I reintroduced it again because of some requests of several daycare centers in my area. . . Daycare centers essentially pay fairly low wages and they are very labor intensive facilities, so the business tax actually disproportionately impacts daycare centers. The other social concern with daycare centers if we are a society that is moving towards single women, especially getting off of welfare and going to work, there is an incentive to reduce the cost of daycare. I think this is one of the things we can do to reduce the cost of daycare which makes a lot of sense. The other . . . factor is that large businesses such as casinos, large manufacturers and so forth should be encouraged to have daycare facilities within their business so people can return to work and not be on the public dole. So for all of those reasons, it makes sense to repeal the business tax as to daycare facilities to promote this particular industry . . . The other factor is . . . there are a great many publicly funded daycare facilities and [private daycare centers] feel that they are in a real competitive disadvantage . . . Senator Adler completed his testimony and stated he would like to amend the bill to take the word "sole" out. Senator Augustine asked how many daycare centers are licensed in the state. Senator Adler said about 100 in the Reno/Carson area and 200 in Clark County. Senator O'Connell questioned, ". . . How many people are we talking about [being in] . . . an establishment? Do we have a number somewhere in the law? . . ." Senator Adler responded there is a definition in the law. The number of children in an establishment must be at least five. Senator O'Connell asked about the age limit of 18 years in the bill. Senator Adler replied that he would like to keep the age at 18. Senator O'Connell inquired about a fiscal note and Senator Adler replied he has no idea what the fiscal impact would be. Senator Townsend explained: . . . I was assigned . . . to the interim committee on child care and the conclusion that we drew was really an interesting one. Most of the people who testified were not in fact daycare center owners, but were businesses who came forward. . . There is an obvious need . . . Where we have slots, they are just not affordable slots. . . There are many hotel properties that have daycare facilities, but they are not . . . for the employees. They are for the guests of the hotel. . . The concern I would have is how we define this. . . I think the term licensed establishment should be considered . . . I would be very careful with the 18 [years of age]. I think we are going to have to look a little bit at that. I don't know if we want get up that high. . . Senator Townsend and Senator Adler discussed the problems with daycare and the fact that most employers want to find a solution to the daycare problem. Senator O'Connell asked if the daycare centers would reduce their fees if they were given this tax break and Senator Adler said he thinks they would. Joan LeSage, Owner/Director, Educare Schools, Inc., testified in favor of S.B. 254. Ms. LeSage said the local daycare rates are very low in comparison to California. Ms. LeSage stated the tax has a detrimental effect on their business. Betty Brinson, Teacher and Director, Wee Express Pre-School, presented and discussed Exhibit F. Senator Lowden inquired, "Could you tell the committee approximately how much you pay in business tax a year ?" Ms. Brinson said they pay $75 a quarter. Senator Lowden asked if their savings would be $300 a year, would that be a major impact on an individual family. Ms. Brinson thought it would be. Senator Lowden questioned where the money would be spent. Ms. Brinson indicated it would be spent on the business. Lou Ann Russell, Director of A+Learning Center, Child Care Alliance, Reno Association for the Education of Young Children, testified in support of S.B. 254. Ms. Russell stated she thinks the age 18 was probably used because that is the age they use for welfare purposes. Ms. Russell said their business would take the money that would normally be spent on taxes and put it back into the business. Senator Regan asked if Ms. Russell thinks that some of that tax should go back into her pocket as profit. Ms. Russell answered no. Senator Lowden and Senator Adler discussed the bill and where it originated and its intended purpose. Anthony E. Leciejewski, Owner/Manager, Anna's Little Learners, Inc., presented and discussed Exhibit G. Lucille Lusk, Lobbyist, Nevada Concerned Citizens, testified in opposition to S.B. 254. Ms. Lusk stated that creating exemptions to the business tax makes a bad law worse, and unequal treatment under the law creates tremendous resentment. Ms. Lusk stated she is not in favor of changing the terminology to "sole purpose" because it would cause a loophole. Carole Vilardo, Lobbyist, Nevada Taxpayers Association, stated there are a lot of reasons why this exemption should be put into place. Ms. Vilardo reiterated prior testimony. There being no further business, Senator Lowden closed the hearing at 4:30 p.m. RESPECTFULLY SUBMITTED: DeLynn Gillentine, Committee Secretary APPROVED BY: Senator Sue Lowden, Chairman DATE: Senate Committee on Taxation March 21, 1995 Page