MINUTES OF THE SENATE COMMITTEE ON TAXATION Sixty-eighth Session May 16, 1995 The Senate Committee on Taxation was called to order by Chairman Sue Lowden, at 2:00 p.m., on Tuesday, May 16, 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: Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division Kathy E. Cole, Committee Secretary OTHERS PRESENT: Charlie Joerg, Lobbyist, Nevada Manufacturing Housing Association Robert S. Hadfield, Lobbyist, Nevada Association of Counties C. O. Watson, Executive Director, Nevada Association of Tobacco & Candy Wholesalers Harvey Whittemore, Lobbyist, McLane Co. Inc. and Pacific Properties & Development Co. Pat Coward, Lobbyist, Retail Association of Nevada Gary Hunter, Chief, Revenue Capital Vending Karen Baggett, Deputy Director, Commissioner on Economic Development Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association Keith Ashworth, Lobbyist, Nevada Power Company Stan Warren, Lobbyist, Sierra Pacific Resources Doug Ponn, Sierra Pacific Power Company Patricia Justice, Attorney, Clark County Legislative Representative Michael Pitlock, Executive Director, Department of Taxation Chairman Lowden opened the meeting with the introduction of the following bill draft requests (BDRs). BILL DRAFT REQUEST 32-606: Provide exception to statutory limit on total rate of taxes ad valorem for rate required to be levied for support of county school district. SENATOR RHOADS MOVED FOR COMMITTEE INTRODUCTION OF BDR 32-606. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS AUGUSTINE, O'CONNELL, AND TOWNSEND VOTED NO.) ***** BILL DRAFT REQUEST 32-594: Achieve assessment equity between ` manufactured homes and site built homes. Chairman Lowden infromed the committee that this BDR provides a uniform method of depreciation for homes, and it came out of the Senate Committee on Natural Resources. She asked Senator Rhoads if he wanted to give the committee an overview of the BDR? Senator Rhoads said the BDR came out of his Senate Committe on Natural Resources and he was prepared to move for introduction of the BDR. He suggested Charlie Joerg would be able to give the committee more background on the bill draft. Charlie Joerg, Lobbyist, Nevada Manufactured Housing Association, explained that the Nevada Association of Counties (NACO) and the League of Cities have been working on this legislation for a number of years. The Nevada Manufactured Housing Association agreed to support this BDR; Senator Rhoads was kind enough to bring it through the Senate Committe on Natural Resources. The BDR contains language to equalize the method of taxation of manufactured homes and site-built homes. Currently, there is a different depreciation schedule on these two types of homes, also. SENATOR REGAN MOVED FOR COMMITTEE INTRODUCTION OF BDR 32-594. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** BILL DRAFT REQUEST 38-817: Increases taxes ad valorem for payment of indigent claims. Robert S. Hadfield, Lobbyist, Nevada Association of Counties, said that this legislation would allow Clark County to raise their tax rate by 1 cent to pay for indigent medical services and would allow other counties to go as high as 5 cents. This bill is needed in his estimation because of the amount of patients needing long-term care who cannot afford the services. One final point Mr. Hadfield made was in the fact that if the counties cannot make the long-term payments then they will lose the matching federal funds, which is roughly $15 million a year. This bill would provide the vehicle to raise the taxes for the services rendered. SENATOR RHOADS MOVED FOR COMMITTEE INTRODUCTION OF BDR 38-817. SENATOR TOWNSEND SECONDED THE MOTION. Senator Augustine asked Mr. Hadfield about the funds that are being sent out of the State of Nevada going to California and to Utah. Mr. Hadfield replied by stating that Nevada does not have enough long-term beds available for the indigent patients. Senator Augustine said, "I just don't understand the rationale of why we are sending money out of here [the state] and you are asking for an increase [in taxes] for the state." A general discussion ensued with the committee members asking questions about the amount of funds going out of Nevada, how many beds are empty in the hospitals throughout Nevada, and other pertinent questions. THE MOTION CARRIED. (SENATORS TOWNSEND, O'CONNELL, AND AUGUSTINE VOTED NO.) ***** BILL DRAFT REQUEST 32-669: Allow incorporated cities to implement gas tax under certain circumstances. Senator Townsend informed the committee how this bill would be amended through the removal of the bill as a whole. Accordingly, the bill with its "permissive language" would say that they could now use the money that they are currently receiving and move funds over into the maintenance of the road. SENATOR REGAN MOVED TO INTRODUCE BDR 32-669. SENATOR TOWNSEND SECONDED THE MOTION. Senator O'Connell wanted to know was this ever on a ballot question and put to the voters and if so what did the question look like. Senator Townsend responded that in previous legislative action the voters had passed measures in which the money was transferred from one project to repairing the roads. Further the senator stated that the funds used for the roads are pretty stable; however, he did mention that one area of concern with funding appears to rotate around the "elder care and disabled bus services." THE MOTION CARRIED. (SENATOR AUGUSTINE VOTED NO.) ***** Chairman Lowden opened the hearing on Senate Bill (S.B.) 68. SENATE BILL 68: Increases tax on transfers of real property and requires deposit of revenue in county school districts' funds for capital projects. (BDR 32-657) Senator Lowden asked the committee to reconsider because there is another request for a BDR which is under the same chapter. Instead of making another whole bill the senator wanted to "gut" S.B. 68 and to put a new amendment if the committee so chose. The amendment however was not available for the committee to look at; therefore, Chairman Lowden closed the hearing on S.B. 68. Senator Augustine wanted for the record to make a commendation. She said, "I want to commend our secretary Kathy Cole... at the end of April she was awarded a $1000 prize for her volunteer work in her Breakfast Reading Club. She goes to the Kate Smith Elementary School in the morning and reads books to the students at breakfast time. There were only 10 of these prizes given, at the $1000 level, so I just thought our committee should recognize that and we are glad to have you here and working in the community, too." The committee concurred with this commendation. Chairman Lowden then opened the hearing on Senate Bill (S.B.) 115. SENATE BILL 115: Revises provisions governing prevention of competition by wholesale dealers of cigarettes. (BDR 32-1160) C. O. Watson, Executive Director, Nevada Association of Tobacco & Candy Wholesalers, testified by referring to Exhibit C and Exhibit D. A general discussion ensued surrounding Mr. Watson's testimony and the materials he had presented. Chairman Lowden asked if there were any who wanted to speak for or against this bill. Harvey Whittemore, Lobbyist, McLane Co. Inc. and Pacific Properties & Development Co., made it clear that he would limit his comments to the bill. He said, "S.B. 115 as previously identified. . .is simply price protectionism at its worst for an industry which does not need it." Mr. Whittemore continued to explain how this bill would affect business in Nevada. There was more discussion from the committee and Mr. Whittemore with regard to this bill and trying to come to a compromise in the language of it. Pat Coward, Lobbyist, Retail Association of Nevada, said "Basically we stand behind our testimony that was presented last March. . .We would support any amendment Mr. Whittemore has previously suggested if that was the rule of the committee. Senator Lowden emphasized that she would hope that there could be a compromise or a meeting of the minds which would make this committee very happy; but if not, they are open to any suggestions for amendments. Gary Hunter, Chief, Revenue, Capital Vending, said "We are opposed to it..." Senator Townsend asked to comment on the testimony on this bill. He related to past legislation that had been proposed to tax everything in the 1983 session. He pointed out that would not work for the benefit of the citizens of Nevada and stated, "Anytime you increase a tax you are going to slow down sales..." Senator Townsend went on to explain that it took them from 1983-1988 to get back to the level of sales in the beginning. In his words, "So we gained absolutely nothing for 5 years." Chairman Lowden closed the hearing on S.B. 115 and opened the hearing on Senate Bill (S.B.) 337. SENATE BILL 337: Revises provisions governing exemptions from property tax for certain businesses relating to conservation of fossil fuels. (BDR 32-600) Karen Baggett, Deputy Director, Commission on Economic Development, said she was here to answer the committee's questions regarding tax deferral, tax abatement, and how the commission works. She provided a brief summary and packet with the information previously requested by the committee (Exhibit E). Senator O'Connell asked Ms. Baggett, "Since we recognize out-of-state companies who are coming here, why don't we ever think about doing things for our own companies. Who are in the state and who are enlarging...doing more investments in the state...Why don't we encourage the people who are already here?" Ms. Baggett responded by saying this program is extended to those who are in our state already. For instance she said that Reno Air has a tax abatement program now as do others. Ms. Baggett then handed out another handout (Exhibit F). Senator Townsend asked for some more information about the policies of the Commission on Economic Development both from their past experiences to their present policies in working with businesses in the state. As the general discussion continued, Ms. Baggett responded to the questions and comments from the committee members. Mr. Coward addressed this bill by stating, "This is a bill that came out of Senate Concurrent Resolution (S.C.R.) 43 of the Sixty-seventh Session that Senator Rhoads chaired last April... We are for the concept [of the bill]..." SENATE CONCURRENT SOLUTION 43 OF THE SIXTY-SEVENTH SESSION: Directs legislative commission to conduct interim study on revenue structure in Nevada. (R-1301) Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, said: "What we had was two provisions existing in law that, in effect, were contradictory and were crafted for specific companies coming in. In discussion with the committee it was felt that there should be parameters that were consistent between the two provisions in law. The points of consistency would be approval by Economic Development Commission, approval of those conditions under which economic development certifies a business. That would be minimum wage...and the fact that they provide medical insurance. It was done because there have been instances since 1991 where when a company which has come in [to Nevada] and which has been involved in alternative sources of energy generation find legislative action is required. They [companies] cannot come and go to the Economic Development Commission. In trying to get consitency within this [procedure] and put a viable tool into their hands (that was the dialogue and the discussion for combining the elements of both these) to put that criteria of economic development in and further set sepcific time frames. And, again, note the discretion goes to economic development, i.e., the personal property tax exemption may be granted for up to 10 years. It does not have to be. The real property exemption may be granted for up to 20 years. These were parts of the points of consistency that we were looking at as a committee." Keith Ashworth, Lobbyist, Nevada Power Company, informed the committee that they do not want any amendments and for the record "Economic Development of Western Nevada as well as the Retail Association supports this bill." The committee continued to address this bill with its provisions among themselves and the witnesses, Mr. Ashworth and Ms. Baggett. Stan Warren, Lobbyist, Sierra Pacific Resources, referenced back to S.B. 231 of the Sixty-seventh Session, "which was the North Star Bill...a forerunner to anything that comes close to representing something like retail wheeling..." He went on to explain the past legislation and how this bill would remedy some of the existing issues. SENATE BILL 231 OF THE SIXTY-SEVENTH SESSION: Makes various changes relating to encouragement of new industry in Nevada. (BDR 58-1103) Doug Ponn, Sierra Pacific Power Company recommended some areas of the bill that should be repealed. There was general discussion from the committee and the witnesses, Mr. Ponn and Mr. Warren. Senator Townsend ask Ms. Vilardo to come forward and address his question, "Who were we trying to accommodate with this policy?" Ms. Vilardo replied, What we were trying to do...look at the mechanics [on exemptions for renewable energy resources]..." The discussion continued. SENATOR REGAN MOVED TO DO PASS S.B. 337. SENATOR RHOADS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TOWNSEND VOTED NO. SENATOR ADLER WAS ABSENT FOR THE VOTE.) ***** Chairman Lowden opened the hearing on Senate Bill (S.B.) 417. SENATE BILL 417: Revises provisions governing collection of money for issuance of certain business licenses. (BDR 32-1976) Patricia Justice, Attorney, Clark County Legislative Representative, said "We have presented this bill and they are asking that you do pass it as is." Ms. Justice continued her testimony with regard to their business. In their business they process 70,000 licenses a year which amounts to $160 million. Further, she described the problems that arise due to the processing of that many licenses. Senator Regan talked about the fact that the state is losing money because they are sending the checks back and forth for overpayments and so forth. SENATOR REGAN MOVED TO DO PASS S.B. 417. SENATOR TOWNSEND SECONDED THE MOTION. A general discussion occurred with questions and comments being raised referring to cities with less population and how they would be affected by the passage of this bill. Michael Pitlock, Executive Director, Department of Taxation, concurred with the testimony of Ms. Justice that this bill would help to clear up some of the problems of processing so many licenses per year. The general discussion ended with Senator Townsend's observations with regard to the language of the bill. He said, "The language that allows each committee in each county to have a business license or choose not to would supersede the specific nature of this, so you wouldn't have a problem." Therefore, there would not be a need to amend this bill to specifically apply to "populations of 50,000" or more. THE MOTION CARRIED. (SENATOR ADLER WAS ABSENT FOR THE VOTE.) ***** Chairman Lowden opened the hearing on Senate Bill (S.B.) 144. SENATE BILL 144: Proposes to exempt expressly from certain taxes on retail sales gross receipts from sales of tangible personal property by certain organizations. (BDR 32-1325) Senator Lowden informed the committee that they had the proposed amendments for this bill. A discussion followed the chairman's comments. Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division, was asked by the chairman to explain what the bill would do with each particular amendment change. He directed the committee's attention to Exhibit G. Senator Townsend and Mr. Pitlock continued to discuss how the changes would affect charities. Mr. Pitlock continued to suggest that the "department's position is that it should not be broadened unduly. So, I would have to say that from the department's position we would stick with amendment 332... One person's tax exemption is another person's tax increase..." Mr. Pitlock was asked to explain who they were eliminating with this bill. Mr. Pitlock said, "There is [sic] issues that are a benefit to the community to make a distinction between possibly the displays as we walk into this building versus displays that are purely entertainment in nature. That is the first distinction that comes to my mind." Senator Lowden then asked, "So, we are exempting purely entertainment displays? We are not exempting informational displays, like we have in the lobby?" Mr. Pitlock said, "I think it should be the other way around. The entertainment should not be exempt and the informational ones should be." The discussion continued around who would be affected by the exemptions with the passage of this bill and any proposed amendments. SENATOR RHOADS MOVED TO AMEND AND DO PASS S.B. 144. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR ADLER WAS ABSENT FOR THE VOTE.) ***** Chairman Lowden called for the introduction of the following bill draft requests (BDRs). BILL DRAFT REQUEST 32-596: Provides for various changes regarding collection of taxes. SENATOR TOWNSEND MOVED TO INTRODUCE BDR 32-596. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR ADLER WAS ABSENT FOR THE VOTE.) ***** BILL DRAFT REQUEST 32-610: Establish bad debt credit against future sales and use tax liability. SENATOR O'CONNELL MOVED TO INTRODUCE BDR 32-610. SENATOR RHOADS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR ADLER WAS ABSENT FOR THE VOTE.) ***** Chairman Lowden adjourned the meeting at 4:15 p.m. RESPECTFULLY SUBMITTED: Kathy E. Cole, Committee Secretary APPROVED BY: Senator Sue Lowden, Chairman DATE: Senate Committee on Taxation May 16, 1995 Page