MINUTES OF THE

      SENATE COMMITTEE ON TAXATION

 

      Sixty-seventh Session

      May 13, 1993

 

 

 

The Senate Committee on Taxation was called to order by Chairman Dean A. Rhoads, at 2:35 p.m., on Thursday, May 13, 1993, in Room 224 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Meeting Agenda.  Exhibit B is the Attendance Roster.

 

 

COMMITTEE MEMBERS PRESENT:

 

Senator Dean A. Rhoads, Chairman

Senator Ann O'Connell, Vice Chairman

Senator Randolph J. Townsend

Senator Sue Lowden

Senator Bob Coffin

Senator Raymond C. Shaffer

 

COMMITTEE MEMBERS ABSENT:

 

Senator Ernest E. Adler (Excused)

 

STAFF MEMBERS PRESENT:

 

Kevin Welsh, Deputy Fiscal Analyst

Billie Brinkman, Committee Secretary

 

OTHERS PRESENT:

 

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

Carole Vilardo, Lobbyist, Nevada Taxpayers Association

Dan Miles, Fiscal Analyst

Marvin Leavitt, Lobbyist, City of Las Vegas

Chairman Rhoads called for a committee introduction of Bill Draft Request (BDR) 41-1994.

 

BDR 41-1994:      Eliminates Nevada racing commission and transfers responsibilities to Nevada gaming commission.

 

      SENATOR COFFIN MOVED FOR COMMITTEE INTRODUCTION OF

      BDR 41-1994.

 

      SENATOR TOWNSEND SECONDED THE MOTION.

 

      THE MOTION PASSED.  (SENATOR ADLER WAS ABSENT FOR THE VOTE.)

 

      *****

 

Chairman Rhoads opened the hearing on Senate Bill (S.B.) 446.

 

SENATE BILL 446: Reduces rate of interest on delinquent taxes.

 

Senator Coffin, as requestor of S.B. 446, stated he supports the measure because the annual rate of interest, 18 percent, on back taxes, is too high.  He said S.B. 446 reduces the annual interest rate to 9 percent  from 18 percent.

 

Janice Wright, Deputy Executive Director, Department of Taxation, came forward to speak to the fiscal impact of S.B. 446.  She referred to the Fiscal Note (Exhibit C), and pointed out the figures for Fiscal Year 1993-1994 show a revenue loss of $2.3 million.  She pointed out because of a tracking program, these figures are very accurate.  However, Ms. Wright told the committee the business tax figure showing a loss of $136,500, is not an accurate figure.

 

Ms. Wright asked that the effective date in S.B. 466 be changed from July 1, 1993, to October 1, 1993, due to the necessity of printing new forms and other preparatory programs in the event the measure becomes law.

 

Ms. Wright said correspondence had been received by several legislators, as well as the Department of Taxation, from taxpayers addressing the fact they were not aware of the use tax being due to the Department of Taxation.  Upon being audited, they were surprised to find they had a back deficiency assessed against them for non-payment of the use tax. Ms. Wright said many businesses, which are not vendors and therefore do not pay sales tax, were not aware they had to pay use tax.  She said a serious problem had been created. 

 

Ms. Wright informed the committee the Department of Taxation had requested the Governor to approve an amnesty program which had been accomplished.  The amnesty program was designed to grant a business which is not currently a retail vendor, a 3-month period of time in which they could self-assess themselves on how much use tax is currently owed, and they would not be subject to a penalty.  The interest would also be reduced to half--from 18 percent to 9 percent.  However, the use tax would still have to be paid.  The design of the Department of Taxation is intended to recognize the difficulty the business people experience in trying to be aware of all financial requirements put upon them by the state for operating a business.  Ms. Wright said the Department of Taxation desires to give the business person the least intrusive way of remitting the back taxes to the state.

 

Chairman Rhoads inquired if the amnesty program offered by the Department of Taxation would reduce the revenues in the budget currently before the legislature.  Ms. Wright said the interest amounts would be slightly reduced, and that the penalty amounts have not had a material impact on the state of Nevada as a whole.  Ms. Wright said amnesty programs had been offered in the past and they did not find the penalties added up to a large amount of revenue.

 

Ms. Wright said the Department of Taxation wants to keep its interest rate higher than professional lenders, because the state does not wish to be a lender.   Ms. Wright said in tracking the prime interest rate since 1960, she thought the present prime interest rate plus 2 percent would, at this time, come very close to the 9 percent interest rate as  outlined in S.B. 446.  She said the taxation department believes this measure is a reasonable approach to the penalty and interest problems.  She informed the committee that the interest and penalty revenues go into the state General Fund, therefore, cities and counties would not be effected by the lower interest rate.

 

Discussion ensued on the plans for notifying all taxpaying business people concerning the use tax and the interest and penalty policies.

 

Carole Vilardo, Lobbyist, Nevada Taxpayers Association, came forward to remark on S.B. 446.  She noted the figures in the Fiscal Note are not a constant revenue source because it is an unknown quantity.  Ms. Vilardo said the Nevada Taxpayers Association supports the concept of S.B. 446, but they would rather see the penalty raised to 1 percent per month rather than the prime interest rate plus 2 percent.  Ms. Vilardo said the penalty has been very well defined in the fact that it would not be cheaper for a business to delay paying taxes because of the interest rates.  She feels an absolute rate should not be established by statute.  Ms. Vilardo said the Nevada Taxpayers Association supports S.B. 446.  They do think the present annual 18 percent is too high, but could support an annual rate of 12 percent for the upcoming 2-year period.

 

Ms. Wright commented it is the responsibility of the legislators to decide the annual interest rate.  However, she said allowing the interest rate to be variable would be a problem for the Department of Taxation due to the cost of changing the program periodically.

 

Ms. Vilardo commented that reducing the interest for the amnesty program would not cost the Department of Taxation revenue.

 

Ms. Wright noted that the Department of Taxation would be very lenient toward any business that requests a time-payment plan as a way to pay the past due taxes, interest and penalties.  She said it is not the design of the system to put people out of business, but to cooperate to the extent that they can stay in business.

 

Marvin Leavitt, Lobbyist, City of Las Vegas, remarked he thought the interest rate should be tied to the prime interest rate.

 

Chairman Rhoads closed the hearing on S.B. 446.

 

Chairman Rhoads introduced Dan Miles, Fiscal Analyst, and requested that he bring the committee up to speed on the status of the budgets for the fiscal years of 1993, 1994 and 1995.

 

Mr. Miles walked the committee through the status report as outlined on a handout (Exhibit D).

 

Mr. Miles then called the attention of the committee to a handout, "Estimated Shortfall if Governor's Revenue Proposals and FCA (Facility Capacity Act) are not Passed" (Exhibit E).  He explained the document to the committee and answered questions from committee members concerning the figures.

 

Discussion followed concerning the revenues and appropriations.

 

Chairman Rhoads thanked Mr. Miles for his presentation.  There being no further business to come before the committee, the meeting was adjourned at 3:30 p.m.

 

 

                  RESPECTFULLY SUBMITTED:

 

 

     

                                          

                  Billie Brinkman,

                  Committee Secretary

 

 

 

APPROVED BY:

 

 

 

 

                                 

Senator Dean A. Rhoads, Chairman

 

 

DATE:                           

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Senate Committee on Taxation

May 13, 1993

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