MINUTES OF THE SENATE COMMITTEE ON TAXATION Sixty-eighth Session June 8, 1995 The Senate Committee on Taxation was called to order by Chairman Sue Lowden, at 1:10 p.m., on Thursday, June 8, 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 Cole, Committee Secretary OTHERS PRESENT: Allen Biaggi, Chief, Bureau of Corrective Actions, Division of Environmental Protection, State Department of Conservation and Natural Resources Peter Krueger, Lobbyist, Nevada Petroleum Marketers Association Mr. Greco, Nevada Petroleum Marketers Association Michael Pitlock, Executive Director, Department of Taxation Pat Coward, Lobbyist, Retail Association of Nevada Mary Santina-Lau, Executive Director, Retail Association of Nevada (RAN) Carole Vilardo, Lobbyist, Nevada Taxpayers Association Mark Schofield, Assessor, Clark County Andrew Gordon, Lobbyist, Sun City-Summerlin Community Association David Pursell, Chief, Division of Assessment Standards, Department of Taxation Eric Cooper, Lobbyist, Las Vegas Chamber of Commerce Henry Etchemendy, Executive Director, Nevada Association of School Boards Senator Lowden opened the hearing on Senate Bill (S.B.) 324. SENATE BILL 324: Increases fees for certain petroleum products. (BDR 51-1306) Allen Biaggi, Chief, Bureau of Corrective Actions, Division of Environmental Protection, State Department of Conservation and Natural Resources, testified he has met with the other parties concerned. They have a proposal to generate the necessary revenues to make the Highway Fund solvent by 1998-1999 (Exhibit C). He provided a supplemental information packet (Exhibit D). Senator Lowden asked if it is correct that most of the oil cleanup will be taking place in the next couple years and then the impact will not be the same? Mr. Biaggi responded that by the year 1999 or 2000 the number of cleanups will dramatically decrease and a reduction in costs will go along with that. The hope is that the bill will sunset some day. Senator Lowden asked if everyone might be reimbursed for the cost of the cleanup in the future? Mr. Biaggi stated this is a twofold problem. If people are left waiting for their refunds for a long period of time, the Environmental Protection Agency (EPA) will look at whether or not this is a viable financial mechanism for tank owners and operators. They may rescind their approval of this fund, which would put their owners and operators in a position of having to go out and secure very expensive private insurance. He said 45 other states have cleanup funds and two states have copayment provisions the same as are being proposed with this bill. Senator Regan asked if the annual fee for the petroleum marketers association will be left in? Mr. Biaggi responded that the fee will still be doubled. Peter Krueger, Lobbyist, Nevada Petroleum Marketers Association, testified in support of S.B. 324. He said there is a need for the cleanup fee to increase. Senator Lowden reminded the committee that they had already passed Amendment No. 537 to this bill for the airport decrease on the fuel tax (Exhibit E). The bill has been waiting on the amendment. Senator Augustine asked Mr. Pitlock if the committee increases the cleanup fee by 0.8 percent, what will happen if there is a decrease to the Highway Fund of 0.2 percent? Michael Pitlock, Executive Director, Department of Taxation, responded anything taking money away from the Highway Fund is going to make a larger problem. SENATOR REGAN MOVED TO AMEND, WITH THE CHANGES FROM AMENDMENT NO. 537, AND AMEND TO REDUCE THE TAXATION ON FUEL, NOT JET FUEL, FROM 23 CENTS TO 10 CENTS, COUNTY OPTION, AND DO PASS S.B. 324. SENATOR TOWNSEND SECONDED THE MOTION. Senator Augustine said she is in favor of the reduction of the aviation fuel tax, but cannot support an increase in the fuel tax the people are already paying. Senator Townsend said 16 percent of California's highway dollars come from the General Fund. Nevada depends on user fees to support the highways. THE MOTION CARRIED. (SENATORS AUGUSTINE AND O'CONNELL VOTED NO.) * * * * * Senator Lowden asked Mr. Greco and Mr. Krueger if there will be another increase in the taxes. They both said there will not be any increase. Senator Lowden opened the hearing on S.B. 485. SENATE BILL 485: Provides credit for bad debts against taxes on retail sales. (BDR 32-610) Pat Coward, Lobbyist, Retail Association of Nevada, testified the bill allows a retailer to recapture sales tax paid to the state on bad debts. Mary Santina-Lau, Executive Director, Retail Association of Nevada (RAN), testified in favor of the bill and explained the purpose of the bill. She discussed a statement from John Andrew, Senior Government Relations Counsel for J. C. Penney Company, Inc. (Exhibit F). She said three portions of the bill need to be amended with language that says "only the debt can be claimed that is occurring upon passage and approval," "that the tax is due and payable when payments are received," and "the debt, as the company claims on the federal tax return." Mr. Pitlock stated there is a fiscal note with a discrepancy. The calculated fiscal note is approximately $9.2 million for the first fiscal year and $13 million for the second fiscal year. This has been calculated using a bad-debt ratio that was provided to the department by the retail association. He suggested that since language needs to be drafted to incorporate the amendments that were discussed, the department should continue to work with the retail association to fine tune the fiscal note. They can come back with a number the committee can be more comfortable with. Carole Vilardo, Lobbyist, Nevada Taxpayers Association, testified she is in strong support of S.B. 485. Senator Lowden closed the hearing on S.B. 485 and opened the hearing on S.B. 512. SENATE BILL 512: Provides separate method of assessment for unit in common-interest community. (BDR 32- 1549) Mr. Pitlock testified that he had drafted some language that he thought expressed the opinions of the consensus. He said he understood the amendment is being drafted. It may need more work. Mark Schofield, Assessor, Clark County, testified the language changes will enable the assessor's office to execute the language in the statute uniformly. Senator Lowden stated there has been a request for an interim study on issues and procedures of taxation. Andrew Gordon, Lobbyist, Sun City-Summerlin Community Association, testified the language, that has been cooperatively drafted, addresses the issue. He said he would make two changes. The two changes would be to make subsection C 3 and 4 uniform in the use of the term "unit" and the last word of the bill draft talks about "appraisal of common elements." He said communities will be appraised as part of the process, but not separately assessed. Mr. Schofield stated he had some concern because of the allocation of the assessment. He presented copies of a case being adjudicated by the supreme court for a lawsuit of an allocation of a double assessment (Exhibit G). He said the language in the administrative code must be precise so that the entire state will be using the same methods. He said there will be an increase in individual taxes. Senator Augustine and Mr. Schofield discussed the changes to be assessed to Sun City. Senator Adler said there needs to be regulation to give full disclosure of assessment and taxes to a person; so they can make a choice before moving into an area. Mr. Pitlock said the taxes are not going up. Instead of going through the home owners' association, the taxes are being directly funneled to a property owner. Senator O'Connell reminded everyone that the taxpayers already feel they are being double-taxed. She asked how Public Service Commission (PSC) can justify that there will be an increase in the property tax, which is the same amount these people are already being charged? Mr. Gordon responded the taxes are going to go up anyway. This is a reappraisal area. He said they cannot exceed 100 percent of the taxable value. There can be no double taxation. Senator O'Connell said the people will now be taxed for the use of the golf course, so they will be double-taxed. Mr. Schofield responded that the assessor's value has been upheld in two administrative board reviews. There has not been a double assessment. He said he estimates there is about a $27 increase per unit. There will no longer be a separate tax for the golf course and club house. Senator O'Connell said this residential area will partly be in her district. She does not want these people to misunderstand the double assessment or taxes they will have to pay. Senator Lowden closed the hearing on S.B. 512 and opened the hearing on S.B. 519. 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. (BDR 32-1926) David Pursell, Chief, Division Assessment Standards, Department of Taxation, testified the department has completed their review concerning the fiscal note for the bill (Exhibit H). This bill creates a revenue decrease of $485,000 statewide. Property that could be put on the tax roll next year will equate to approximately $344,000; the majority of which is in Clark County. The net loss is $829,000 if the county adds the portion of property that is not on the tax roll currently. SENATOR O'CONNELL MOVED TO AMEND AND DO PASS S.B. 519. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Lowden opened the hearing on Assembly Bill (A.B.) 72. ASSEMBLY BILL 72: Revises provisions relating to imposition of certain taxes for capital projects and financing construction of schools. (BDR 34- 409) Eric Cooper, Lobbyist, Las Vegas Chamber of Commerce, testified that the Las Vegas Chamber of Commerce feels that a 20-year pay- as-you-go plan for schools is sufficient. Henry Etchemendy, Executive Director, Nevada Association of School Boards, testified this bill came from one of the interim studies. The school boards urge the committee to do pass of the bill. SENATOR REGAN MOVED TO DO PASS A.B. 72. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Lowden explained Amendment No. 663 to S.B. 131. SENATE BILL 131: Authorizes sellers and their agents to collect fees from purchasers who issue checks with insufficient funds. (BDR 52- 208) SENATOR RHOADS MOVED TO CONCUR WITH AMENDMENT NO. 663 TO S.B. 131. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Lowden adjourned the meeting at 2:30 p.m. RESPECTFULLY SUBMITTED: ______________________________ Diane Rea, Committee Secretary APPROVED BY: _____________________________ Senator Sue Lowden, Chairman DATE: ______________________ Senate Committee on Taxation June 8, 1995 Page