MINUTES OF THE JOINT MEETING OF

      SENATE COMMITTEE ON TAXATION

      AND

      ASSEMBLY COMMITTEE ON TAXATION

 

      Sixty-seventh Session

      February 4, 1993

 

 

 

The joint meeting of the Senate Committee on Taxation and the Assembly Committee on Taxation was called to order by Senate Chairman Dean A. Rhoads, at 2:06 p.m., on Thursday, February 4, 1993, in Room 119 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Meeting Agenda. 

 

SENATE COMMITTEE MEMBERS PRESENT:

 

Senator Dean A. Rhoads, Chairman

Senator Ann O'Connell, Vice Chairman

Senator Sue Lowden

Senator Bob Coffin

Senator Raymond C. Shaffer

Senator Ernest E. Adler

 

ASSEMBLY COMMITTEE MEMBERS PRESENT:

 

Mr. Robert E. Price, Chairman

Mrs. Myrna T. Williams, Vice Chairman

Mr. Rick C. Bennett

Mr. Bernard Anderson

Mr. Roy Neighbors

Mr. John B. Regan

Mr. Michael A. Schneider

Mr. Larry L. Spitler

Mr. Peter G. Ernaut

Ms. Joan A. Lambert

Mr. John W. Marvel

 

SENATE COMMITTEE MEMBERS ABSENT:

 

Senator Randolph J. Townsend, (Excused)

 

ASSEMBLY COMMITTEE MEMBERS ABSENT:

 

Mr. Ken L. Haller, (Excused)

 

STAFF MEMBERS PRESENT:

 

Kevin D. Welsh, Deputy Fiscal Analyst, Legislative Counsel Bureau

Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau

Billie Brinkman, Senate Committee Secretary

Sandi Machado, Assembly Committee Secretary

 

OTHERS PRESENT:

 

Norman D. Glaser, Chairman, Nevada Tax Commission

Keith Ashworth, Member, Nevada Tax Commission

Barbara Smith Campbell, Member, Nevada Tax Commission

Candace E. Fox, Member, Nevada Tax Commission

Henry B. Sprenger, Sr., Member, Nevada Tax Commission

John E. Marvel, Member, Nevada Tax Commission

Janice A. Wright, Deputy Executive Director, Department of Taxation

Perry Comeaux, Executive Director, Department of Taxation

 

Chairman Rhoads welcomed members of the Nevada Tax Commission to the joint meeting of the taxation committees.

 

Chairman Rhoads introduced Norman D. Glaser, Chairman, Nevada Tax Commission.  Mr. Glaser explained one of the responsibilities of the tax commission is developing regulations and holding hearings on implementing the taxes that are passed by the legislature.   He said there are generally two concerns brought forth when the tax commission meets:  1) developing regulations, and implementing the legislation that has been passed; and 2) the commission sits as a board to hear the concerns of the taxpayer.   He said the tax commission represents the state of Nevada and the commission recognizes the state is financially hard pressed.  The duties of the tax commission and the Department of Taxation is to collect the taxes.  Mr. Glaser complimented the Department of Taxation on the job it does collecting taxes.  He said one of the taxes never before collected is the use tax from people who purchased items outside the state.  He pointed out registering vehicles out-of-state is one area to avoid use tax.  He said fees have been tripled on those people trying to circumvent the Nevada law.

 

Mr. Glaser introduced Keith Ashworth, member of the Nevada Tax Commission.  Mr. Ashworth said in the process of the  proposed Governor's reorganization plan there will be changes made which were not objectionable to the commission.  He said one of the budget items shows a plan that the Nevada Tax Department will lose two local government's budget analysts.  He said the review and scrutiny of local government's budgets will be taken away from the tax commission per se.  His comment was that if those two positions are abolished, the responsibilities which accompany those jobs should also be abolished, such as reviewing local budgets and preparing the "Redbook" (1992-1993 Ad Valorem Tax Rates For Nevada Local Governments) because that document is prepared from all the information  coming from local government's budgets.    He said the commission does not want to take exception to the Governor's reorganization plan, but there was a concern about taking some of the tools away. Mr. Ashworth cautioned that the commission and the tax department not be held  responsible for the jobs done by the two analysts whose positions are proposed to be abolished.

 

Mr. Ashworth continued with another topic  --  bottled water.  Water coming from a vending machine versus water that is purchased in a store.  He said tax is paid on the water in the vending machine, but there is no tax on the water purchased in the store.  He said that issue has come before the commission twice, and that problem has not yet been solved.  He encouraged the taxation committees to consider this issue.

 

Senator Adler pointed out he had introduced a bill dealing with the vending water issue.

 

Assemblywoman Williams asked in reference to losing two local government analysts, who will make those kinds of decisions.  Will they still be in the purview of the tax commission or will it be advisory and the decision made by the Department of Taxation.

 

Perry Comeaux, executive director of the Department of Taxation, came forward to address Mrs. Williams' question. He said in terms of who will prepare the "Redbook",  he had not seen a draft of legislation that would change the existing law to remove most, if not all, of the department's responsibility in the local government's finance area.  One option would be to have the department prepare the "Redbook" simply from the information provided by local governments.  But, he pointed out, he does not know what the proposed bill will say about that.  He said, hopefully, that information would be in his hands in a matter of days.  In terms of the tax commission, the Governor's reorganization plan has no effect on the tax commission, according to Mr. Comeaux.

 

Mr. Ashworth said in reference to the reorganization plan, he understood local governments would no longer be required to submit a tentative budget or a final budget for approval to the tax commission.  He said that was fine if that was what the legislature wanted, but that information submitted to the tax commission is used to compile the "Redbook", which contains the valuations and the tax rates.

 

Senator O'Connell asked if the tax commission does more than go over the figures, do they debate the issues, or simply "rubber stamp" the submitted documents and take the information from the tentative budget to make up the "Redbook".

 

Mr. Ashworth, in reply, said during the process of the tentative budget, the tax department meets with the local governments, one on one, and many changes may be made between the tentative budget and finalization.

 

Assemblywoman Lambert inquired if it becomes necessary for the local governments to bump the $3.64 property tax cap can the local governments iron out the problems or will the tax commission be  asked to settle disputes over the tax cap. And if the commission has that responsibility,  will there be enough staff to handle the problems with the proposed abolishment of the two analyst positions.

 

Mr. Ashworth explained it was the understanding of the commission that within the reorganization plan a lot of the responsibility for oversight of the local governments will be taken away from the tax commission and those things will be ironed out at the local government level.  He stated that if a local government bumps the tax rate cap, then that would have to be ironed out between those local entities.

 

Assemblyman Marvel commented, as a former member of the tax commission, there were several counties which always exceeded the then $5.00 cap.  There was no arbitration among any of the local entities.  The tax commission had to make the decisions on how the $5.00 cap was to be distributed. He said he felt the local governments look to the oversight  of the commission and the tax department. They not only depend on it, but they need it.

 

Mr. Glaser noted the commission had been informed by Janice Wright, Deputy Executive Director, Department of Taxation, that 65 percent of the local government's tentative budgets are out of compliance when they reach her department.  After adjustments, those budgets are 97 percent in compliance.  She also pointed out if the counties had the sole responsibility of being in compliance, the preliminary budgets would probably be closer to compliance.

 

Mr. Glaser introduced Henry Sprenger, Sr., member of the Nevada Tax Commission.  Mr. Sprenger talked on the basic cost of cigarettes that come into Nevada and said this subject will be coming up before the taxation committees.  He admonished the committee members to be aware of this issue before it comes up.  Mr. Sprenger continued with another item which is the lack of statutory definition for charitable      organizations.  He asked the legislative members to provide the tax commission with a definition of a non-profit organization, a tax exempt organization.

 

Mr. Glaser introduced John E. Marvel, member of the Nevada Tax Commission.  Mr. Marvel is the subcommittee chairman for the problem that has arisen with respect to the "object of the transaction" which has to do with taxation of services.  He pointed out the creative services industry has cooperated a great deal.  That industry is writing proposed regulations which it is hoped will resolve the problems without the necessity of legislation.   Mr. Marvel explained creative services covers such industries as photographers, media, public relations, etc., and the question is whether those industries should be subject to taxation. 

 

Mr. Glaser introduced Barbara Smith Campbell, member of the Nevada Tax Commission.  She outlined her concern on the "object of transaction".  She said the department is referring to the problem as "unbundling of the transaction".  She indicated other arenas involved are leasing regulations and freight delivery.  She pointed out when the service is a distinct and separate transaction, it is not subject to the sales or use tax.  However, Ms. Campbell noted when the commission has the responsibility of instituting  regulations, it does not encourage or promote businesses to "unbundle" their transaction.   Ms. Campbell said her area of concern is in developing future regulations through legislation for the department to administer.  She stressed the  process should be looked at  completely so the  intent is clear and businesses are not encouraged to "unbundle the transaction" to the customer.

 

Another Nevada Tax Commission member,  Candace Fox, was introduced by Mr. Glaser.  Ms. Fox  said she appreciated the commission's sense of balance between trying to respect the needs of the taxpayers, and at the same time respecting the revenue needs and carrying out the state statutes and regulations.  She discussed the relationship between the Department of Economic Development, the tax commission and Department of Taxation.  Specifically, she pointed out the deferrals granted by the economic development department and the commission on sales tax for projects in progress.  She said the  agendas between the economic department and the tax commission differ --  their agenda is to promote and encourage new businesses to come into the state, and the tax commission  supports that, but it is cognizant of the kinds of taxes being deferred in terms of dollars.  Ms. Fox outlined that presently somewhere between $16 million and $17 million in sales tax has been deferred on developing businesses in this state.  And, Ms. Fox said, at this point the Department of Taxation has no review authority, no advisory capacity over those deferrals.  Ms. Fox remarked it would seem to be a logical responsibility of the tax commission to at least have some sort of a review process over those deferrals.

 

Assemblyman Price commented it had never occurred to him that perhaps the committees should look at the deferrals referred to by Ms. Fox.

 

Mr. Glaser expressed one of the concerns before the commission when sitting as a panel and hearing the distressing stories from the taxpayers is to have  the power to forgive only the penalty.  Mr. Glaser asked that some latitude be given the tax commission by the legislature, so that those folks who are not intentionally defrauding the state, the hardship cases, could be given a little leniency.

 

Mr. Glaser mentioned a bill which has been introduced by Assemblywoman Lambert, Assembly Bill 101.

 

      Assembly Bill 101:  Authorizes department of taxation to

                            waive payment of interest on certain                                 taxes.

 

Mr. Glaser commended Assemblywoman Lambert for introducing that legislation.  He said perhaps it would provide a little more latitude to the tax commission, other than just forgiving the penalty.  He acknowledged the desire of the tax commission is to keep the taxpayer in business.  He said the commission is business oriented and tries to keep the regulations to a minimum.

 

Assemblywoman Lambert pointed out that A.B. 101 would give the commission the ability to waive penalties or interest or both at the discretion of the tax commission.

 

Senator Coffin inquired as to the current interest rate being charged on overdue taxes.  Mr. Glaser replied 1.5 percent per month -- 18 percent per year.  Senator Coffin suggested the rate be lowered to a straight 6 percent per year.  Discussion followed.

 

Assemblyman Ernaut remarked, for the record, that he was born in Mr. Glaser's district when he (Mr. Glaser) was a Senator for Nevada.  He told Mr. Glaser, "it is an honor to be sitting across from you today.  A legend in my hometown."

 

Senator O'Connell complimented the  Nevada Tax Department on the cooperation they show the business person and the taxpayer.  She said she felt the concern shown the Nevada people by this department is a tribute to the commission and the leadership.

 

Mr. Norman concluded the remarks by reading Senate Bill 1000  (Exhibit B).

 

Chairman Rhoads adjourned the meeting at 3:04 p.m.

 

 

                                                   RESPECTFULLY SUBMITTED:

 

 

                                                                     

                                   Billie Brinkman,

                                   Committee Secretary

 

 

 

 

 

 

 

 

APPROVED BY:

 

 

 

 

                                    

Senator Dean A. Rhoads, Chairman

 

 

DATE:                              

 

 

                                   

Mr. Robert E. Price, Chairman

 

 

DATE:                              

??

 

 

 

 

 

 

 

Senate Committee on Taxation

Assembly Committee on Taxation

February 4, 1993

Page 1