MINUTES OF MEETING
ASSEMBLY COMMITTEE ON TAXATION
Sixty-seventh Session
May 13, 1993
The Assembly Committee on Taxation was called to order by Chairman Robert E. Price at 1:36 p.m., Thursday, May 13, 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. Roy Neighbors
Mr. John B. Regan
Mr. Michael A. Schneider
Mr. Larry L. Spitler
COMMITTEE MEMBERS ABSENT:
Mr. John W. Marvel (Excused)
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Mr. Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau
OTHERS PRESENT:
Robert D. Faiss, Attorney at Law, Lionel, Sawyer & Collins, appearing as counsel for the Nevada Resort Association
William A. Bible, Chairman, Nevada Gaming Control Board
Following roll call Chairman Price opened the meeting and made a few announcements. He then opened the hearing on AB 233.
ASSEMBLY BILL 233 - Clarifies provisions regarding applicability of casino entertainment tax. (BDR 41-1402)
Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau, provided committee members with a Bill Explanation for AB 233 attached hereto marked Exhibit C.
Chairman Price alluded to Exhibit D asserting the casino entertainment tax subject matter had a rich history. Chairman Price had put together a history beginning with 1979 dealing with the casino entertainment tax. Exhibit D contained a bill introduced by Senator Sloan; committee meeting minutes; facts with regard to theme parks; an article entitled "Sales Taxation of Services" published by the Federation of Tax Administrators; and an interim study report. Chairman Price furnished the committee a set of minutes from 1985 (Exhibit E) containing testimony regarding an assembly bill dealing with the casino entertainment tax. Chairman Price also provided for committee members Exhibit F which was a commentary written by Jon Ralston in the Las Vegas Review Journal that mentioned the casino entertainment tax.
Robert D. Faiss, Attorney at Law, Lionel, Sawyer & Collins, appearing as counsel for the Nevada Resort Association (NRA), testified in support of AB 233. Mr. Faiss provided committee members with a copy of his prepared testimony a copy of which is attached hereto marked Exhibit G. Mr. Faiss only read a small portion from his prepared testimony.
Mr. Faiss stated AB 233 would clarify the Nevada legislative intent that the casino entertainment tax imposed by NRS 463.401 was limited by the scope of the former federal cabaret tax, which was imposed by 26 U.S.C. Section 4231(6).
Mr. Faiss conveyed the objective of the NRA was to ask the committee and the Nevada legislature to once again make clear the Nevada gaming industry was not vulnerable to deficiency tax assessments due to the fact some state audit agents developed theories contrary both to established legislative intent and time-honored agreements between the NRA and the Nevada Gaming Control Board to recognize that legislative intent.
Mr. Faiss asserted the essential amendment offered by the NRA in AB 233 was to specifically exempt from the casino entertainment tax any "facility that would not have been subject to taxation pursuant to 26 U.S.C. Section 4231(6) as that provision existed in 1965..." Mr. Faiss suggested the provision did not change the casino entertainment tax. It maintained the legislative intent of the tax as it had existed since the tax was enacted in 1965. The legislative history of NRS 463.401 clearly established the application of the casino entertainment tax was the same whether or not AB 233 was passed; however, passage of AB 233 would make sure there was no further effort by state auditors to expand the scope of the tax beyond legislative intent, as the industry had experienced in the past.
Mr. Faiss familiarized the committee with the reasons why he was appearing as a spokesman on the casino entertainment tax. Mr. Faiss provided the committee with material documents and the history of the casino entertainment tax entitled "Exhibits in Support of AB 233 (Casino Entertainment Tax)" marked Exhibit H, a copy of which may be viewed in full at the Legislative Counsel Bureau Research Library. Mr. Faiss believed after the committee had time to review the documents, the committee would come to the conclusion AB 233 was simply a declaration of past and present legislative intent.
Mr. Faiss offered, in conjunction with the Gaming Control Board Chairman William A. Bible, a suggestion that the hearing be recessed and a subcommittee be appointed to oversee negotiations sought to determine whether it would be appropriate to replace the casino entertainment tax for the future with a tax that would be revenue neutral, but that the Gaming Control Board's audit division would feel more comfortable in administering.
Mr. Faiss noted it was consistent with the recommendation of the Legislative Counsel Bureau's subcommittee to study gaming of which Mrs. Williams was a member. The specific subcommittee's recommendation was the Gaming Control Board, "should submit to the 1993 Legislature for consideration by the Senate and Assembly Committees on Taxation an analysis of the options available to amend the casino entertainment tax and have the tax remain neutral including an explanation of any fiscal impacts on different segments of the gaming industry." Mr. Faiss communicated the Gaming Control Board complied with the directive on March 19th with a 20 page analysis.
Mr. Faiss reported the NRA had begun meetings with Chairman William A. Bible, Chairman Bible's attorney and staff and were willing to give the undertaking a priority to see if the gaming authorities and the gaming industry could reach an agreement on a revenue neutral replacement tax that would make sense to the Taxation Committee.
Mr. Faiss relayed to Chairman Price the NRA was prepared to make a full presentation and answer any questions. Chairman Price accepted the suggestion to send AB 233 to subcommittee.
Mr. Haller asked if there would be some discussion on the theme parks that were being constructed. Chairman Price commented there was a change in the gaming industry. The industry was beginning to focus on family entertainment that would affect taxation.
William A. Bible, Chairman, Nevada Gaming Control Board, asserted the casino entertainment tax was the subject of a great deal of discussion with the interim study committee on gaming. The interim committee directed the Gaming Control Board to prepare a report and submit the report to the legislature. A copy of the report is contained in Exhibit D attached hereto. Mr. Bible conveyed the tax itself was a very difficult tax for the Gaming Control Board to administer and a difficult tax for the casinos to pay. It was difficult to determine when to apply the tax and when not to apply the tax.
Mr. Bible iterated the discussions revolved around a number of issues, as follows: (1) What was the location of the entertainment and was it subject to taxation; (2) What type of entertainment was subject to the tax; and (3) The valuation of the taxable sales (the entertainment combined with a coupon book which might include rooms and gaming or entertainment activity) and what type of valuations would be established on the value of the coupons so a correct assessment could be made of the tax.
Mr. Bible expressed the NRA had been very gracious in terms of attempting to resolve a number of the issues. Mr. Bible stressed to a large extent the Gaming Control Board was defining the casino entertainment tax via litigation. That was expensive for the state and time consuming for the agency as well as expensive for the industry.
Mr. Bible contended through the discussions a number of parameters had been set that the Gaming Control Board felt should be accomplished in terms of any replacement type tax that would replace the existing casino entertainment tax or amendments and changes to the language of the existing tax. The amendments and changes should be clear, concise and easily understood not only by the taxing agency, but the licensees as well. The tax also should be revenue neutral and not paid by the licensee, but by the patron or consumer in terms of the casino entertainment tax. Mr. Bible looked forward to working with the subcommittee.
Chairman Price set the subcommittee to convene at 5:30 p.m. on Wednesday, May 19, 1993. Chairman Price appointed the whole taxation committee as a subcommittee to hear AB 233. Chairman Price would be chairing the subcommittee.
Mr. Haller wanted to make sure the Northern Nevada casinos were notified of the hearing and able to provide input at the hearing.
There being no further business to come before committee, the meeting was adjourned at 2:00 p.m.
RESPECTFULLY SUBMITTED:
DIANNE LAIRD
Committee Secretary
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Assembly Committee on Taxation
Thursday, May 13, 1993
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