MINUTES OF THE meeting
of the
ASSEMBLY Committee on Taxation
Seventy-Second Session
May 14, 2003
The Committee on Taxationwas called to order at 3:58 p.m., on Wednesday, May 14, 2003. Chairman David Parks presided in Room 3142 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. David Parks, Chairman
Mr. David Goldwater, Vice Chairman
Mr. Bernie Anderson
Mr. Morse Arberry Jr.
Mrs. Dawn Gibbons
Mr. Tom Grady
Mr. Josh Griffin
Mr. Lynn Hettrick
Mr. John Marvel
Ms. Kathy McClain
Mr. Harry Mortenson
Ms. Peggy Pierce
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Senator Maurice Washington, Washoe County, Senatorial District No. 2
STAFF MEMBERS PRESENT:
Ted Zuend, Fiscal Analyst
Kim Morgan, Committee Counsel
June Rigsby, Recording Secretary
OTHERS PRESENT:
Carole Vilardo, Nevada Taxpayers Association
Marvin Leavitt
The meeting was called to order at 3:58 p.m.
Chairman Parks:
Good afternoon, I’d like to call the Assembly Committee on Taxation to order. Today is kind of a work session to get caught up (Exhibit C). We have seven bills, one of which we have not yet heard. We will hear that tomorrow, Senate Bill 314. I would like to see what the interest is on the part of the Committee to look at possibly considering four of the bills and I’d like to hold the other two until after our hearing tomorrow. So, I’d like to take up Senate Bill 440. Perhaps Mr. Zuend could refresh our memory on that bill.
Senate Bill 440 (1st Reprint): Provides for postponement of payment of property taxes in cases of severe economic hardship under certain circumstances. (BDR 32-658)
Ted Zuend:
Senate Bill 440 authorizes the owner of a single-family residence to file claim to postpone the payment of property taxes under certain conditions. The assessed value of the residence cannot be more than $175,000. The owner cannot own other property with an assess evaluation of more than $30,000 and the owner must have occupied the residence for at least six months. The owner cannot be the subject of bankruptcy proceedings and cannot owe delinquent taxes on the residence for a year other than the year the postponement is requested. The owner must have suffered a severe economic hardship that is expected to last for at least a year and the total annual income of the family cannot exceed the federally designated level signifying poverty. Taxes may not be postponed for a period longer than three years.
The proponents noted the bill is a result of the voter’s approval last November to grant authority to the Legislature to provide property tax relief in cases of severe economic hardship. Some concern was expressed by the Taxpayers Association that S.B. 440 may conflict with A.B. 442, which also provides for property tax relief in cases of economic hardship. Discussion, however, indicated the respective bills address separate issues and any technical conflicts can be resolved through bill drafting. Any assessor noted the authority for approving the application and administering the postponement of taxes should be in the hands of the county treasurer rather than the county assessor, because the treasurer is responsible for collection of the taxes. However, they did not provide a specific amendment.
[Mr. Zuend, continued] I just wanted to mention that this bill differs somewhat from the bill that we heard that Mr. Hettrick introduced earlier in the session. That actually affected assessed evaluation and it was appropriate for the assessor to handle that one. This simply handles the payment of taxes and it appears that it would be more properly handled by the county treasurer rather than the county assessor, who is not involved in the payment of those taxes. So, I would suggest, at least from a staff perspective, that it would be better to authorize the treasurer to handle this, with the assessor’s only role possibly as having the forms available if a taxpayer has a problem with the taxes, as well as the treasurer to apply for the postponement of the exemption. Thank you.
Chairman Parks:
Thank you, Mr. Zuend. Usually there’s a local government assessor, a county assessor present, but we don’t see one here today, do we? I guess what we’d probably like to resolve is that issue between the county treasurer and county assessor. Is there anybody present in the audience that could comment on that?
Carole Vilardo, Nevada Taxpayers Association:
It is better if that does go to the treasurer. There are some other issues that are involved. One of the other issues with that particular section, in S.B. 440, is the fact that it speaks to a loan, and it is not the assessor that would be making a loan, in effect, the way that it’s written, so I think you definitely want to amend that. The comment made about the forms being available through the assessor or the treasurer, I don’t know that that needs to be specifically in statute, but because both of them are going to do it right now, and I know that, at least in Clark [County], the treasurer makes other forms available that relate to the assessment. I think you definitely want to change that to “treasurer” for that point of consistency.
Marvin Leavitt:
I just want to echo what Carol said. I think we do not want to have a situation where you have the same person making the determination of assessment and then involved somehow or another in the collection or the deferment of the payment. It just doesn’t make sense to have the same individual doing both things. I think you’re much ahead to have the treasurer, who has collection responsibility, have this responsibility rather than the assessor.
Chairman Parks:
Thank you, Marvin. Does anyone know whether this was discussed on the Senate side?
Carole Vilardo:
Chairman Parks, it was not discussed in the Senate. At this point there were some other adjustments that were made. Obviously, the bill is in amended form. What frequently happens, that’s one of the things that I don’t think because we were up against deadlines, as memory serves, those amendments were done, literally, for the last meeting of Taxation to approve before everything had to be out in a committee. So, as all of the members know, it’s very difficult to walk through at that point, and figure out what’s correct and what isn’t correct. That was one of the problem areas.
Chairman Parks:
Thank you, Mrs. Vilardo.
Assemblywoman McClain:
Tell me on what occasion would anybody ever have income at federal poverty level, in a house to assess the evaluation that is $175,000, which is like, what, $450,000?
Chairman Parks:
It’s $500,000.
Carole Vilardo:
If you look at both bills, the premises are totally different. Assemblyman Hettrick’s bill was to provide reliefs, irrespective of income, when there were extraordinary increases in assess value that created extraordinary burdens of taxation. This bill was designed to look at the person and, Assemblywoman McClain, do you know where Huntridge is? Huntridge area is down in Clark County. In those areas there, you conceivably, with the older homes, just because of the appreciation in value on those, have homes that are now upwards of $150,000-$200,000, yet many of the people that live in that area have lived in those homes for 40 and 50 years.
So, maybe you had somebody working and somebody was on social security, maybe you have that as a starter home for a young couple. Through no fault of their own, after September 11, 2001, they get laid off, so the tax impact becomes very difficult for them now. It’s a situation where you do not expect that to be an on going problem. It is a function in time of having lost income, which makes it an economic hardship to you, which is the reason that bill is restricted to three years. It’s assumed that in that condition that’s been set up, you would expect that within a three year time frame, you would have come out of whatever created that economic hardship for you. Both bills have the same thing where they’re liens, and while you’re doing a forgiveness, if you will, at that point and time on property, once you finish that period of time, you must pay back the break that you have received. I hope that answers.
Assemblywoman McClain:
Yes, that helps, but I guess my problem is, if you look on page 3, line 8, where it says, “total annual income,” it makes it sound like you’re going to have to track their income for an entire year to even qualify.
Carole Vilardo:
If you track the way the senior citizens rebates were done, which is in property tax, there is an income provision on that. Until we moved it over to the Division of Aging Services last session, because it was an entitlement program, that information had to be brought into the assessor. Generally, what was used as the determining factor for qualification was the income tax return that was filed by the person. It represents that one year that you’re looking at. We’ve had the rebate provision both for renters and homeowners since the late 1970s, early 1980s. It’s been handled without problems.
Chairman Parks:
Mr. Zuend, do want to add further clarification?
Ted Zuend:
Yes, just on the issue related to who is supposed to administer this. I believe Bill Berrum, the Washoe County Treasurer, actually testified in Senate Taxation that he thought it was more appropriately handled by the treasurer’s office. Some of these qualifications in the actual administration of the postponement. I believe what occurred, and it’s something along the lines that Ms. Vilardo said, that there was a rush to conclude. He had also proposed some additional amendments that he did not come back to talk about, but he was supposed to provide some specific amendments. They never got provided in time, so the bill passed with only the other amendments that were presented to the Committee, and a couple of other amendments that Carole referred to.
Chairman Parks:
Thank you. Is there any further comments or discussion on this bill?
[Chairman Parks called for a motion on S.B. 440.]
ASSEMBLYMAN MARVEL MOVED TO AMEND AND DO PASS S.B. 440.
ASSEMBLYMAN HETTRICK SECONDED THE MOTION.
THE MOTION CARRIED. (Mr. Anderson, Mr. Arberry, and Mr. Mortenson were absent for the vote.)
[Chairman Parks opened the discussion on S.B. 471.]
Senate Bill 471 (1st Reprint): Revises provisions relating to certain taxes and fees regarding petroleum products and fuels for motor vehicles and aircraft. (BDR 32-584)
Ted Zuend:
S.B. 471 amends on behalf of the Department of Motor Vehicles various provisions for the collection and administration of petroleum fees and gasoline and diesel fuel taxes. Among other things, the bill revises the licensing and rights and responsibilities of dealer, suppliers, exporters, transporters, and users of these fuels. Also, for ease of administration, the bill conforms as closely as possible the provision relating to the administration of the two separate taxes. In addition to DMV, a representative of petroleum marketers also supported the bill. No amendments to S.B. 471 were proposed. This is an agency bill to streamline the administration of these provisions. If you recall, the gasoline was originally administered by the Department of Taxation and then the fuel taxes were consolidated under DMV a couple of years ago, so they wanted to make the provisions in each of the diesel and gasoline taxes very similar, rather than applying different standards to the two taxes.
Chairman Parks:
Thank you, Mr. Zuend. We heard this bill yesterday and I guess it’s fairly fresh in our memories. Are there any questions or comments that anybody has? Is there anybody in the audience that would like to add any comment regarding this bill?
Chairman Parks called for a motion on S.B. 471.
ASSEMBLYMAN MARVEL MOVED TO DO PASS S.B. 471.
ASSEMBLYMAN GRIFFIN SECONDED THE MOTION.
THE MOTION CARRIED WITH ASSEMBLYWOMAN GIBBONS VOTING NO. (Mr. Anderson, Mr. Arberry, and Mr. Mortenson were absent for the vote.)
[Chairman Parks opened the discussion on S.B. 473.]
Senate Bill 473 (1st Reprint): Makes various changes to provisions governing abatement of taxes for new or expanded businesses. (BDR 32-1241)
Chairman Parks:
S.B. 473 was heard back on May 7. Mr. Zuend, would you like to comment?
Ted Zuend:
S.B. 473 reduces the number of full-time employees that a new business was required to have on its payroll by the fourth quarter for the purposes of obtaining abatement from property taxes, business license taxes, or the local support tax. It also authorizes abatement from these taxes for a business. It furthers the development in refinement of intellectual property into a commercial product. The bill also reduces the amount of capital investment required to obtain abatement of personal property taxes. It extends the personal property and sales tax abatements for renewable energy to an energy storage device that reduces the consumption of fossil fuel. Finally, S.B. 473 eliminates the graduate exemption from the business tax and sets the exemption at 50 percent of the tax, otherwise extends the sales tax abatement to a lessee who leases rather than purchases qualifying property, and extends, until June 30, 2009, the property and sales tax abatements for facilities for the generation of electricity from renewable energy that are set to expire on June 30, 2005.
Testimony from economic development indicated that the changes being proposed are at the request of the local development authorities. Because of the changing mix, business is seeking to establish, relocate, or expand operations within Nevada. No one spoke in opposition to the bill, but, considerable discussion among Committee members and the proponents of the bill took place with Committee members expressing both support and opposition to the changes being proposed in S.B. 473. No amendments were suggested. Thank you.
Chairman Parks:
Thank you, Mr. Zuend. Are there any comments or questions?
Assemblyman Goldwater:
Mr. Chair, I think as I indicated in the early hearing, I actually [had a constituent] who wrote a book that the largest single threat to a fair and equitable tax system are abatements and exemptions in the name of economic development. An entire book dedicated to that one subject. This particular bill says that we’ll grant these exemptions if we reduce the number of employees. We’re reducing the number of employees, we’re reducing the capital investment, and we’re reducing the ownership requirement. I have no idea why we need to do that. We don’t need these economic development statutes. If we do anything, we should require more of businesses that want to abate their taxes. If we want to do something for economic development; let’s build some nice schools and put educated people in front of them. Let’s fully fund our university and create top-notch programs. Let’s fund some decent social infrastructure. That’s what’s going to bring businesses to Nevada, not giving away our tax money. I should also say the other provisions of this bill I don’t have a problem with, but I will not be supporting this bill for those reasons.
Chairman Parks:
Thank you, Mr. Goldwater. Yes, Ms. Pierce?
Assemblywoman Pierce:
Thank you, Mr. Chairman, I agree with Mr. Goldwater, thank you.
Chairman Parks:
Thank you, Ms. Pierce. I guess the question that certainly comes to my mind is that by reducing the number from 75 to 30 full-time employees on page 2, as well as, from 25 to 10 employees, does that open enough of the… I guess from testimony that we received there was a significant incentive to try to get the very small business to relocate.
Assemblywoman Pierce:
It seemed like this was tailored to that battery company that wants to move into Apex. Is this going to make us look “pretty enough,” or in two years are they going to come back and say we have to do something to be “pretty enough”? It seems like it’s never-ending.
Assemblyman Hettrick:
I understand the concerns and don’t disagree. I guess the one thing I would say is, first, I think the other provisions that Mr. Goldwater said that already, and this bill probably needs to go forward, so if we’re not going to process the whole thing, we probably ought to look at amending out just the piece. I would wonder about what Mr. Goldwater and the others who have expressed concern would think about lowering the number of employees and leaving the rest of the requirements for the abatement as it exists in current law. My thought to that is that if you lowered the number of employees and left the high investment, the type of employee, and the type of company, you would get a relatively high‑paying company. There might be a way to foster some of these high-tech industries by just lowering the number of employees, leaving the rest of the statute the same. Just a thought.
Assemblyman Griffin:
I was going to make the observation similar to Mr. Hettrick. I don’t disagree with Mr. Goldwater’s comments, other than I think our development authorities need as many tools as possible to be competitive with other development authorities seeking new businesses. I understand Ms. Pierce’s comment. What happens in two years? Are we pretty enough? But, I think once these new businesses come here, in almost every single occasion, they stay. I think it’s critical to give our development authorities the tools to bring in these businesses. I support the bill.
Assemblyman Grady:
I can tell you that in one of my areas, the Fernley area, this legislation has been extremely helpful. We have a growing community in Fernley because of the industrial park and what they have used. The economic development has worked with them. A lot of houses were built. A lot of new taxes are being paid as a result of companies like Amazon moving in there. I understand Mr. Goldwater’s concern, but I can tell you from the rural standpoint, it has really helped Lyon County.
Assemblyman Mortenson:
Someone made the point in the last testimony that we’re not giving away something here because if you don’t get it, you haven’t given anything away. If you bring a company in, you have added taxes, even though they may not be the full tax. Then, later on, when their advantages run out, they’re running at full tax. So you’re not giving anything away, you’re just lowering the dues to get in.
Assemblyman Goldwater:
Just to respond to that criticism. Tax abatements, when companies are asked why they move places or why they relocated on entry and exit surveys, tax abatements aren’t really on there. Companies take advantage of them. Good schools, good culture, those things are there. When we abate the taxes, we reduce our capacity to provide those good things. So, do they not come because of tax abatements? No. They will come. They will take advantage of them if they’re there, but they’re going to come if we have good schools and the like. Do we need to compete with other states? We do. Do we need to be in here every session extending the eligibility for this, giving away more and more? We do not. That’s what this bill, in my opinion, is doing, giving away the store even more.
Assemblyman Mortenson:
Mr. Goldwater, I agree with you 100 percent. I didn’t mean to contradict you because I agree exactly with what you said. We need an educated work force and we don’t get it unless we can improve our schools, educate our kids with good schools, and we need a very good social base before a lot of companies want to come here. I just want to make that point that you’re not losing anything by giving it away, initially, unless that company would have come here without… And, that’s your point. The last thing I meant to say the first time I talked is that I’m still neutral on this, trying to decide.
Chairman Parks:
Thank you, Mr. Mortenson. Most of you know that I’m not a big fan of redevelopment districts for the same reasons that Mr. Goldwater initially enumerated. I think I’m going to hold this bill until our hearing tomorrow and see if there’s further discussion on this. Thank you for your comments on that. Let’s look at Senate Bill 489.
[Chairman Parks opened the discussion on S.B. 489.]
Senate Bill 489 (1st Reprint): Makes various changes to provisions governing exemption from local school support tax for systems that use renewable energy to generate electricity. (BDR 32-1135)
Chairman Parks:
We heard S.B. 489 on May 7, 2003.
Ted Zuend:
Senate Bill 489 provides an exemption that will expire on June 30, 2005, from local sales taxes for solar thermal energy systems and solar lighting systems that reduce the consumption of electricity or natural gas. The bill also delays from June 30, 2003, to June 30, 2005, the expiration of an exemption for products or systems designed or adapted to use renewable energy to generate electricity. A proponent of the bill suggested an amendment to lines 8 and 10 on page 1 that would authorize the exemption for solar systems that also reduce the consumption of propane, in addition to electricity and natural gas.
There was discussion among the appropriateness of the proposed amendment because of some confusion regarding whether the amendment would exempt systems that use propane to generate energy from the sales tax. Staff believes that would not be the case if the Committee determines that the granting of the temporary exemption for these solar systems is appropriate. Staff recommends that the language be amended to provide the exemption for a system that reduces the consumption of electricity or any fossil fuel. There was no testimony in opposition to S.B. 489. Thank you.
Chairman Parks:
Thank you, Mr. Zuend. Any comments or discussion from Committee members? As Mr. Zuend suggested, I think using the term “any fossil fuel” seems to be the appropriate terminology, given the other considerations.
Ted Zuend:
The fiscal note, which was under the original terms of the bill, provided for a fiscal note of about $60,000 over a biennium, a net loss in local revenues. I assume that expanding it to fossil fuels might increase the loss, although propane is not subject to sales tax now. In the system, again, whether it’s sold or not is important. The fiscal note was something in the neighborhood of $60,000 over a biennium, total statewide local taxes.
Chairman Parks:
Is there anybody in the audience that would like to make a comment relative to this bill? Comments or recommendations from the Committee?
Assemblyman Goldwater:
Ted, didn’t we do this last session?
Ted Zuend:
The exemption being extended was done last session and was put in for just a two-year period. It extends, I believe, to 2005, two more years.
Assemblyman Goldwater:
You didn’t like it last session, Carole, if I recall, and that’s why we put a sunset on it.
Carole Vilardo:
Exactly, because we have said sometimes exemption is a good public policy, but they should always have a sunset for review. Here’s roughly the issue on this and the amendment.
This, like a lot of other bills, last session, because of the energy crisis we were in, was felt to possibly help. Some people obtained more affordable energy and gave them a break on the sales tax. It was done for two years, as a couple of other exemptions were done only for two years, on the basis that if we hadn’t solved the crisis, or come out of it, we were going to be in deep trouble at the end of two years. This bill was amended to provide this to go forward to 2007 on the basis that some new technology would be available.
There’s a curious thing, Mr. Goldwater, that you will be very happy about on streamline sales tax, and I’m sure you know it; the rest of the Committee may not. We have a number of bifurcated exemptions whereby the exemption applies only to the local portion of the taxes, not the 2 percent portion. Under the streamline tax provisions, you cannot have that effective 2006. That is the reason, from the original bill that was amended, to put it to 2005. We’re going to be getting rid of an awful lot come 2005.
Assemblyman Goldwater:
This won’t be a split exemption if this sunsets.
Carole Vilardo:
That’s right.
Assemblyman Goldwater:
Just for those members that weren’t on this Committee last year, it was agreed upon, this sunset. It wasn’t going to come back for an exception and it was OK to do. They were going to attract these firms, and they were ready to sign the documents. I can clearly remember that they were telling me they had the contract ready to go. They were ready to ink the deal and just needed this exemption and once we had this exemption and voted on it, and now we need it extended. I can’t support it.
Assemblywoman Pierce:
Well, I’m thinking about it. The energy crisis isn’t over. The other thing is that for me it’s also notable that the fossil fuel industry is subsidized at a gargantuan level at a federal level.
Assemblyman Goldwater:
Just to Ms. Pierce, they still can apply for all of the economic abatements that exist. They still can and they will. This was just an even greater exemption.
Chairman Parks:
My question is, if this is just an extension, why is there so much additional language added?
Assemblyman Grady:
It’s not often that I even understand where Mr. Goldwater is going, but I do agree. I think exemption is what has this state and part of the financial problems we’re having right now. I can’t support it either.
Chairman Parks:
I think we’re going to hold this bill and sleep on it. I think we have one other thing that I’d like to go ahead and do today. Mr. Zuend has prepared a document for us with regard to real property transfer tax. We’d like to pass it out so that we can look it over (Exhibit D). He has a few comments that he’ll share with us to describe the item.
Ted Zuend:
Mr. Chairman, I just wanted go through this very quickly. It’s just the specific documents that have been produced in regard to this issue. It’s not a lot of them. The first is the memorandum that was discussed the other day to Chairman Parks from the Research Division dated February 20, 2003, which included some detail on some of the tax rates in other states, among other things. We also included Mr. Hettrick’s remarks to the Taxation Committee on May 9, 2003, under tab B, it should be. Tab C is simply the amendment that was presented on behalf of the recorders to both Taxation Committees. You received a copy of that also on May 9, 2003. Rick Combs of the Fiscal Division Office prepared a history of the RPTT exemptions because that’s something of an issue with the reporters, and also with the state imposing such a tax, because some of the loopholes that are in the law. Finally, there’s a correspondence between Rick Combs and Brenda Erdoes, our Legislative Counsel, concerning to RPTT exemptions and what we could not do away with. Apparently, the one that cannot be done away with, under federal law, is the bankruptcy exemption. So, it’s just background information for you to review.
Chairman Parks:
Any questions for Mr. Zuend? Is there anything else to come before the Committee? If there’s nothing further to come before the Committee, we are adjourned. Thank you very much.
The meeting was adjourned at 4:39 p.m.
RESPECTFULLY SUBMITTED:
Corey Fox
Committee Secretary
APPROVED BY:
Assemblyman David Parks, Chairman
DATE: