MINUTES OF MEETING

      ASSEMBLY COMMITTEE ON TAXATION

 

      Sixty-seventh Session

      June 25, 1993

 

 

 

 

The Assembly Committee on Taxation was called to order by Chairman Robert E. Price at 5:10 p.m., Friday, June 25, 1993, in Room 331 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

      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. Ken L. Haller, Excused

 

GUEST LEGISLATORS PRESENT:

 

      Senate Ernest E. Adler, Capital Senatorial District

 

STAFF MEMBERS PRESENT:

 

      Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau

 

OTHERS PRESENT:

 

      Lieutenant Governor Sue Wagner, Chairman, Nevada Commission on Economic Development

      Janice Wright, Deputy Director, Nevada Department of Taxation

      Howard Barrett, Nevada Taxpayers Association

      Mark Brown, representing CMS Generation Company

      Jack Roberts, Manager of Domestic Projects, CMS Generation Company, CMS Energy Company

      Thom Shelton, CMS Generation Company, CMS Energy Company

      Dan Tobias, E. A., Barakat and Chamberlin, Inc.

      Alan Glover, Nevada Power Company

      Perry Comeaux, Executive Director, Nevada Department of Taxation

      Peter Kruger, Nevada Rental Association

      David Horton, Committee to Restore the Constitution

      Bobbie Gang, Nevada Women's Lobby-Reno

      Lucille Lusk, Nevada Coalition of Concerned Citizens

 

 

Chairman Price stated testimony would continue on:

 

ASSEMBLY BILL 768 -     Provides exemption from tax for equipment to conserve energy or use substitute sources of energy.  (BDR 32-1894)

 

Lieutenant Governor Sue Wagner, Chairman, Nevada Commission on Economic Development (CED), opened testimony on AB 768 by explaining since the meeting on the evening of June 23, there had been several amendments drafted.  She submitted proposed amendments to the bill which included a change in the summary of the bill and the section of NRS affected, those amendments are attached as EXHIBIT C and marked AB 768 Draft 3 at the lower left.  Those amendments had resulted from meetings between CMS, Carole Vilardo, Senator Ernie Adler, the taxation department, and CED.  She believed they addressed the concerns raised at Wednesday's meeting.  The new language was actually a substitute bill.

 

Mr. Neighbors asked if the Commission of Economic Development was still involved in the new language.  Mrs. Wagner stated CED was not involved, at least as to certification, at this point. The new bill dealt more with an alternative fuels issue than an economic development issue.

 

Senator Ernest Adler, Capital Senatorial District, had been instrumental in drafting the new language and Lt. Governor Wagner turned testimony over to him.  Senator Adler explained the bill had been an economic development bill, but now it was a bill which promoted certain recycled materials for energy production, similar to solar energy production exemptions.  The reduction of use of fossil fuels and the reduction of tires in landfills in Nevada was important.  The economic development aspect had become secondary.  The proposed language was consistent with current statutory language and was a result of much discussion.

 

Janice Wright, Deputy Director, Nevada Department of Taxation, stated she had reviewed the amendment language and said it fit well within the language parameters for the exemption for solar energy which had been used minimally.  She noted only the solar equipment was exempt in current statute.  The new language dealt with the facility for the production of electrical energy (and there were solar facilities which would qualify at this time) and the department would view the language to include the total value of the equipment, the generating facility's building and land, unless there was an alternate use, such as housing, on the land. 

 

In answer to a question from Mrs. Lambert, Ms. Wright said personal property generally had a shorter depreciable life than real property improvements.  She also agreed a July 2 effective date would eliminate any problems for the county assessors.

 

Mr. Spitler asked why the twenty-five year exemption noted in Section 4 was not applicable to Sections 1 and 2.  Ms. Wright answered real property had a life which exceeded 25 years.  Mr. Thom Shelton, CMS Generation Company, added Carole Vilardo had suggested the "not to exceed a period of twenty-five (25) years" language because she wanted the exemption period quantified.  It represented no change to current law.  Mr. Spitler asked if it could be changed from 25 years to something shorter in subsequent sessions.  Ms. Wright said legislative authority would allow a reduction and could change the taxability of property currently existing.

 

Howard Barrett, Nevada Taxpayers Association, said he believed Section 4 had been added because of some objection Ms. Vilardo had had to the provisions of the exemption when it had been considered from the economic development perspective.  She did not believe any exemption should be ongoing.  He said in the bill's new form the 25-year limitation should apply to all sections of the bill.  Chairman Price said the limitation could be addressed in the next session, subsequent to the study on exemptions.

 

Mrs. Lambert suggested the exemption period be reduced for personal property.  Discussion of the appropriate exemption periods for various property, real versus personal and mixed, ensued.  Mr. Dan Tobias, Barakat and Chamberlin, said the life for personal property allowed by the Internal Revenue Service, was up to fifteen years, depending on the class of property.  Discussion of the impact on the Clark County tax base and revenue followed.

 

Mr. Spitler said if there was an appetite to pass this measure, he did not think they should worry about the amendments. Also, amendments could be handled in the Senate.  Mr. Shelton stated the key point was there had to be a starting point for power generation facilities which used less fossil fuels and which began to address the benefits of recycled materials and solar.  He believed including their project in this section of NRS was the most logical.

 

Alan Glover, Nevada Power Company, noted the changes suggested in EXHIBIT C removed the project from the economic development section of NRS to the environmental, recycling and regeneration chapters.  He noted the Public Service Commission already granted reductions to plants using non-fossil fuels.  He suggested if there were additional savings due to the PSC allowances, there be some provision made to pass any savings on through to the ratepayers.

 

A discussion ensued regarding exemption terms, property covered and not covered by the exemptions, assignee responsibilities and beneficial uses, et cetera.

 

      * * * * * * * * * *

 

      ASSEMBLYMAN ERNAUT MOVED AMEND AND DO PASS AB 768.

 

His suggested amendments were to use a July 2, 1993 effective date; to include the term "non-fossil fuels and recycled materials" in the description of NRS 361.076; and, to restrict the exemption to 15 years on personal property. 

 

      ASSEMBLYMAN REGAN SECONDED THE MOTION.

 

Mrs. Williams commented, not to reflect on the merit of the bill itself, she had maintained a policy throughout the session to vote for no new exemptions.  She, therefore, would vote in opposition to the bill.

 

Mr. Ernaut enjoined he still believed this issue was an economic development issue, regardless of the NRS Chapter affected.  He felt the state needed this project in spite of its creation of a new exemption.

 

Mrs. Lambert stated she had a potential conflict and would abstain.

 

      THE MOTION PASSED. 

      ASSEMBLYMAN LAMBERT ABSTAINED.

      ASSEMBLYMEN MYRNA WILLIAMS, MARVEL AND NEIGHBORS VOTED NO.

 

      * * * * * * * * * *

 

Chairman Price called for testimony on AB 770.  The bill explanation is attached as EXHIBIT D.

 

ASSEMBLY BILL 770 -     Proposes to add definition of "amount of rental charged" to Sales and Use Tax Act of 1955.  (BDR 32-651)

 

Janice Wright, Deputy Director, Nevada Department of Taxation, said this bill was requested by the department in order to clarify the tax policy on property which was rented or leased.  She explained there had been regulations adopted in 1991 by the Nevada Tax Commission which had provided mandatory rental costs were taxable and optional rental costs were nontaxable.  Those regulations had been challenged.  AB 770 would allow the department to put a question before the voters to provide, if approved, all rental and lease charges be taxable transactions.

 

After a brief interchange as to what would and would not be included, Perry Comeaux, Executive Director, Nevada Department of Taxation, explained the taxability of various items which were not subject to sales tax (such as fuel costs for a rented airplane).  Under the provisions of AB 770, if a person elected to have the airplane fueled as a part of the rental, that service would be a taxable transaction as would be any other charge for services rendered in connection with the sale or rental of tangible personal property and sales tax would be charged. 

 

Mr. Comeaux elaborated rental companies had the choice of either paying sales tax on the goods or equipment they intended to rent to the public and not have to charge sales tax on the rental fee, or they could buy the goods or equipment without tax and collect tax on the rental charges over the life of the goods or equipment.  This bill did not change existing law, in that respect.  (In the airplane example above:  If the rental company chose to pay sales tax up front on the airplane, the company would not have to charge sales tax on renting out the airplane or anything associated with its rental.)

 

Mr. Comeaux explained the kind of transaction this bill was modeled for was where a company was leasing show and convention sets and the mandatory part of the set was minimal, yet the optional items rented could be substantial.  He added it was the department's position all items which comprised the set should be taxable, including delivery and striking and removal of the set which costs were sometimes optional now.

 

Mr. Regan asked if, in a situation where it took a week to set up, a week for the show, and a week to tear down, all the charges would be taxable under the language in AB 770.  Mr. Comeaux affirmed all those charges would be taxable, whether optional or mandatory.

 

Peter Kruger, Nevada Rental Association, stated his association was opposed to the bill, especially as it pertained to deposits, and damage waivers on everything from party to construction equipment rented by small, short-time rental businesses.

 

In answer to a question from Mrs. Williams, Mr. Comeaux stated it would be difficult to estimate the revenues this change would generate because optional rental figures were not reported under current statute.

 

Chairman Price added rental companies generated a great deal of their profits from the optional coverages for which they charged, such as insurance and damage waivers, et cetera.  Mr. Comeaux said under this bill those charges would become taxable.

 

In response to a query from Mr. Marvel, Mr. Comeaux replied there would be no additional audit costs, because almost everyone affected was already being audited.  He pointed out this bill, if passed, would only provide the department the ability to go to the voters to see if there was appetite for inclusion of all rental charges as taxable transactions.  He also explained, responding to a comment from Mr. Neighbors about minimal use rentals, sales tax was a transaction tax and, therefore, tax could be charged on the same personal property (and related incidentals) over and over.

 

Chairman Price said action on this bill would be handled later in the meeting.

 

 

      * * * * * * * * * *

 

ASSEMBLY BILL 779 -     Requires constructionof certain school in Mineral County.  (BDR S-2108)

 

Chairman Price called for discussion of AB 779.  The bill explanation is attached as EXHIBIT E.  He said amendments were being drafted to AB 779 which eliminated the "hammer" in the bill.  He gave a brief background of the evolution of AB 779.  When the gas tax bill had found no support in the committee, the bill draft for Mineral County schools had been drafted.  After hearings in Hawthorne and subsequent discussion in committee, the bill was requested in a slightly different form where the concept would go to a vote of the people with a provision for the use of sales tax and privilege tax which would allow a break on the impact on property taxes for Mineral County residents and if a bond was not passed, then the state would mandate Mineral County to build the schools in Mineral County.  At this time he simply wanted to verify the members of the committee wanted to proceed with amendment of the bill without the mandatory "hammer" provision. 

 

 

      * * * * * * * * * *

 

ASSEMBLY BILL 188 -     Directs issuance of Nevada silver coins. (BDR 31-1094)

 

Chairman Price asked David Horton to report on AB 188, "The Silver Coin Bill".  Mr. Horton submitted new language for AB 188 which made the bill into a voluntary "token bill".  The proposed language is attached as EXHIBIT F.  He said the amendment language would limit the coin to a $5 token (which would be sold for use in $5 slot machines at a cost of $4.75).

 

In response to a question from Mrs. Williams, Mr. Horton stated there would be no constitutional question as to its use in these circumstances because it would be used like scrip and could basically be used as a state credit instrument.  Mrs. Williams stated the provision relative to use of the coins in payment of local taxes and fees still bothered her.

 

Mr. Ernaut stated the subcommittee had reported the bill back to committee without recommendation.  He said his concern was these coins would be minted and then end up in a warehouse somewhere.

 

Mr. Regan asked how much the tokens would cost.  Mr. Horton said he was not sure, but he would estimate $2.  Mr. Regan said he felt it would be closer to $1.70, based on his experience with token costs.

 

Mr. Horton agreed the language in the amendment could be altered to exclude "or local" on line 43, page 1.

 

      ASSEMBLYMAN REGAN MOVED AMEND AND DO PASS AB 188.

 

      ASSEMBLYMAN SCHNEIDER SECONDED THE MOTION.

 

      THE MOTION PASSED.

 

      * * * * * * * * * *

 

 

ASSEMBLY BILL 731 -     Proposes to revise provisions governing exemption of gross receipts from sales of tangible personal property to and by specified governmental entities and certain charitable, educational or religious organizations from certain taxes on retail sales.  (BDR 32-975)

 

Chairman Price called for discussion of AB 731. 

 

Bobbie Gang, Nevada Women's Lobby-Reno, spoke in support of AB 731 with the proposed amendments attached as EXHIBIT G.  She wanted to see the language of the law conformed to the way it had always been interpreted:  sales to or from charitable organizations would be exempted from sales tax.  She was in favor of the proposed amendment which had completely changed the sense of the original bill.  Any questions as to the effect of the amendment should be addressed during the interim in conjunction with the taxation department.

 

      ASSEMBLYMAN REGAN MOVED TO AMEND AND DO PASS AB 731.

 

      ASSEMBLYMAN ERNAUT SECONDED THE MOTION.

 

Chairman Price asked Mr. Comeaux and Lucille Lusk, Nevada Coalition of Concerned Citizens, if they had read and were in agreement with the amendment proposed.  Both replied affirmatively.  Mr. Comeaux commented he believed the statute could be reviewed in the 1995 session if any questions or problems arose in the meantime.  But, for now, this clarification would give the department necessary guidance in their audits of charitable organizations.

 

      THE MOTION PASSED.

 

      * * * * * * * * * *

 

      ASSEMBLYMAN ERNAUT MOVED TO INDEFINITELY POSTPONE AB 770.

 

      ASSEMBLYMAN JOAN LAMBERT SECONDED THE MOTION.

 

      THE MOTION PASSED UNANIMOUSLY.

 

There being no further business to come before committee, the meeting was adjourned at 6:45 p.m.

 

      RESPECTFULLY SUBMITTED:

 

 

                             

      LINDA CHANDLER LAW

      Committee Secretary

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Assembly Committee on Taxation

June 25, 1993

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