MINUTES OF MEETING
ASSEMBLY COMMITTEE ON TAXATION
Sixty-seventh Session
March 25, 1993
The Assembly Committee on Taxation was called to order by Chairman Robert E. Price at 2:04 p.m., Thursday, March 25, 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. Peter G. Ernaut
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:
None
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Mr. Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau
OTHERS PRESENT:
Michelle Bero, Nevada Association of Counties
John Sherman, Management Analyst, representing Washoe County
Raymond L. Sparks, Chief, Registration Division, Nevada Department of Motor Vehicles and Public Safety
Jim Shelly, Senior Research Analyst, Nevada Employment Security Department,
Carole Vilardo, Nevada Taxpayers Association
Bonnie James, Las Vegas Chamber of Commerce
Gary Hunter, Nevada Department of Taxation
Martin Bibb, State Director, National Federation of Independent Business
David S. Johnson, Senior Management Analyst, Nevada State Industrial Insurance System
Nancy Samon, Chief of Contributions, Employment Security Department,
Chairman Price opened testimony on AB 313.
ASSEMBLY BILL 313 - Reduces rate of additional privilege tax imposable by certain counties. (BDR S-790)
Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau, provided committee members with a Bill Explanation for AB 313 attached hereto marked Exhibit C.
Ken L. Haller, Assembly District No. 27, sponsor of AB 313 spoke in support of the bill. He explained AB 313 was drafted due to a number of irate phone calls he received around July 1, when the 1 percent was added to the motor vehicle privilege tax. People not only had the highest registration fee in the country, but an even higher fee in Washoe County. AB 313 provided for a rollback of one-half of 1 percent by the counties of Humboldt, Elko, Churchill, Lander and Washoe.
Mr. Neighbors asked the amount of revenue raised by the 1 percent. Mr. Haller estimated approximately $300,000 for Washoe County, based on his own estimate and other figures given to him over the years.
Mr. Zuend pointed out the tax imposed in any of the other counties would be temporary, except for Washoe County. He added a sunset provision existed. He continued stating as soon as the particulars of AB 104 of the 1991 legislative session ran their course, where the rural counties gave up part of their Supplemental City-County Relief Tax (SCCRT) to keep Washoe whole for awhile, then the right no longer existed to impose the tax. Effectively, in the future beyond whatever year denoted in AB 104, Washoe County would be the only county affected by the tax.
Michelle Bero, Nevada Association of Counties (NACO), spoke on behalf of Churchill County. She presented a letter from the Churchill County Administration Office, a copy of which was furnished to each committee member (Exhibit D). The letter explained Churchill County's situation. She stated if the motor vehicle privilege tax was reduced to one-half cent Churchill County would lose approximately $126,000. Ms. Bero indicated to Chairman Price it was her belief the full one cent had been implemented.
John Sherman, Management Analyst, representing Washoe County, spoke in support of AB 313. He delineated part of the painful process Washoe County went through was attempting to make up for loss revenue due to the 1991 legislative session fair share bill. Mr. Sherman said at the time, in an attempt to make up a very significant amount of dollars in excess of $8 million in 1992 and close to $15 million in 1993, the thinking of the Board of County Commissioners was to broaden the burden on what sources would be tapped. The legislature allowed the Board of County Commissioners five taxes, one of which was the vehicle tax.
Mr. Sherman added to reduce the motor vehicle privilege tax by half would place pressure on Washoe County to raise other taxes. Under AB 104 passed last session, the only other tax available to Washoe County would be the property tax. The property tax was a very significant tax used for operating purposes by all local governments. Mr. Sherman commented approximately one month ago representatives from Clark County and NACO and he came before the Taxation Committee informing the committee language was being written that would initiate some minor adjustments to AB 104. He continued explaining a portion of the language from Washoe County would provide for some taxpayer relief, but on the side of the property tax. He stressed all local governments in Washoe County were cognizant of the fact that the local government was getting close to the $3.64 statutory cap.
Mr. Sherman responded to Mrs. Williams illuminating since the fiscal year was not complete because the tax was imposed July 1, 1992, the estimated amount of money lost would be somewhere between $1.6 and $1.7 million. He continued stating, by way of reference, of the five taxes, basically three of them made up a vast majority of the revenues. The three most important taxes were the sales tax, the property tax and the motor vehicle privilege tax. The gaming tax and the real property transfer tax generated less than $1 million combined. Those three taxes were very important to the makeup package.
Raymond L. Sparks, Chief, Registration Division, Nevada Department of Motor Vehicles and Public Safety, responded to the questions with regard to the amount of revenue in question. The special vehicle privilege tax was imposed July 1, 1992. It had only been in effect for the current fiscal year. At the end of February, 1993, there had been $134,000 collected for Churchill County. He added the actual collections for Washoe County through the end of February were $2.448 million.
Mr. Marvel asked if any other county had imposed the tax. Mr. Sparks conveyed Clark County had the supplemental privilege tax which had been authorized under SB 112 from the 1991 legislative session. Only Churchill and Washoe Counties have thus far adopted the special privilege tax.
Mr. Zuend said the tax did not sunset for Washoe County, but it did sunset for every other county. Mr. Zuend believed it was a six year phase-in period beginning fiscal year 1991-1992 through 1996-1997.
Chairman Price opened testimony on AB 356.
ASSEMBLY BILL 356 - Requires development of single form for certain payments and reports required of businesses and other employers.
(BDR 32-1236)
Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau, provided committee members with a Bill Explanation for AB 356 attached hereto marked Exhibit E.
Ken L. Haller, Assembly District No. 27, sponsor of AB 356, said he had been requested by an accounting firm in Reno, Nevada, to introduce AB 356. He indicated simplified single form reporting had been established in California. Mr. Haller provided committee members with a copy of one of California's forms pointing out how the form was simple. (Exhibit F) Mr. Haller believed businesses were hurt as far as reporting was concerned. Mr. Haller stated he discovered recently AB 153 existed in Governments Affairs that addressed the same sort of problem in a different fashion. He voiced support from the Governor's office with regard to the simplification of forms.
Jim Shelly, Senior Research Analyst, Nevada Employment Security Department (ESD), spoke in support of the concept of AB 356, but was opposed to some of the language. He iterated ESD was opposed specifically to the language in page 3, section 3, line 17 reading, "Contributions are due and must be paid by each employer to the executive director for the fund on or before the last day of the month immediately following the close of each calendar quarter." He explained because of the nature of ESD's program and its relationship with federal law, federal law imposed certain requirements. Mr. Shelly expanded stating nonprofit corporations were not subject to the law until the corporation had four or more employees in each of 20 weeks. ESD felt the language locked into each calendar quarter. ESD had more flexibility under regulation NAC 612.260. He continued stating ESD had reimbursable accounts requiring the filing of a report at the same time other employers were required to file a report; however, were not required to pay until ESD billed the employer, and then the employers had 30 days from that date to pay. Mr. Shelly said the language in section 1 of AB 356 stated the reports would be filed when the contribution was paid. The language needed to be examined more closely.
Mr. Shelly explained for Chairman Price reimbursable accounts were used for all nonprofit corporations and governmental organizations had the option.
Mr. Shelly stressed certain due dates did not always coincide with the business tax or the State Industrial Insurance System (SIIS). ESD preferred the regulation remain as it was.
Chairman Price informed Mr. Shelly a bill was being drafted changing the due date of the employee tax.
Mr. Shelly continued pointing out some of the other problems that should be considered. He emphasized the information required for the three programs was not compatible. Employees were not reportable to all three agencies, tax wage limits were different and because of exemptions and various legal definitions, reportable wages were not identical. He noted the employee accounts were different. ESD forms required a number of employees on the 12th of each month. That was a formula used by the Bureau of Labor Statistics and was also used to calculate the average annual wage and the annual taxable wage base. He said the business tax form had four different methods of determining the average number of employees.
Chairman Price believed if someone could figure out a way to utilize a single form even if the form contained 27 copies, at least it should be a single form. He thought the representatives from each agency could get together and introduce some new ideas. Mr. Shelly again agreed with the concept, but felt there were many problems with the language. He believed there could be a viable solution.
Mr. Shelly elucidated California did have a form that collected four taxes, but those taxes were very closely related. AB 356 proposed a single form for three very different programs.
Mrs. Lambert stated the mechanism in AB 153, currently being heard in Government Affairs, called for the agencies to coordinate with one another and initiate some pilot programs. She elaborated stating not only were the three agencies supposed to work together, but any body in state government imposing a fee or a tax. Mr. Shelly was not sure if AB 153 referred to registration forms or both registration and reporting forms. Mr. Shelly noted if the registration form was being discussed, he felt it could be a real advantage in a one-form system.
Mr. Shelly asked the committee to consider that ESD's report required wage lists of individual employees by social security number. He revealed some of those reports were up to 300 pages long. He asked if it was the intent to have the form go to each department. Mr. Shelly iterated ESD had approximately 1,400 large employers reporting on magnetic tape. Those employers had been accommodating ESD by utilizing the magnetic tape and in turn ESD had been accommodating those employers. He did not understand how the magnetic tape reporting would work in a one form system.
Mr. Shelly noted anytime ESD used a form that combined unemployment tax with any other state tax, because ESD was funded by the Department of Labor, ESD was funded only for the unemployment tax portion. ESD would be required to enter into a cost share agreement with the Department of Labor. He asserted that could be complex and time consuming and possibly an expensive situation.
Mr. Shelly wanted to make sure ESD did not make it more burdensome for the employer. He was concerned there might be one huge complex form, rather than dealing with three separate programs. He expressed ESD would be more than willing to meet with any other agency to assist in this matter.
Carole Vilardo, Nevada Taxpayers Association (NTA), voiced NTA's very strong support for the concept contained in AB 356. She referenced AB 153 and expressed it was important to note NTA recognized businesses were burdened with duplicity. Ms. Vilardo said it was time to figure out to how to make it simpler for businesses. Economic development efforts would ultimately be impacted because the regulatory environment was a very serious consideration when businesses enter the state. Ms. Vilardo stressed the concept both in AB 153 and AB 356 also fit with the overall reorganization study. The concept fits in with what the Economic Development Commission had been trying to do in coordinating and being "user friendly."
Ms. Vilardo articulated specifically with regard to AB 356 the different reporting dates allowed by ESD and SIIS and stated the bill needed to look at those types of technicalities to that degree of specificity. In the case of ESD, she referenced the change of reporting dates relative to nonprofit. She believed if the nonprofit reporting dates were ESD's biggest problem, and if the reporting dates which varied by SIIS dovetailed with the fact that public entities and nonprofits were being dealt with, it could be easily taken care of. Ms. Vilardo reference section 1, line 5, reading "... a single form for use by businesses..." could be amended to read "...use by private for profit businesses...".
Ms. Vilardo emphasized NTA's concern with the impact on reporting dates between the agencies. Even if reporting dates remained different, she believed the problem could be resolved. For example, if a three part form were utilized and the dates coincided between the business license tax, ESD and SIIS, other agencies could use the form by tearing off the appropriate form and filing it at the appropriate time. A certain amount of base information was consistent with all reporting.
Ms. Vilardo expressed support for the language contained on page 1, section 2, line 16, of AB 356, with regard to the adjustment of the payment date. The tax would be paid after it was due and not the same day it was due.
Ms. Vilardo asked the committee to consider amending sections 2 to 5 to read the act would become effective January 1, 1995, as opposed to January 1, 1994. She wanted the committee to consider the fact there would be a level of reorganization needing to be implemented as well as some modifications implemented if AB 153 were passed. She concluded asking for the committee's support of AB 356.
Ms. Vilardo informed committee members AB 153 was heard approximately one month ago. Although there was no opposition to AB 153, it contained power and NTA believed AB 153 should be better defined. She expressed AB 153 would ultimately fit with whatever happened in reorganization. She mentioned the inclusion of the Secretary of State's office with regard to reporting. Ms. Vilardo said the secondary goal would be to get involved with local governments. There was a duplication of fees and reporting between local governments and state. NTA realized much of what needed to be done could not be accomplished by 1995, but at least recommendations could be made in 1995 with regard to exactly what could be implemented and what the second stage would be. She indicated another workshop would be scheduled for AB 153.
Bonnie James, Las Vegas Chamber of Commerce, echoed the Chamber of Commerce's support for AB 356. She stressed the Chamber of Commerce would do anything necessary to assist with the paper-work associated with the passing of AB 356.
Gary Hunter, Nevada Department of Taxation, emphasized the Department's concerns with AB 356. The Department of Taxation did support the idea of consolidated reporting, but wanted to bring to the committee's attention the consolidated payment of those taxes must also be considered. He outlined if someone was going to pay the business tax, SIIS and ESD all on one form, then a check would be written for the sum of the three taxes. The problem with a consolidated payment would be distinguishing the payment priority. What if the payment was insufficient?
Mr. Hunter iterated the three agencies did not have the same identifiers for tax accounts. Mr. Hunter did not believe it would be beneficial if there was one form with three different calculations and three different checks to be mailed in at three different times.
Mr. Hunter enunciated the Department of Taxation's support for AB 153. He believed AB 356 should be incorporated into AB 153 in a two year period of time. One account identifier would be helpful, the computers should be able to communicate with each other and possibly utilize one agency to process the payments. He continued illustrating how each payment from each agency currently was processed differently. He reiterated he did believe the consolidation process could be done, but the question was how and the cost associated with it. He believed down the line it would be very cost effective.
Mr. Hunter moved on discussing the date the business tax was due. He explained the reason the business tax was due the last day of the quarter had to do with the way the controller accounted for monies. If the date was changed to the next month, the controller accrued it differently and in the biennium, one-quarter would be lost into the next biennium. He explained the dollars would be there, but in the accounting the amount would be lost for the biennium. Mr. Ernaut pointed out it would only be lost for the first fiscal year, because the following year it would be caught up.
Mr. Hunter suggested leaving the due date on the last day, but the payment date could be moved up to the 15th day of the next month, or 30th of the next month. He pointed out anyone who asked for an extension, received one. Mr. Hunter said the Department of Taxation was very liberal in that regard.
Mr. Hunter noted in section 4 of AB 356, NRS Chapter 612 dealt with ESD's interest rate of one-half of 1 percent. He stated the sales tax and business tax interest rates were one and one-half percent per month. If a consolidated report was considered with a consolidated payment, some thought should be given to a standardized penalty and interest rate.
Mr. Hunter's recommendation was the concept of AB 356 be incorporated into AB 153.
Mr. Spitler believed the whole point of AB 356, at least from the business communities' point of view was, to create "user friendly" forms. Mr. Spitler asked how the forms were prepared and if AB 153 proposed to prepare the forms and try out the forms first before finalizing the forms. Mr. Hunter responded the Department of Taxation kept expanding the forms as the requirements changed. Mr. Spitler thought it would be a good idea if the small businesses had some input as to the evaluation of the forms or the collection process. Mr. Spitler pointed out the people who wrote the forms were not the people who had to fill them out. He said there needed to be a trial run to make the forms "user friendly." Mr. Hunter stated AB 153 possibly could be expanded to include a representative of the business community to become involved in the meetings. Mr. Spitler voiced the Chamber of Commerce, a big business and a little business should become involved in the process. Those businesses needed representation.
Martin Bibb, State Director, National Federation of Independent Business (NFIB), stated NFIB was the country's largest small business organization with approximately 600,000 members nationally, 4,200 of which were located in Nevada. Mr. Bibb said NFIB had a research foundation that created a questionnaire called "Small Business Problems and Priorities." The questionnaire listed from number 1 to number 75 the top small business concerns in a national ranking. He said for the last form printed in March of 1992, the top small business problem was the cost of health care. The fourteenth highest priority was state paperwork. Mr. Bibb emphasized AB 356 addressed that problem. He believed it was a real problem and he echoed Mr. Spitler's thoughts in trying to find a small business perspective in the process of developing forms and/or approaches. NFIB supported the concept of AB 356.
Mr. Bibb informed Mr. Spitler NFIB was involved in an informal workshop with regard to AB 153. NFIB recognized there was more than one work product aimed at the overall problem. Mr. Spitler said AB 153 might be amended to include input from the public. Mr. Bibb recognized it was not an easy process for the agencies.
Mr. Spitler said with the electronic assimilation of information, various programs, ways people could electronically report information and transfer forms, it was critical when forms were developed that the forms parallelled certain rather common formats. The information transmitted to a state agency should not only be done in an intelligible manner, but the information should be processed and communicated easily.
David S. Johnson, Senior Management Analyst, Nevada State Industrial Insurance System, spoke in support of the concept of AB 356, but voiced some concern with the language. He informed committee members SIIS was, to the best of his knowledge, the only state agency with a formal forms management program. The forms management program had been in effect for approximately three years and had saved SIIS approximately $150,000 in the first two years through managing the ordering process, design changes, consolidation of similar forms, etc.
Mr. Johnson had been specially trained in forms design and analysis by the American Management Association in order to help institute the forms management and control program. Mr. Johnson said if there was a reasonable place to consolidate, SIIS would be in favor of it.
Mr. Johnson expressed concern about the type of information each of the three agencies collected. He explained SIIS collected different information than the other agencies. SIIS collected information with regard to payroll in specific job classifications, as opposed to the amount paid to any employee. He expanded stating some employers reported payroll on a monthly basis, some reported quarterly and some reported semi-annually or annually. SIIS also required an advance premium deposit based upon the reporting frequency. He reiterated the employer account numbers were tracked differently in each of the three agencies.
Mr. Johnson informed the committee SIIS was working on the consolidation of six different types of forms and communications to employers into one form. SIIS felt it was to its best interest to provide employers with as clear simple requests for information as possible, as well as the means to submit payment to the agency.
Mr. Johnson expressed concern with the issue of how the payments would be allocated if AB 356 were implemented. He voiced his concern with regard to the method of payment, i.e. would an employer make three separate payments or would there be one central payment location. He added if there was a shortage, which of the three agencies would be shorted. Miscalculations were common when payments were submitted.
Mr. Johnson apprised committee members that it took hours to design a quality form. People actually spent hours studying the psychology and work and data flow in the design of forms. Mr. Johnson agreed with the idea of designing the form and implementing a "test" form, before the form was finalized.
Mr. Spitler added the general public would not ultimately design the form, but a form could be drafted and presented to focus groups to ask if the form worked for them. Mr. Spitler believed the focus group approach would be more applicable. The ultimate goal should be to have the government "user friendly." It was Mr. Spitler's opinion that it impeded small businesses' ability to earn money when it took two days to fill out a form. Mr. Spitler liked the idea of the focus groups and additionally let the people offer ideas with regard to the design of the form. Mr. Neighbors agreed with the focus group idea for input, as well as a small working group to get the task accomplished.
Mr. Johnson expressed SIIS's interest in participating in any way it could to assist with implementation of a simpler form.
Mr. Zuend commented he understood what ESD had to go through with the federal government. He referenced the California Employment Development Department (EDD) form (Exhibit F) and mentioned California had managed to develop a form with its counterpart.
Nancy Samon, Chief of Contributions, Employment Security Department, addressed the issue with regard to the California Employment Development Department. She explained ESD's counterpart was EDD in California. She continued stating currently in California EDD collected four taxes, a portion of the income tax, the disability tax, the unemployment tax and a state training tax. EDD had a cost share agreement with the federal government and all of the taxes had to be reported on a separate line on the form.
Ms. Samon explained the reason it could be accomplished in California was due to the fact that EDD was under the auspices of the Department of Labor. All of the taxes were collected under one law which was the unemployment compensation law. She revealed California did not have the myriad of problems with identifying employers and the related problems Nevada would have because it all came under one section of the law.
Mr. Zuend said at some point California decided it wanted EDD to collect its personal income taxes. Ms. Samon added California's sales tax and workman's compensation program were separate. Mr. Zuend surmised California revised the law to accomplish the collection of the taxes.
Ms. Samon responded to Chairman Price stating to her knowledge, as far as unemployment was concerned, there was not any other state in the union that had all the information on one form. In most of the states it was either a separate form or if there was a combination, it was done in the employment security department.
Mr. Zuend referred back to the comment with regard to the lien date. Mr. Zuend mentioned if the lien date was fixed as mentioned in AB 356, one quarter of revenue would be lost. That would be $12.5 million lost in the revenue base for this biennium. Mr. Zuend said it could be solved and referenced in the 1991 legislative session the lien date was moved up on the mining tax to June 30th so it could be accrued to the fiscal year. The law contained a 30-day period from the lien date when one had to report and pay the taxes. It could effectively be done within the business tax as well. It would not change the lien date, nor necessarily the payment because as Mr. Hunter indicated, most businesses currently were waiting until the end of the quarter to pay the tax. It would just make it clear that it was acceptable to wait 30 days to pay the tax. It could be done and not lose revenue.
Chairman Price indicated he would speak with Mr. Garner with regard to AB 153 and the possibility that some of the members on the Assembly Taxation Committee could work with the Government Affairs Committee.
There being no further business to come before committee, the meeting was adjourned at 3:25 p.m.
RESPECTFULLY SUBMITTED:
DIANNE LAIRD
Committee Secretary
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Assembly Committee on Taxation
March 25, 1993
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