MINUTES OF MEETING
ASSEMBLY SUBCOMMITTEE ON TAXATION
Sixty-seventh Session
June 1, 1993
The Assembly Subcommittee on Taxation was called to order by Chairman Robert E. Price at 5:08 p.m., Tuesday, June 1, 1993, in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda, Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Mr. Robert E. Price, Chairman
Mrs. Myrna T. Williams, Vice Chairman
Mr. Rick C. Bennett
Mr. Ken L. Haller
Mrs. Joan A. Lambert
Mr. John W. Marvel
Mr. Roy Neighbors
Mr. John B. Regan
Mr. Michael A. Schneider
Mr. Larry L. Spitler
COMMITTEE MEMBERS ABSENT:
Mr. Peter G. Ernaut (Excused)
GUEST LEGISLATORS PRESENT:
Jan Evans, Assembly District 30
Vivian L. Freeman, Assembly District 24
STAFF MEMBERS PRESENT:
Mr. Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau
OTHERS PRESENT:
Pat Coward, Economic Development Authority of Western Nevada (EDAWN)
John P. Comeaux, Executive Director, Nevada Department of Taxation
Chairman Price announced the subcommittee of the whole was meeting to consider the business license tax legislation. Chairman Price hoped the committee could devise a way to process the various versions of the business license tax legislation. He announced a subcommittee would be meeting and discussing Scott Scherer's business tax bill on June 2, 1993, at 5:00 p.m.
Chairman Price asked for consideration of AB 448.
ASSEMBLY BILL 448 - Revises exemption from business tax for proposed businesses. (BDR 32-954)
ASSEMBLYMAN LAMBERT MOVED DO PASS AB 448.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
Mrs. Williams asked what the criteria was to qualify as a new business in Nevada, beyond the population threshold.
Jan Evans, Assembly District 30, emphasized the presentation for consideration of AB 448 was made by the Commission on Economic Development (CED) at an earlier date. The criteria in addition to being a new business and meeting the investment figure as well as the full time employees, was criteria regarding the wage rate to be paid.
The committee discussed the criteria necessary to determine the wage rate. Mr. Zuend expanded in that regard. Mrs. Evans surmised averaging the wages tended to pull up the wage threshold. Just one or two very high salaries, when averaged together, could appear like the employees were being paid higher than in actuality.
Mr. Marvel expressed concern with businesses that might move to Nevada eventually impacting the welfare rolls. He thought the wage threshold needed to be examined. Mrs. Evans understood he did not want the state to have to subsidize those in the lower wage bracket. Mrs. Evans said the committee could review the wage threshold.
Mr. Marvel wanted to know what role the Department of Taxation would play if AB 448 was passed. Mrs. Evans responded Mr. Comeaux or the CED would have to address that.
Pat Coward, Economic Development Authority of Western Nevada (EDAWN), expressed a large amount of time was spent by EDAWN and CED watching and developing the regulations. The Commissioners with CED were the main group developing the regulations with CED staff. Mr. Coward emphasized EDAWN and the Nevada Development Authority (NDA) were very much involved in a debate back and forth with the $10.86 wage threshold. Mr. Coward expanded on EDAWN's involvement. The average wage rate was debated extensively meeting after meeting to make sure it was fair and equitable.
Mr. Spitler asked what type of companies would Nevada attract with the new thresholds. Mr. Spitler believed in incentives. Mr. Spitler believed Nevada had to be careful if the incentives were not successful because exemptions were being built in that worked against the state on the overall tax perspective.
Mr. Coward did not believe the thresholds should be lowered to the point every company could move to Nevada, but be lowered to the point that target marketing would become effective in selectively recruiting companies. Not one signature company had qualified under the current tax abatement. Spiegel did not meet the wage qualification and was turned down. Mr. Spitler stated in observing the business tax, AB 448 was one more exemption that would need to be explained.
Mr. Zuend mentioned there were several companies under the new criteria that would have (on first cut) qualified under the statutory guidelines. Mr. Zuend believed the CED, with no experience with the abatement, did not know how to draw a wage guideline. That was why CED did not want to get too detailed right now. It was a good idea to see how the wage threshold worked with the better than average standard and monitor same through the Department of Taxation.
Mrs. Williams voice her opposition to any exemptions. She mentioned WesTrends conducted a presentation illustrating Utah had been very selective about new businesses relocating to its state. Utah kept the wage level high and as a result had great success.
Mrs. Williams referenced her discussions with several business people in Nevada and those businesses wanted to know what the bottom line figure was going to be. Mrs. Williams did not think incentives were going to make one bit of difference as to whether or not a good company would relocate to Nevada.
Mrs. Evans knew companies wanted to relocate to a state with a stable tax base. One of the criticisms of Nevada was the taxes were tampered with every two years. Mrs. Evans pointed out CED, NDA and EDAWN did not have a whole lot to offer companies considering relocation. She noted when a company was looking to relocate to Nevada, CED needed to be able to offer some type of incentives. She believed the companies did consider the lists and were looking for the best bargain. She knew Nevada already possessed an attractive tax base, but it was highly competitive out there. Nevada was not in a very good competitive position compared to many of the other western states.
Mrs. Evans cited Utah and mentioned she had received a narrative from Utah. Utah, for over ten years, had been scrutinizing all variables that fed into what made a company successful and what attracted and held good companies. Utah made adjustments accordingly each year. Utah made decisions as to what variables mattered, and accordingly would offer incentives, or vice versa. Utah constantly monitored and decided what the right mix was and sought companies and retained companies. It was not just a matter of relocating the company to the state, but keeping the company there.
Mrs. Evans wanted to focus on the fact AB 448 was not just an exemption, but tax money that was foregone. She urged to not just look at the tax money Nevada was losing, but the fact the company was in Nevada with a minimum number of employees and investments. The company was assisting Nevada's economy. Money would be circulating in a whole variety of other ways. She wanted the committee to study the whole comprehensive picture.
Mrs. Williams knew the money would be in circulation, but just for the necessities of life. If any one of the employees had a catastrophe, then the burden would be held by the state. According to what Mrs. Williams had read, the tax picture in Nevada was far superior to any of the other states. Mrs. Williams thought Nevada needed to find a different way to market itself to bring in new business. She believed even with the business tax, Nevada had the best tax picture in the western states.
Mr. Regan asked if the average wage could be amended to read the average wage "may not be less than $10.86" or write the regulations for the tax commission the incentive wage must be no less than the state average wage. Mr. Zuend said it could be inserted as a guideline in the law. Mr. Zuend clarified Mr. Regan wanted to amend existing regulation. Mr. Regan wanted to amend AB 488 to spell out the incentive wage be no less than the state average industrial wage as defined by the Employment Security Department (which was $10.86 right now.)
ASSEMBLYMAN REGAN MOVED TO AMEND THE MAIN MOTION ON AB 448 TO DENOTE IN THE STATUTE THE INCENTIVE WAGE WOULD BE NO LESS THAN THE STATE AVERAGE INDUSTRIAL WAGE AS DEFINED BY THE EMPLOYMENT SECURITY DEPARTMENT.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
Mrs. Lambert said, "If we put it in law we have to wait two years to fix it. If we leave it in regulation and we know what the regulation is right now, if we do get some experience and we do see that the highest paid CEO in the nation somehow skews the $4.25 minimum wage of its 100 employee, or whatever, the Commission could fix it in the meantime. I would suggest that we leave the law as it is now, look in two years if we have some experience and then see what happens. If at that time we feel it should be in statute, put it in statute. We might know a little more and not be shooting in the dark so much."
Chairman Price asked for a voice vote on the amendment to the main motion.
THE MOTION TO AMEND THE MAIN MOTION FAILED.
Mr. Bennett appreciated Mrs. Evans arguments in favor of AB 448. He added if he was inclined to consider any expansion of an exemption it would be AB 448, but he shared Mrs. Williams position of not supporting any exemptions in this legislative session.
Mr. Neighbors echoed what Mr. Bennett and Mrs. Williams had said as far as exemptions. Mr. Neighbors stated if Nevada eliminated the gaming tax, there were only 47 out of the 50 states paying more taxes than Nevada. He thought that in itself was a selling point. It was very difficult, being from the rural counties, to grant exemptions.
Chairman Price asked for a voice vote on the main motion to pass AB 448.
THE MOTION TO DO PASS AB 448 FAILED.
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Chairman Price asked for consideration of AB 405.
ASSEMBLY BILL 405 - Makes various changes to provisions governing business tax. (BDR 32-180)
Vivian L. Freeman, Assembly District No. 24, alluded to the two purposes in introducing AB 405. One reason related to child care and the other was she wanted the business tax to be fair and equitable for the employers across the state.
Mrs. Freeman referenced AB 405 contained provisions for exemptions to child care providers and a grant or incentive for businesses to provide child care. After listening to previous testimony, Mrs. Freeman thought it would be a good idea to provide new businesses with a tax incentive if the business provided child care for its employees.
Mrs. Freeman pointed out if a 50 percent tax credit could be allowed for the larger businesses, those larger businesses could provide a Cadillac child care service. The credit could be adjusted for small employers.
Chairman Price asked Mrs. Freeman if she wanted to work up some amendments to AB 405 in anticipation of passage.
Mr. Zuend asserted most of the states that allowed a child care credit were generally based on a business income tax, instead of an employee tax similar to Nevada's tax. Fifty percent seemed to be a common figure used as a credit against other states' business income tax.
Mrs. Freeman clarified for Mr. Spitler the child care center had to be a licensed facility to qualify for the exemption.
Mrs. Freeman commented getting some kind of assistance for child care had been a long-term issue. Since there was no money in the general fund, she was hoping perhaps an incentive could be allowed for businesses. She was open for suggestions from the committee.
Mrs. Williams had a difficult time taking the position against anything to do with child care, but the state could not afford to lose any of its tax monies. She pointed out if the state gave in to child care and lost tax revenues, the state would be hurting with child needs somewhere else.
Mr. Regan asked if Mrs. Williams wanted to amend AB 405 to cover in any given business tax bill to put the equity back into child care. He said the child care industry was one of the few industries demanding a certain level of employment. Mr. Regan said he would vote for a level playing field.
ASSEMBLYMAN REGAN MOVED TO AMEND WHATEVER BUSINESS TAX THE COMMITTEE PASSES THAT THE INDUSTRIES WHICH ARE BY LAW DEMANDED TO HAVE A CERTAIN LEVEL OF INCOME RECEIVE SOME PROTECTION FROM THE TAX.
THERE BEING NO SECOND THE MOTION FAILED.
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ASSEMBLYMAN HALLER MOVED DO PASS AB 405.
THERE BEING NO SECOND THE MOTION FAILED.
Chairman Price asked for consideration of the business license tax legislation.
ASSEMBLY BILL 394 - Makes changes in computation of business tax. (BDR 32-1104)
ASSEMBLY BILL 418 - Makes various changes to provisions governing business tax. (BDR 32-1719)
ASSEMBLY BILL 421 - Extends date for payment of business tax. (BDR 32-311)
Mr. Haller expressed his opposition to a business license being revoked upon nonpayment of the tax.
Chairman Price asked the committee to consider the business license tax legislation by referring to Exhibit C, a chart illustrating a breakdown of each of the proposed bills offered. Chairman Price suggested using AB 394 since AB 394 covered most of the changes and was an assembly bill.
ASSEMBLYMAN MARVEL MOVED TO ELIMINATE THE CAPS ON THE BUSINESS TAX LEGISLATION.
ASSEMBLYMAN WILLIAMS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.
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ASSEMBLYMAN REGAN MOVED THE TAX RATE BE $25 PER QUARTER ON THE BUSINESS TAX LEGISLATION.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
FOLLOWING DISCUSSION, THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.
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ASSEMBLYMAN WILLIAMS MOVED NO EXEMPTIONS TO THE BUSINESS TAX LEGISLATION UNLESS ALREADY INCLUDED IN EXISTING LAW.
ASSEMBLYMAN NEIGHBORS SECONDED THE MOTION.
Mr. Zuend pointed out there was a current exemption in the law for the "mom and pop" businesses and an unincorporated business. That was to cut down on the Department of Taxation having to locate the Avon ladies, etc. The exemption stayed in all the proposed legislation.
THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.
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John P. Comeaux, Executive Director, Nevada Department of Taxation, wanted to implement the change to the business tax legislation to reflect the due date as the last day of the quarter, but provide the tax be payable by the end of the next succeeding month. The due date would coincide with the sales tax due date.
ASSEMBLYMAN SCHNEIDER MOVED TO AMEND THE BUSINESS TAX LEGISLATION TO REFLECT THE DUE DATE OF THE TAX AS THE LAST DAY OF THE QUARTER, BUT PROVIDE THE TAX BE PAYABLE BY THE END OF THE NEXT SUCCEEDING MONTH.
ASSEMBLYMAN SPITLER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.
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ASSEMBLYMAN REGAN MOVED TO AMEND THE BUSINESS TAX LEGISLATION TO PROVIDE REVOCATION OF BUSINESS LICENSE FOR FAILURE TO COMPLY WITH LAWS AND REGULATIONS.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
Mr. Comeaux informed the committee that provision was contained in the sales and use tax law and it was the most effective collection tool the department had. He said very few businesses stayed closed. It was used as a very last resort. The first resort was to have a revenue officer speak with the business; liens could be filed; bank accounts could be withheld upon. He said the department went a long way before the department would resort to lock and seal. There was also a work out period if necessary.
THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.
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The committee agreed unanimously by vote of those present the proposed amendments to the business tax legislation be drafted and placed in AB 394 as a total bill.
There being no further business to come before committee, the meeting was adjourned at 6:05 p.m.
RESPECTFULLY SUBMITTED:
DIANNE LAIRD
Committee Secretary
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Assembly Committee on Taxation
Tuesday, June 1, 1993
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