MINUTES OF THE
SENATE Committee on Taxation
Seventy-second Session
April 10, 2003
The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 1:43 p.m., on Thursday, April 10, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Mike McGinness, Chairman
Senator Dean A. Rhoads, Vice Chairman
Senator Randolph J. Townsend
Senator Ann O'Connell
Senator Sandra J. Tiffany
Senator Joseph Neal
Senator Bob Coffin
STAFF MEMBERS PRESENT:
Rick Combs, Fiscal Analyst
Mavis Scarff, Committee Manager
Gale Maynard, Committee Secretary
OTHERS PRESENT:
Dino DiCianno, Deputy Executive Director, Department of Taxation
Robert E. Shriver, Executive Director, Division of Economic Development, Commission on Economic Development
Berlyn Miller, Vice Chairman, Commission on Economic Development
Chuck Alvey, President Chief Executive Officer, Economic Development Authority of Western Nevada
Somer Hollingsworth, President, Nevada Development Authority
Gaylyn J. Spriggs, Lobbyist, Nevada Taxpayers Association
Bill Berrum, Treasurer, Washoe County
Jim J. Avance, Lobbyist, Nevada Marine Association
Karen Winchell, Program Manager, Department of Motor Vehicles
We will open the hearing on Senate Bill (S.B.) 466.
SENATE BILL 466: Authorizes disclosure of certain information from records and files of Department of Taxation concerning administration of business tax. (BDR 32-555)
Dino DiCianno, Deputy Executive Director, Department of Taxation:
Currently, Nevada Revised Statutes (NRS) 364A.100 do not allow for the release of any information regarding whether a business has a State business license. The Department of Taxation would like to be able to confirm to the public a business is registered and has a license only.
The department receives a significant number of complaints from the public and other businesses as to why we cannot release the information. No financial information will be released, only that the business is either registered or not.
Chairman McGinness:
If there is no one else to testify on S.B. 466, we will close the hearing.
SENATOR O’CONNELL MOVED TO DO PASS S.B. 466.
SENATOR RHOADS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman McGinness:
We will now open the hearing on Senate Bill 473.
SENATE BILL 473: Makes various changes to provisions governing abatement of taxes for new or expanded businesses. (BDR 32-1241)
Robert E. Shriver, Executive Director, Division of Economic Development, Commission on Economic Development:
With me today is Vice Chairman Beryln Miller; in Las Vegas is Somer Hollingsworth, President, Nevada Development Authority; Chuck Alvey, President Chief Executive Officer, Economic Development Authority of Western Nevada; and Tim Rubald, Director, Business Development, Division of Economic Development.
Senate Bill 473 is to more genuinely reflect the state of business in our incentive programs. We are trying to encourage technology development, and the development of intellectual property to its potential.
Our focus, and the reason we are lowering some of the numbers, is to reflect high wage companies who initially start with a lower employment number and then grow. Most companies have started small and have grown into major corporations. Nevada is, and continues to be, a home for small business and these changes to the incentives would reflect this and are more realistic for our commission in evaluating the criteria and qualifications of a company.
The wage criterion is one they will not compromise in evaluating a company. This is the only way we can project the value of a company and its economic benefit to the State of Nevada. As we mentioned in our joint presentation, this is an investment program to abate certain taxes where the State is saying it believes in this company and what it does.
Berlyn Miller, Vice Chairman, Commission on Economic Development:
We want to assure you when we look at these applications, it will be in the best interest for the State of Nevada. We will look at the wage, health benefit packages, and educational opportunities for employees. All these things will be looked at before we okay the application and give abatements and deferrals. I assure you by lowering these areas, we are not lowering the standards by granting these exemptions.
Senator O’Connell:
If I could draw your attention to page 10, section 5 on line 22, you talk about this act becoming effective July 1, 2001. Is it your intention to give relief to some of the companies who have come in since then?
Mr. Shriver:
It appears to be a typographical error. Our intention was for 2003.
Rick Combs, Fiscal Analyst:
This is an adjustment to a section from the statutes in 2001, and basically a technical adjustment made into the previous bill and is going back to that effective date. You will notice the actual effective date is not in bold language, indicating it is old. It is a technical adjustment to a bill passed last session.
Mr. Miller:
Senator O’Connell, if you will look at section 8, this will indicate the effective date as July 1, 2003.
Senator O’Connell:
I read that, but in the bold print it stated when this act becomes effective and it did not coincide with this one.
Mr. Miller:
This was not our intent at all.
Senator O’Connell:
I still have questions on section 3, page 8, line 18, where the percentage is dropped from 80 percent to 50 percent. Would you share some information on this?
Mr. Shriver:
This is the business activity tax abatement program. Currently, we have a stepped program where in year 1 you receive 80 percent, year 2 is 60 percent, year 3 is 40 percent, year 4 is 20 percent, and year 5 the full amount is paid. It actually turns out to be 50 percent abatement. We spend a lot of time trying to explain this to a company and decided to call it 50 percent abatement because this is what it is.
Senator Neal:
Why would you want to give abatement to a person who refines a patent or intellectual property?
Mr. Miller:
One of our goals is to attract high-tech companies and their research and development companies. This is where the high salaries are. We wish to get them to house intellectual properties in Nevada rather than some other place, and every dollar invested this way would be better than any dollar we can invest otherwise.
Senator Townsend:
We all can agree we have tried to find companies that are high-paying, nonpolluting, low water-using, and that give health benefits and something back to the community. I was pleased to see this bill and its language and this is important for all sections of the State. When we started the economic development debate, these were key elements.
Senator Neal:
What is the average State wage at this time?
Mr. Shriver:
The current average wage is $15.48 per hour, or about $32,000 per year.
Senator Neal:
When you give these tax rebates to these various companies, how do you know they are fulfilling their promise in terms of the statutes?
Mr. Miller:
We have the tax department and audits to follow up on this for us.
Senator Neal:
How often?
Mr. Shriver:
The audit is performed every 5 years. At the conclusion of a vote at our meetings, each company is reminded they will be subject to an audit.
Senator Neal:
I notice on page 5 you are reducing the capital investment from $50 million to $5 million and by at least $1 million for industrial and manufacturing businesses. What type of an investment company can meet these requirements?
Mr. Shriver:
We are seeing more of these types of small businesses coming here. For this particular abatement, which is the personal property, $50 million is a significant amount of money for any kind of business. Remember, this does not include buildings or land; therefore, you are only looking at the personal property of the company. We are looking at the equipment and it is a significant number. What has happened over the years is we continue to make exceptions to the rule to attract companies and $5 million is a much more realistic figure.
The information we passed out at the joint hearing highlights some of the companies that have received abatements over the last 2 years. I think you will see the capital figure is more in that range. It is to attract companies, not only for our urban areas, but for our rural and suburban communities as well.
Senator Neal:
What is the present benefit to the State in terms of dollars without this law going into effect?
Mr. Shriver:
From January 1, 2001, through December 31, 2002, our abatements have created sales tax revenue alone of $36 million, and this is after the abatements provided have been subtracted out. The total new tax revenue that includes both the local and State government is over $45 million.
Senator Neal:
Do you have an estimate as to what the change in the bill would bring?
Mr. Shriver:
We think it will encourage that amount and maybe more.
Chuck Alvey, President Chief Executive Officer, Economic Development Authority of Western Nevada:
These recommendations came out of workshops held with the commissioners and development authorities. We do not have specific projections because it is economy-based, but we think there are a lot of companies that would consider us. We have three site selectors in town and one of them is a tax specialist and said these incentives are critical to their companies. Many of their clients are dealing in the 30- to 40-employee range and these are the start-ups and we are looking for those beginning companies. The larger companies are not looking at us now and we are missing good opportunities. It is the quality of the jobs we get and to emphasize, keeping the salary high and providing benefits will be very important to the kinds of companies we can bring here and is critical to us.
Somer Hollingsworth, President, Nevada Development Authority:
Not all the companies we bring into the State of Nevada and take before the commission will qualify. Therefore, the dollars you just heard are from the companies who got incentives. Last year, from the 50 companies the Nevada Development Authority brought in, 3514 jobs were created. The employee economic impact of those jobs was $414 million. The exciting thing is over the next 5 years $50 million will be generated for the State and $115 million to the local governments. With diversification being one side of the future for this State, along with our great resort history, we are going to have an economy that cannot be beat. The commissioner is very frugal on any kind of benefits handed out and incentives being allowed. It is a great draw for us and our clients to be able to go through these incentive programs and allow them to see the State of Nevada is interested in moving companies here and is willing to invest in them.
Mr. Miller:
It is important for us to receive and be able to give these benefits because for our competitors and neighboring states, it is automatic and companies do not have to apply. At least with us, they have to come through the commission and we look at their salaries and benefits.
Chairman McGinness:
Could someone address the addition of the energy storage device?
Mr. Shriver:
Page 9, lines 38 through 40 of S.B. 473 defines renewable energy. We are in the process of being noticed by some companies who have developed the technology that will create devices for use and storage of electrical energy. We do not want to miss out on a segment of the renewable energy movement. We believe this to be the coming thing and we want to make sure our statutes for abatements reflect this and if a company of this nature comes looking, we have this ability to provide them with the same opportunities other renewable energy producers have. This is the basis for the change.
Senator Neal:
In looking at the repeal section, why is that in the Statutes of Nevada?
Mr. Combs:
Let me go back to section 5. It is basically repealing the prospective expiration of the provisions that authorize the abatement for the taxes for the generation of electricity from renewable energy. Those provisions are expected to expire by limitation on June 30, 2005. When the bill putting these provisions in was enacted, there had to be parallel provisions because once these things expired, the old section had to come into being. What this does is remove the expiration and, by doing so, repeal the parallel provision, because you are never going to go back to the way it was and the expiration is gone.
Therefore, section 5 and section 6 work together to repeal the current expiration dates that are in statute for those renewable energy provisions.
Senator Neal:
Why is it in the statutes and not in the NRS? Is it because of the parallel provision?
Mr. Combs:
I am sure this is why it is set up this way. Section 6 is the second parallel provision that would have become effective for the property tax abatement section.
Senator Neal:
We actually have two section of law here, the Statutes of Nevada and the Nevada Revised Statutes.
Senator O’Connell:
The other bill we have on solar energy that expires is not included in this bill, but does the effective date affect this bill as well?
Mr. Combs:
No, and this will get confusing. This is the abatement provision and there is an exemption provision and normally you would find that to be permanent, but in this case there is an expiration date. The changes in here should not impact the changes in any other bill at all.
Mr. Shriver:
I do want to offer an amendment (Exhibit C) for section 4, page 8, line 43 dealing with the inclusion of leased equipment. We are seeing more and more of this with technology-based companies. Rather than purchasing equipment, they look at leasing. When we drafted this, it was confusing. On line 43 there would be new language. We want to make sure it is clear to the Department of Taxation that it is not the lessor who is exempted, but the lessee.
We also want to make changes to the language on page 9, line 22. I think this will give better clarification.
Gaylyn J. Spriggs, Lobbyist, Nevada Taxpayers Association:
There is a comment from the association is, we do not think anything should be permanent. If you have abatements or exemptions, you may want to visit them somewhere down the road to see if they are still working. They should have a sunset so they will not get lost and never be thought of again.
Mr. DiCianno:
Based on the testimony provided earlier, the department is satisfied and the language is clear with the proposed amendments to S.B. 473.
Senator Neal:
Would you like to answer the question posed to the other speakers in reference to how often you check on the exemptions and abatements?
Mr. DiCianno:
We review them on a yearly basis.
Chairman McGinness:
We will close the hearing if there are no more testifiers for S.B. 473. Are there any actions by the committee on this bill?
SENATOR NEAL MOVED TO AMEND AND DO PASS S.B. 473 WITH THE AMENDMENT THAT CLARIFIES WHEN MACHINERY OR EQUIPMENT IS LEASED, THE LESSEE IS THE TAXPAYER WHO IS ELIGIBLE FOR AN ABATEMENT.
SENATOR TOWNSEND SECONDED THE MOTION.
Chairman McGinness:
Senator O’Connell, do you have a question on the motion?
Senator O’Connell:
I think a very good point has been made from the testimony of the taxpayers association and the explanation from Mr. Combs. If we accept section 5, this becomes permanent as opposed to being reviewed at some future time or having a sunset. I think this is something that should be done.
Mr. Shriver:
Under provisions of chapter 231 of NRS, we are required to report biennially to the Legislature all the activity in the abatements. We had worked with the taxpayers association in the past and we should be held accountable every 2 years to the effectiveness and significance of the abatement program. I think this part of our statute should satisfy the taxpayers association; we are held to a review every 2 years.
Senator O’Connell:
I would feel more comfortable if it was put into the statutes and would come to our attention, rather than get a report. I do not know if anyone has the same concerns, but if you have it and it is something you know you are going to read as law, it is much more effective than coming in a report and going on a shelf.
Chairman McGinness:
Senator O’Connell, let us take action on this motion and if you want to put a motion for a sunset, we will consider that as well.
Senator Coffin:
Do you find other states have sunsets?
Mr. Shriver:
I have been working and competing with states for 27 years. Most states do not have sunset provisions. States like Utah and Idaho are routinely administratively provided through the tax department or commission on economic development. They do not have sunset provisions and how this affects anything I cannot say. If you would like to retain a sunset, then that is your prerogative to do so. We will welcome any opportunity to explain and defend any actions of the commission and what we do to benefit the State and I think we should be held accountable.
Chairman McGinness:
There has been a motion and second to amend and do pass on S.B. 473. Are there any other comments on the motion?
Senator O’Connell:
Since we are trying to do the same thing with our exemptions, I would like us to be consistent and I propose we add a further amendment for a 6-year review.
Chairman McGinness:
The amendment for the sunset would be on June 30, 2009. Are there any other comments?
SENATOR O’CONNELL MOVED TO FURTHER AMEND AND DO PASS S.B. 473.
SENATOR TOWNSEND SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman McGinness:
Let us move to the work session document (Exhibit D. Original is on file in the Research Library.). The first bill in the packet is S.B. 270. The proponents of this bill asked that we do not consider this bill today.
SENATE BILL 270: Establishes source and procedure for funding grants to regional organizations for economic development. (BDR 32-781)
Chairman McGinness:
We will move on to Senate Bill 370.
SENATE BILL 370: Authorizes board of county commissioners to impose additional tax on transfer of real property for control of invasive species. (BDR 32-39)
Chairman McGinness:
Senator Rhoads and the State Department of Agriculture have brought this bill before us. Are there any comments?
Senator Rhoads:
We had severe outbreaks in northeastern Nevada last year of invasive species and because the winter was moderate, it looks as if we will have another outbreak. Mormon crickets have already been found. This is permissive language, leaving it up to the county to enact an additional tax, and not a mandate.
Chairman McGinness:
As you can see in your work session document, the State Department of Agriculture had an amendment added and there is also some discussion about inserting the allocation to go back to the county of origin and should be included in the amendment. Also the amendment for the Clark County recorder’s office is to be part of this motion.
SENATOR RHOADS MOVED TO AMEND AND DO PASS S.B. 370.
SENATOR TOWNSEND SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR NEAL VOTED NO.)
*****
Chairman McGinness:
Let us take up S.B. 313.
SENATE BILL 313: Clarifies provisions governing collection of tax on use of leased property. (BDR 32-295)
Chairman McGinness:
Senator Raggio, who had a constituent leasing automobiles to a public entity, brought this bill to us. I believe there was a legal question. Was this question addressed?
Mr. Combs:
Senator Raggio presented this bill and indicated that based on the fiscal note, there was approximately $2.5 million in lost revenues per year. He indicated the support of an amendment that would limit the effect of the bill to leases of automobiles to government entities only. A copy of this amendment is attached on page 7 of the work session packet. The Legal Division drew this draft up which gives the Department of Taxation some direction on how to apply S.B. 313 in terms of that particular lease situation. The original bill was just clarifying; this one is providing direction to the department.
Senator Coffin:
Would the term lease include short-term rentals?
Mr. DiCianno:
Senate Bill 313 does not impact the governmental services fee, which is also referred to as the short-term lessor fee. The State does have to pay the short‑term lessor fee, but it has nothing to do with this particular bill.
Chairman McGinness:
By restricting this to automobiles, this would also reduce the impact of the fiscal note as well. Do you have any new numbers?
Mr. DiCianno:
No, we do not, but I think you have to look at the economic benefit it does provide for those entities; therefore, it has a positive impact.
Chairman McGinness:
Is there any reference on this bill by the committee?
SENATOR RHOADS MOVED TO AMEND AND DO PASS S.B. 313 WITH THE AMENDMENT INDICATED ON PAGE 7 OF THE WORK SESSION DOCUMENT.
SENATOR TOWNSEND SECONDED THE MOTION.
Chairman McGinness:
Are there any questions on the motion?
Senator Neal:
I will be voting no for the simple reason this bill takes money from the local support school tax and the school operating funds. We are here trying to raise money and we are giving tax breaks. We talk about not getting money for the schools and here we are taking away from the schools.
Senator Townsend:
I am going to address the issue. It addresses a private company entity selling something to a government entity and having it taxed. There is a package that will be supported by this committee to give the schools whatever they need based on what the budget is.
Senator Neal:
It says right here in the bill the entity that is exempt from the sales and use tax and local school support taxes. Local school support tax is money that goes into operating the schools and we have a shortage of the budget.
Chairman McGinness:
Are there any other questions on the motion?
Senator Coffin:
I am going to support this bill.
Senator Neal:
Do I understand the local school support tax is not taking the money from the schools? Did we amend this out?
Senator Coffin:
No. I do not intend to amend that out, I intend to support the bill as amended. I wish we had the fiscal note or an approximation of the actual cost, which I suspect is less than $2.5 million.
Senator Neal:
So the local school support exemption we will be voting upon is still there, is that correct?
Senator Coffin:
Apparently Senator Raggio has committed to raise the money to make up the difference.
Senator O’Connell:
I am delighted to hear what Senator Neal has said and I am going to vote against this bill, because I believe government should be treated like the private sector. If the private sector has to pay the tax, then government should also.
THE MOTION CARRIED. (SENATORS NEAL, O’CONNELL AND TIFFANY VOTED NO.)
*****
Chairman McGinness:
The next issue is S.B. 440. This bill was on the ballot for the last year. Washoe County Treasurer, Mr. Berrum asked for an opportunity to bring some amendments to this bill.
SENATE BILL 440: Provides for postponement of payment of property taxes in cases of severe economic hardship under certain circumstances. (BDR 32‑658)
Bill Berrum, Treasurer, Washoe County:
There are a series of amendments and what I have handed out is an addition to section 13 (Exhibit E). The target markets we are looking at are people who are on fixed incomes and with a hardship. If they are having a hard time paying their taxes now, and the continued tax increases in assessed value over the next 3 years of deferment are postponed, then it would make it even harder for them to pay the property taxes off.
This bill is a combination of an exemption that would be the amount of increase of the assessed value for each year during the period of postponement of 1 to 3 years, depending on how they qualify with the assessor’s office.
It will become effective the first fiscal year following the approval of the postponement and will remain in effect up to 3 years. This will help those who need the help and if they needed continued help, they would have to come back and reapply, starting the process over again.
A new section in the amendment (Exhibit E) handles county governments that give a tax break to senior citizens. This refers to NRS 427A.450 which deals with refunds to seniors through the assessor’s office. If the taxes were going to be postponed and an exemption would apply for a period of time and the citizen qualified for the senior refund, the rebate should come back.
These are the two primary amendments we have. In section 9, subsection 2, on page 3, near the end of the sentence, we propose taking out the words “in the succeeding” and replacing them with “for 3 years.” This would be consistent and would keep everything in the perspective of 3 years. When we went through the scenarios with the Clark County treasurer, staff, and the assessor’soffice, we felt year 1 may start at the end of this year for the exemption or postponement; this would be the beginning of the first year.
Senator O’Connell:
Are you saying Mark Schofield, Clark County assessor, approved this language?
Mr. Berrum:
Yes. He was the one who wrote it. This is the result of the conference calls we have had. I believe section 23, subsection 6 page 7, can be deleted. In the previous amendment, if the taxes as deferred and agreed to were not paid within 30 days, the penalties and interest due would be reinstated and the claim for economic hardship would be void. This duplicates what section 6 prior to this tried to say.
Another issue concerned the original presentation of when the property tax becomes due, there was a 6 percent penalty for the next 10 days, and thereafter another 7 percent penalty. We looked at how heavy this burden would be for those to get their taxes paid at the 13 percent and this defeated the purpose. What we propose to do in section 23, subsection 8, is change the percent to 6 percent instead of 7 percent. This would fit into the scenario of the property owners making a deal with us and due to the nature S.B. 440, they have not had penalties and interest during the hardship period. These individuals should pay something and therefore, a onetime, flat 6 percent would be the penalty. If they cannot pay within the next 20 days, it will revert back to a heavy tax bill.
These amendments were discussed and I believe we have covered this to accomplish the intent and the purpose of where we wanted to go. There is a limitation on the exemption and the only area of consideration would be in section 9, subsection 1(a), where Mr. Schofield requested the assessed value be changed from $500,000 to $175,000. This would mean someone is living in a $500,000 home and we want to know if this would be a better qualifying number for this exemption. We do not want abuse in the system and one way may be to tighten up on the qualifications. I believe I have covered all the amendments.
Senator O’Connell:
If we accept the amendments proposed by Mr. Schofield, along with the additional amendments, I would like to see language for the legislation to come back to the Legislature; maybe a 4-year period would be ample time to review how this bill has worked.
Senator Townsend:
We are under the assumption this will be easy to do and we might give him something that is mechanically a problem. The point is well-taken to make sure we keep an eye on the legislation to find out if we did this appropriately.
Senator Tiffany:
This question was brought up by Assemblyman Lynn Hettrick. He was very concerned about some of the property owners in Lake Tahoe whose property had been in the family for generations and the family members who owned the property now were not rich and being priced out of the market because of the taxes involved. Is this part of it? Is it being addressed?
Senator O’Connell:
It is being addressed in another bill.
Senator Tiffany:
Okay. I was thinking that the $175,000 would not be enough if you are addressing it this way.
Chairman McGinness:
Mr. Berrum, I have some concerns about your amendment and I think the amendments Mr. Schofield presented spoke of the residents having an assessed value of not more than $175,000. The first part of your amendment refers to issuing an exemption from taxation equal to the amount of the increase and then talks about postponements. I think we are mixing exemptions on top of postponement. I am confused.
Senator Coffin:
I share your confusion. Were we given proof of how many people who either lost their homes or were in the process of losing them because of the property tax versus bad habits or poor family budgeting? I think this is a driving factor in order to pass a bill like this.
Senator O’Connell:
The reason you have this bill before you is a concern that has been brought to my attention by the assessors. The fact they did not have any flexibility in the law because of our constitution and they needed some means to, on individual hardship cases, look at these cases and not have these people sell their homes based on the inability to pay their property taxes.
A general improvement district (GID) case brought this to my attention where an older lady had terminal cancer, had lost her husband, and most of their income had gone to his infirmity. Because they developed her area into a GID, she could not afford the assessment on her home. I had called Mr. Schofield to see if there was anything we could do. He told me the situation assessors have been dealing with, and said there was nothing we could do for this woman.
I believe the person who spoke also encountered this situation, which began over 6 years ago with the issue coming from us, and then going to the voters. This is a problem where property owners do not have any flexibility on how to address any of these hardship issues.
Mr. Berrum:
Mr. Schofield and I spoke of the postponement and exemption issue as a combination quite a bit. If you are going to increase the assessments on someone who has a hardship for 2 to 3 years and they are having a hard time paying it, the increase in assessments is going to make it more difficult on them.
The number of people who would qualify for this would be minimal. Mr. Schofield states there are about 10,000 people who qualify for the senior rebate. More than half of these seniors are renters and would not qualify because they do not own the property. In Washoe County, there are about 3000 and probably the same ratio of renters. We are thinking the number of people who can qualify for this is going to be small, but we are still hitting the target area. The exemption would be temporary and it would give them a level amount to pay off over the next 3 years, including the 6 percent, and hopefully pull themselves out.
Senator Townsend, this will be a lot of work for both the assessors’ and treasurers’ offices, however, the exemption process the assessor already does will minimize duplication of efforts and we will use the same standards and pick up on the second half of this while the treasurer takes over.
As to Senator Coffin’s inquiry, in Washoe County during my 8 years, I have not sold a piece of property at a tax sale from anyone with whom I have had a payment arrangement and worked with in hardships. I have sold maybe 12 houses in 8 years that had people living in them and none of them would have qualified for these proposals.
Chairman McGinness:
We have had limited time and I understand you did not have the time you needed to develop these new amendments. We have looked at these and I would like to see you take these amendments to the Assembly committee, if we can get this bill out as it stands. I am not comfortable with making the amendments you had suggested and will look to the committee for further direction.
SENATOR O’CONNELL MOVED TO AMEND AND DO PASS S.B. 440 WITH MR. SCHOFIELD’S AMENDMENTS BROUGHT TO THE COMMITTEE WITH THE HEARING OF THE BILL.
SENATOR NEAL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman McGinness:
Mr. Berrum, I think the committee needs more time to address your amendments and take a look at them. We just did not have time today. If there are no questions on the motion, we will take up S.B. 472. This bill came from the Office of Veterans’ Services.
SENATE BILL 472: Establishes method for determining total percentage of permanent service-related disability for purposes of calculating disabled veteran’s exemption from property tax. (BDR 32-523)
Chairman McGinness:
Testimony indicted most veterans who have a disability with a designation of 60 percent or more will be designated by the department to be 100 percent unemployable. There is a loss of $88,000 in property tax and the loss to State government is about $5000 per year. Is there any discussion on this? Anyone want to take action on S.B. 472?
Since there is no further discussion or action taken on S.B. 472, let us move on to S.B. 490.
SENATE BILL 490: Authorizes use of money in infrastructure fund for operation and maintenance of flood control projects in certain counties. (BDR 32‑579)
Senator O’Connell:
They did not make a good case. I had a problem with following why they have not done anything towards managing the flood plain and instead have built some kind of a building for training and now they want to use this for operation and maintenance. I do not think it would be a proper use of the money.
SENATOR O’CONNELL MOVED TO INDEFINITELY POSTPONE S.B. 490.
SENATOR TIFFANY SECONDED THE MOTION.
Chairman McGinness:
There has been a motion. Are there any questions on the motion?
Senator Townsend:
I support the philosophy that any bonding not be used for operations and maintenance. I do not support the motion for the following reason. The federal government is asking us to put this money aside and only apply it to the Truckee River portion of the flood control. I have spoken with Senator Raggio and neither he nor I are happy with the restrictions. Nevertheless, we would support this bill with the Washoe County amendment and with the support of the city.
If the motion fails, I would move to amend and do pass. I understand this is a tough one to swallow, but neither our county nor any of the cities created it.
Senator Neal:
Keeping with my position, I understand the conditions needing correction rose out of a natural disaster from the flood of 1997. We remember the pictures and the people got a particular tax to deal with the flood control and they are now asking for 1.8 percent of this to operate the maintenance. I also understand that in order to get the U.S. Army Corps of Engineers to participate in this project, they would have to put up this particular money. I know the flood was a disaster, and in some instances, like Sparks, it was beneficial because it allowed them to fill up the big hole they had.
I would like to vote for this measure because we are trying to help the people in this area ward off future disasters. I would not vote for the motion to indefinitely postpone the bill.
Chairman McGinness:
There was a motion to indefinitely postpone the bill S.B. 490. Are there any other questions? All opposed?
THE MOTION FAILED. (SENATORS NEAL, TOWNSEND, RHOADS, COFFIN AND CHAIRMAN MCGINNESS VOTED NO.)
*****
Senator Townsend:
I move we amend S.B. 490 with the county amendment in our work session and do pass.
SENATOR TOWNSEND MOVED TO AMEND AND DO PASS S.B. 490 WITH THE WASHOE COUNTY AMENDMENT.
SENATOR NEAL SECONDED THE MOTION.
Senator O’Connell:
I was going to ask if the maker of the motion would entertain another amendment and have this reviewed again. I am very interested in knowing how this money is going to be spent now.
Senator Townsend:
I do not have a problem with this depending on what we are talking about. We cannot sunset something that is going to be a funding source and create a problem. What kind of review do you want? I would entertain anything.
Senator O’Connell:
The flood happened in 1997 and we came back and heard in testimony there was no wall at all that addresses flood control. What they had done was build a training building with the money, which I do not recall was in the law. If we said it came back to the Legislature within 6 years for a review, we had an entirely different picture as to how the money was going to be used and it did not come to fruition.
Senator Neal:
We are doing the same thing for Washoe County we did for Clark County. We have retaining walls and some of the money went to maintenance.
Chairman McGinness:
There has been a motion to amend and do pass S.B. 490 with the amendment from Washoe County and adding some notation about a report due.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman McGinness:
Written testimony has been submitted by Nicole J. Lamboley, Lobbyist, City of Reno, to be entered into the record on S.B. 490 (Exhibit F). Let us turn to the work session on S.B. 404 which studies competition between local governments and private enterprises.
SENATE BILL 404: Proposes imposition of sales tax on sales of items purchased by state and local governments for resale to public. (BDR 32-410)
Chairman McGinness:
I think Rose E. McKinney-James brought up a question about Clark County’s school district or any school district in the State who sold lunches or anything like this.
Mr. Combs:
There were a number of questions asked at the hearing on this bill and I have tried to note what they were and come up with answers. The bill clearly applies to school districts. It lists districts in the definition and appears to be inclusive of all local government entities. There were some questions as to whether the bill would apply to salvage sales and the Legislative Counsel Bureau’s interpretation is it would not apply to salvage sales. The purpose of the bill is solely related to things purchased by local governments for resale. If their intent at the time of purchase was not to resell it, then this provision would not apply.
There was also a question about prison industries. The Legislative Counsel Bureau felt that this industry would still be exempt because there is no purchase for resale. They purchase the raw materials and then produce something with those raw materials and then sell them.
Meals sold at schools are exempt pursuant to NRS 372.285. This is a specific exemption provided for school meal sales and this section would not require school districts to collect sales tax on the sale of the meals in the school cafeteria.
There is a difficulty because there is no specific exemption for other cafeterias in other State and local government buildings.
Senator O’Connell:
In our regular taxing situation, if you go into a restaurant, sit down and eat the food in that restaurant or in a grocery store, you are not charged sales tax, it is when you take the food out, or is it the opposite?
Mr. Combs:
It is just the opposite. The issue comes up with cafeterias not in schools, but in other government buildings and here you run into a problem because there is going to be some food purchased for the purpose of resale. If you go to the Caucus Deli and buy a banana, this would be an issue. There may be other settings where he or she may actually have ingredients and prepare dishes, or at least they do at some restaurants and concession stands. Those items, you can argue, would not be purchased for resale and this certainly will draw some concerns at the Department of Taxation.
Fund-raisers for schools were another question. There is nothing in this provision that would not apply to fund-raisers unless the fund-raiser was through a nonprofit; the Legislative Counsel Bureau indicated those cases involving a nonprofit organization would be exempt. If the organization was not exempt, the way the provision is worded now, the bill would require the collection of sales tax on those items.
Chairman McGinness:
We will open discussion on S.B. 464.
SENATE BILL 464: Revises provisions relating to vessels. (BDR 32-1240).
Chairman McGinness:
This deals with the sales price of boats and basically treats vessels like motor vehicles when you have a private sale. Both the Department of Motor Vehicles and the Division of Wildlife are backing away from this bill.
Senator Townsend:
I have discussed this bill with the individuals involved and the fair thing to do is to copy what we do with automobiles. We have wrestled with this for a couple of sessions and I think we have a fair and equitable way for consumers and businesses in the automobile industry, private as well as trade-ins and retail sales. If this is the proposal, I do not have a problem with it. I have just seen this language and I do not know how we equate this to how we deal with automobiles. Maybe someone can explain this.
Mr. Combs:
It seems the way the bill was originally proposed, it would be changing a lot of the provisions to make them somewhere in the manner of which vehicles or the occasional sales vehicles are handled, including the exemption for the used vessel. The only difference would be the Department of Motor Vehicles will not be involved in collecting the tax. Now you have the issue of who will collect the tax.
Chairman McGinness:
I believe the Division of Wildlife did come in and the proponent of the bill agreed to take out the part about the appraisal so they would not have to actually look at the boat, rather just look at a vessel book to make the appraisal. If we are going to process this we also have to remove vessel from the Department of Motor Vehicles. I believe Mr. Avance had indicated this would be all right with him. It also changes the percentage the Division of Wildlife could keep from 6 percent to 10 percent to help them with their administrative costs.
SENATOR TOWNSEND MOVED TO AMEND AND DO PASS S.B. 464 WITH THE AMENDMENT IN THE WORK SESSION DOCUMENT.
SENATOR RHOADS SECONDED THE MOTION.
Senator O’Connell:
The amount of the administration for S.B. 464 seems high to me and I do not think it should be that much. There were two other bills introduced the same day, and the administrative costs being discussed were 2 percent and 3 percent.
Chairman McGinness:
Staff has indicated this bill will probably have to be re-referred to finance. We have taken care of the policy end and finance can take care of the fiscal end. The motion is amend and do pass. Are there any questions on the motion?
THE MOTION CARRIED UNANIMOUSLY.
*****
Senator Townsend:
If the auto industry uses a blue book, what book does the vessel industry use?
Jim J. Avance, Lobbyist, Nevada Marine Association:
It is a yellow book published by the same company as the blue book. In section 6 we amended out wildlife and at that point determined the fiscal impact to the Division of Wildlife would be $40,000 because they would only need one clerk to pass the money through to taxation.
Chairman McGinness:
Let us take up S.B. 471.
SENATE BILL 471: Revises provisions relating to certain taxes and fees regarding petroleum products and fuels for motor vehicles and aircraft. (BDR 32-584)
Testimony came from representatives of the Department of Motor Vehicles in a cooperative effort with various groups and they testified in favor of the bill.The amendment is on page 24 of the work session document. It was recommended NRS 366.197 not be included in this part of the amendment. Proponents and opponents have decided to get a bill next session so we can actually talk about this issue.
Senator O’Connell:
When we heard the bill twice, K. Neena Laxalt came in and said she had not seen or agreed to the amendment. Is this the amendment?
Chairman McGinness:
It is the last part on page 24 (Exhibit D) that reads “amend NRS 366.197.” We will not include this part of the amendment.
Senator O’Connell:
The rest of the amendment was all right?
Chairman McGinness:
The rest of the amendment was agreed to.
SENATOR TOWNSEND MOVED TO AMEND AND DO PASS S.B. 471.
SENATOR RHOADS SECONDED THE MOTION.
Chairman McGinness:
Are there any questions on the motion?
Senator Neal:
Is this adding any money to the budget or taking any money away?
Chairman McGinness:
No, it is not.
Senator Neal:
Then what is this bill doing?
Mr. Combs:
I believe this bill may have some increase in fuel tax revenues collected, but in terms of a negative fiscal impact, it does not have one.
Senator Neal:
They are charging fees of $25 for handling checks?
Mr. Combs:
Those are for the bounced checks.
Karen Winchell, Program Manager, Department of Motor Vehicles:
There will be minimal fiscal impact. We did prepare a fiscal note which I do not have with me, but it is approximately $28,000 and would allow us to assess the amount of the audit to the auditor they chose outside the State of Nevada.
Chairman McGinness:
This will be $28,000 positive to the State?
Ms. Winchell:
Yes. This will be additional revenue.
Chairman McGinness:
We all have heard the motion.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman McGinness:
We will take up S.B. 489. This bill came from natural resources.
SENATE BILL 489: Makes various changes to provisions governing exemption from local school support tax for systems that use renewable energy to generate electricity. (BDR 32-1135)
Senator Rhoads:
Senator Neal questioned the fiscal note on this bill (Exhibit G). It would cost $14,000, but it does not come out of the local school support tax. Instead, it would be picked up by the State of Nevada.
When we processed this bill, they wanted an amendment of the first page on line 7. After “Solar,” they wanted to insert “or solar,” and on page 2, line 17 it would be the same insertion. There is one other change. We need to sunset this in 2005 instead of 2007.
SENATOR RHOADS MOVED TO AMEND AND DO PASS S.B. 489.
SENATOR TOWNSEND SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS NEAL, O’CONNELL, AND TIFFANY VOTED NO.)
*****
Chairman McGinness:
Are there any other bills to come before the committee?
Senator O’Connell:
I want to make sure we do not forget the things we need to do for the recorder’s office in reference to the transfer tax. Do you feel we can do something with this when looking at the tax package?
Chairman McGinness:
I did talk to some of the recorders and they have a list of about 16 exemptions that are a problem and most of them would not bring money to the State, but they would bring money to the local governments. More importantly, it would make recording easier. It is a pretty big issue and if we cannot address it in this session, I am committed to the recorders to get a bill for the next session and take a look at those 16 exemptions.
Senator O’Connell:
I may have some exemptions.
Chairman McGinness:
Senator O’Connell has made copies for discussion on the Real Property Transfer Tax Exemptions/Review for elimination (Exhibit H).
Senator O’Connell:
If you would prefer to deal with this in the tax package, this would be something for us to consider. The only concern someone has raised has to do with exemption 8. I had asked Carson City Clerk Recorder Alan Glover to take a look at this and make some recommendations, this is the list he made and it would help us with the recorders, and also with collecting tax on a number of these exemptions.
Chairman McGinness:
Mr. Combs had a chance to speak with someone during our brief recess and their opinion was this is something we could handle as part of the final tax package; it would give us an opportunity to form some opinion.
Senator Townsend:
The exemptions on the second page came to me from attorneys who have discussed this with other members of a certified public accountant fraternity and have to do with transfers of titles to and from a trust, if the transfer is made without consideration. Because there is not consideration it would create a problem to establish a value and then acquire the tax, it is not worth it, and more importantly, it has no relevance to the issue of taxing something that has no consideration. This is where the issue came from. I support this bill and Senator Neal’s bill. They both have some very important components in them in getting rid of or reviewing some exemptions.
Chairman McGinness:
With nothing else to come before us, the meeting is adjourned at 3:38 p.m.
RESPECTFULLY SUBMITTED:
Gale Maynard,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: