MINUTES OF THE SENATE COMMITTEE ON TAXATION Sixty-eighth Session June 27, 1995 The Senate Committee on Taxation was called to order by Chairman Sue Lowden, at 4:30 p.m., on Tuesday, June 27, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. There is no 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 GUEST LEGISLATORS PRESENT: Assemblyman Brian Sandoval, Assembly District No. 25 Assemblyman John Carpenter, Assembly District No. 33 STAFF MEMBERS PRESENT: Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division Kathy Cole, Committee Secretary OTHERS PRESENT: Michael Pitlock, Executive Director, Department of Taxation Michael Trudall, Manager, Caughlin Ranch Homeowners Association Kit Weaver, Assessor, Carson City Ron Fox, Chief Appraiser, Washoe County Assessor's Office James I. Barnes, Deputy District Attorney, Washoe County Randy Day, Commissioner, Office of Nevada Commissioner for Veteran Affairs Mark Schofield, Assessor, Clark County Ben Duncan, Member, Nevada Veterans' Advisory Commission Chairman Lowden opened the hearing on Assembly Bill (A.B.) 170. ASSEMBLY BILL 170: Clarifies legislative intent concerning application of sales tax to food for immediate consumption. (BDR S-692) Michael Pitlock, Executive Director, Department of Taxation, said: For several years the department has been struggling to clarify its regulations dealing with the exemption for the sales tax on food. As a part of and in response to ...[discovering] when food is exempt and when food is not. The debate centers on the interpretation of the phrase, `prepare food for immediate consumption' and the department in working with the Retail Association Industry has made great progress in clarifying those regulations. One of the problems we had in adopting these policies is when we tried to focus in on the product itself...regardless of where it is sold... Then if you bought a can of Coke in the grocery store it is taxed and yet, if you buy that same can of Coke out of the vending machine it is not taxed... [This bill] changes that legislative intent language... [to address these problems]. Senator O'Connell asked, "Is this going to apply to your water and ice machines as well?" Mr. Pitlock replied, "Yes, the current regulations that we are working on establishes water as a food and therefore it...is exempt..." He then continued to explain to the committee for the record that there is a fiscal note associated with this bill of approximately $2 million per year. Mr. Pitlock stated, "There's approximately $27 million worth of food sold from vending machines annually and at a 7 percent tax rate that equates to about $2 million...per year." The committee discussed the various problems related to places who charge tax on certain food items and others who do not charge a tax on the consumable food products. SENATOR TOWNSEND MOVED TO DO PASS A.B. 170 AND RE-REFER TO THE SENATE COMMITTEE ON FINANCE. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman Lowden opened the hearing on Assembly Bill (A.B.) 377. ASSEMBLY BILL 377: Exempts certain charitable organizations from responsibility of paying business tax on behalf of certain persons who participate in trade show or convention. (BDR 32-1070) Assemblyman John Carpenter, Assembly District No. 33, said this bill would exempt small charitable organizations from paying the business tax. Further Mr. Carpenter said there is a limit, in that these organizations can only hold one or two events per year. Senator Adler then asked for a definition of what is a "charitable organization" and did this definition match previous terminology of what is a charitable organization. Mr. Carpenter then recommended some amendments to deal with foreseeable problems in the verbiage of the bill, in order to make the wording consistent with the law. SENATOR ADLER MOVED TO AMEND AND DO PASS A.B. 377. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman Lowden opened the hearing on Assembly Bill (A.B.) 607. ASSEMBLY BILL 607: Exempts certain privately owned parks from property taxes and requires notification of certain persons of statutes authorizing relief from penalties regarding property taxes. (BDR 32-1070) Assemblyman Brian Sandoval, Assembly District No. 25, said he would not repeat his testimony from a previous hearing and furthermore there were people present who would be testifying. Mr. Sandoval is here to show support of this bill. Senator O'Connell asked whether Mr. Sandoval was aware of the interim study which was going to address services in areas such as this, the Caughlin Ranch, to which Mr. Sandoval replied that he was not aware of this. The senator then related how Senator Rawson had a similar problem several years ago. Senator O'Connell recommended that Mr. Sandoval speak with Senator Rawson about the "home rule study" which was taken statewide. Mr. Pitlock said that the department interprets this bill's language to be very narrow in scope, dealing just with the property taxes of a place such as that in Caughlin Ranch. Senator Lowden wanted the assurance of Mr. Pitlock that this narrow reading of the bill would remain so if the committee decided to take action on the measure. Mr. Pitlock concurred with this and said that there is a requirement in the agreement with the local governments with regard to the property. Michael Trudall, Manager, Caughlin Ranch Homeowners Association, presented suggestions for an amendment to A.B. 607. As Mr. Trudall mentioned, the Caughlin Ranch is a planned residential community with over 2,300 acres of land within its boundaries. He then, showed a map and continued his dialogue with respect to the land that is in question as far as property taxes, which is roughly 20 linear miles. Senator Lowden asked for clarification on what this bill would do. She said, "Would this bill be putting it back into the public lands for purposes of insurance and those kinds of things?" Mr. Trudall explained how the taxes are being assessed now and what they would be if this bill were to be passed into law. Kit Weaver, Assessor, Carson City, said that this bill does three things. They are, "...the Caughlin Ranch Park...it also...permits the treasurer to bill a small tax bill in one payment...and you can appeal your penalties to the Department of Taxation..." An in-depth discussion ensued between Senator Rhoads, Senator Lowden, and Mr. Weaver in search of how this bill would be implemented through regulations in zoning for public parks and further, who could apply for these exemptions. Ron Fox, Chief Appraiser, Washoe County Assessor's Office, along with James I. Barnes, Deputy District Attorney, Washoe County, both explained that they were concerned about the interpretation of this bill with regard to the "common parcels of land" throughout the State of Nevada. They believed that these concerns were allayed by previous witnesses, especially, Mr. Pitlock and Mr. Weaver's testimony. Senator Adler along with Mr. Trudall and others continued the dialogue with regard to fees and public access to the park facilities. SENATOR REGAN MOVED TO DO PASS A.B. 607. SENATOR RHOADS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman Lowden opened the hearing on Assembly Bill (A.B.) 656. ASSEMBLY BILL 656: Extends exemption from taxation for veterans of Persian Gulf Crisis to all veterans who served on active duty during crisis. (BDR 32-1915) Senator Lowden wanted to get an update on how this bill could be implemented in order to fund a veteran's home to put some money together as "seed money" from tax exemptions. Randy Day, Commissioner, Office of Commissioner for Veteran Affairs, gave an update on this proposal. He looked at various ways they have raised funds as a result of previous legislative sessions. Mr. Day asserted that none have been particularly successful due in large part because of the downtime between the "idea" and the "actual implementing" of the funding sources. With the aid of Senators Lowden and Augustine, the committee was made aware of the fact that there is a 2,280 acre parcel of land in southern Nevada which could be used as a possible veterans' home; however, how it would be funded becomes the major issue again. At this point Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division, and Mark Schofield, Assessor, Clark County, regarded the language of the bill as needing "corrective measures." Mr. Schofield said he strongly supports this bill as well as "adding the additional option of allowing a portion of the veteran's exemption that would ordinarily go towards motor vehicle privilege tax or the real personal property tax to go toward the veterans' home. He said, "Speaking for the assessor's association it would not be an administrative problem... However, with 333,000 veterans in Clark County I would hate to see the ramifications of eliminating the options that they currently enjoy...on the other hand if you add the option, you may get the veterans to support it..." Senator Lowden reaffirmed that the committee's efforts are toward helping the veterans who are in need. Ben Duncan, Member, Nevada Veterans' Commission, and committee members joined Mr. Schofield in discussions which revolved around exemption options, veterans' concerns, and possibly capping the funding source at $1.5 million. Chairman Lowden closed the hearing on A.B. 656 and opened the hearing on Senate Bill (S.B.) 311. 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. (BDR 32-1022) SENATOR TOWNSEND MOVED TO CONCUR WITH ASSEMBLY AMENDMENT NO. 1235 TO S.B. 311. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman Lowden opened the hearing on Assembly Bill (A.B.) 527. ASSEMBLY BILL 527: Repeals certain provisions relating to importers, wholesalers and suppliers of intoxicating liquor. (BDR 32-509) Mr. Pitlock asked the committee to take some action on this bill as it was a "department bill" that deletes three provisions in the liquor tax area that were found to be unconstitutional and needs to be repealed via legislative action. Senator O'Connell said: There's a provision in the law that we understand has not been used in that its intent and purpose can be circumvented and it has been in the law since 1979 or so... This is the one that Senator Adler had spoken to on the floor when he was talking about brew-pubs and the reason...we have not had any more wholesalers open up here is because the law requires either $100,000 in merchandise and so many square feet of warehouse space.... Mr. Pitlock said he recalled the discussion on the floor but he did not remember the site. Further he informed the committee that he is a strong advocate for free enterprise and he would not mind supporting the committee's decision at deleting certain language from the bill as long as it would not delay the passage of A.B. 527 because it is needed by the department. SENATOR O'CONNELL MOVED TO AMEND AND DO PASS A.B. 527. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman Lowden opened the hearing on Senate Bill (S.B.) 308. SENATE BILL 308: Provides exemption for tax levy of certain taxing districts in certain cities from statutory limit on total ad valorem tax levy. (BDR 32-732) SENATOR O'CONNELL MOVED TO CONCUR WITH THE ASSEMBLY AMENDMENT TO S.B. 308. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Senator Lowden opened the hearing on Senate Bill 144: Senate Bill 144: Proposes to exempt property sold by or to certain organizations from taxes on retail sales. (BDR 32-1325) SENATOR TOWNSEND MOVED TO CONCUR WITH THE ASSEMBLY AMENDMENT TO S.B. 144. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Chairman Lowden opened the hearing on Senate Bill 123. SENATE BILL 123: Permits imposition of tax on retail sales for management of solid waste. (BDR 32-661) SENATOR RHOADS MOVED TO AMEND AND DO PASS S.B. 123. SENATOR ADLER SECONDED THE MOTION. THE MOTION FAILED. (SENATORS LOWDEN, AUGUSTINE, O'CONNELL, AND REGAN VOTED NO.) ***** SENATOR REGAN MOTION TO INDEFINITELY POSTPONE S.B. 123. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman Lowden said, for the record, John P. Sande supports A.B. 415 with its proposed amendments. ASSEMBLY BILL 415: Revises provisions relating to imposition and collection of tax on special fuel. (BDR 32-368) Chairman Lowden adjourned the meeting at 5:30 p.m. RESPECTFULLY SUBMITTED: Kathy Cole, Committee Secretary APPROVED BY: Senator Sue Lowden, Chairman DATE: Senate Committee on Taxation June 27, 1995 Page