MINUTES OF THE

      SENATE COMMITTEE ON TAXATION

 

      Sixty-seventh Session

      May 18, 1993

 

 

 

The Senate Committee on Taxation was called to order by Chairman Dean A. Rhoads, at 2:05 p.m., on Tuesday, May 18, 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

Senator Ernest E. Adler

 

GUEST LEGISLATORS PRESENT:

 

Senator Leonard Nevin,  Washoe County Senatorial District No. 2

 

STAFF MEMBERS PRESENT:

 

Kevin Welsh, Deputy Fiscal Analyst

Billie Brinkman, Committee Chairman

 

OTHERS PRESENT:

 

Raymond L. Sparks, Chief, Registration Division, Department of Motor       Vehicles and Public Safety

Sherry Blackwell, Assistant Chief, Motor Carrier Bureau, Department    of Motor Vehicles and Public Safety

Stephanie Tyler, Lobbyist, Nevada Propane Dealers Association

Patrick V. Fagan, Lobbyist, Yellow-Checker-Star Cab Companies

Jack Owens, General Manager, Yellow-Checker-Star Cab Companies

Daryl E. Capurro, Lobbyist, Nevada Franchised Auto Dealers Association

 

Chairman Rhoads requested a committee introduction of Bill Draft Request (BDR) 32-1346.

 

BDR 32-1346:      Makes changes in taxing sale and use of motorboats.

 

      SENATOR TOWNSEND MOVED FOR COMMITTEE INTRODUCTION OF

      BDR 32-1346.

 

      SENATOR COFFIN SECONDED THE MOTION.

 

      THE MOTION CARRIED.  (SENATORS O'CONNELL AND LOWDEN WERE

      ABSENT FOR THE VOTE.)

 

      *****

 

Chairman Rhoads opened the hearing on Senate Bill (S.B.) 455.

 

SENATE BILL 455:  Eliminates conversion factor for liquefied petroleum gas used in calculation of tax on special fuel.

 

 

Senator Leonard Nevin, Washoe County Senatorial District No. 2, explained there were two bills before the committee and that he had requested both of them on behalf of the Department of Motor Vehicles and Public Safety.

 

He explained, in reference to S.B. 455, that during the 1991 Legislative Session, a bill was passed which gave an allowance to users of propane as an energy-saving device.  He indicated the issue became very confusing and that Nevada lost a lawsuit as a result of the confusion at a cost of about $800,000 out of the highway fund.  Senator Nevin explained S.B. 455 "brings it back into compliance" and puts money back into the highway fund through provisions of this legislation.

 

Senator Nevin went on to discuss Senate Bill (S.B.) 454.

 

SENATE BILL 454:  Makes various changes related to motor carriers.

 

Senator Nevin explained the Department of  Motor Vehicles and Public Safety had requested S.B. 454.  He said this measure, as well as S.B. 455, is a revenue saver.  He said S.B. 454 cleans up the Nevada Revised Statutes (NRS) for Department of Motor Vehicles and Public Safety.

 

Raymond Sparks, Chief, Registration Division, Department of Motor Vehicles and Public Safety, and Sherry Blackwell, Assistant Chief, Motor Carrier Bureau, Department of Motor Vehicles and Public Safety, came forward to discuss S.B. 455.

 

Mr. Sparks explained this measure changes the conversion factor for liquefied petroleum gas (LPG or propane) for taxation purposes.  He said LPG is considered a special fuel, along with diesel, compressed natural gas and other types of fuels other than gasoline, which are used in motor vehicles.  Special fuel tax is collected by the Motor Carrier Bureau.  He said the tax rate for special fuels, other than compressed natural gas and LPG, currently is 27 cents per gallon.  A reduced rate had been established for compressed natural gas and LPG at 23 cents per gallon, which he said is to recognize the relative efficiencies and provide some kind of a break because of the environmental issues in that type of fuel. 

 

Mr. Sparks explained the statute, NRS 366.197, provides for a conversion formula to be used in determining the taxable gallons for compressed natural gas and LPG in computing the tax liabilities.  That is the statute that is proposed to be amended by S.B. 455.  The LPG is a liquid and is sold and dispensed in a liquid state. 

 

Mr. Sparks pointed out NRS 366.197 provides the conversion formula which states the gallons are determined based on a formula based on cubic feet.  He said to apply that particular conversion formula, one has to take the product in its liquefied state, apply some factor to convert it to cubic feet, and then provide the statutory formula to convert it back to gallons for tax purposes.  Mr. Sparks said obviously, in the case of compressed natural gas, the formula is necessary because the compressed natural gas is in a gaseous state.

 

Mr. Sparks pointed out LPG is in a liquid state so it is somewhat illogical to go from liquid to cubic feet back to liquid to determine a tax rate. 

 

He informed the committee that the Department of Motor Vehicles and Public Safety had levied an audit assessment against a major user of LPG in southern Nevada and was challenged on the rejection of their use of this conversion formula.  The user asked for a re-determination from the "department" and the "department" did not agree with the user argument being made in this case, therefore the situation went to court and it was ruled  that NRS 366.197 was clear in stating the formula to be used. 

 

Mr. Sparks explained the "department" was not sure that the intent of the legislators was to provide for a convoluted conversion method, whereby a gallon somehow becomes less than a gallon for tax purposes.  Mr. Sparks said he believed the different tax rate for diesel fuel and LPG was set forth with the intent to provide a special break for users of those types of fuels.  He indicated S.B. 455 would simply  strike the terms "liquefied petroleum gas" from the existing statute which provides for the conversion formula.  He said the conversion formula would not apply under the new measure, but that the lower rate of 23 cents per gallon would prevail.

 

Mr. Sparks further explained the conversion formula provides that when a user of LPG purchased 100 gallons, then the rate would be 23 cents per gallon.  With the application of the conversion formula, the 100 gallons ends up being about one-third of that, or about 30 gallons and the tax is paid on 30 gallons under the application of the present formula.

 

Senator Coffin referred to a committee hearing in the Sixty-sixth Session whereby a bill was heard which ultimately became NRS 366.197.  Senator Adler added to the discussion.  Chairman Rhoads requested Mr. Welsh to research the minutes from the referenced hearing of the Sixty-sixth Session.

 

Chairman Rhoads read a letter into the record from Michael H. Naylor, Director, Air Pollution Control Division, Clark County Health District (Exhibit C) in opposition to S.B. 455.

 

Stephanie Tyler, Lobbyist, Nevada Propane Dealers Association, came forward to express opposition to S.B. 455.  She pointed out that reference to the discussion from the Sixty-sixth Session was very critical to rolling back any provisions from this bill.  She asked for the opportunity to re-address S.B. 455 because the president of the Nevada Propane Dealers Association, Mike Ericksen, was delayed and could not be present at this hearing.

 

Patrick V. Fagan, Attorney representing Yellow-Checker-Star Cab Companies, and Jack Owens, General Manager, Yellow-Checker-Star Cab Companies, came forward to speak in opposition to S.B. 455.    Mr. Fagan spoke from a prepared handout (Exhibit D, the original is on file in the Research Library.

 

Mr. Fagan explained he felt the confusion came from the argument advanced by the Department of Motor Vehicles and Public Safety that LPG or propane is a liquid.  He explained that propane, when it is exposed to normal atmospheric conditions, pressure and temperature, is a vapor.  Mr. Fagan stressed it is misleading to characterize propane as a liquid because "it is not."  He said it is transported as a liquid only when it is under pressure and at a lower temperature than the atmospheric temperature.  Mr. Fagan pointed out a problem had arisen because NRS 366.197 provided that the fuel be taxed as it is consumed, not on the amount of fuel that is stored or transported.

 

Mr. Fagan told the committee that he had reviewed statutes in other states to gain information on how other states tax propane.  He said practically every state that he reviewed, including Utah, Idaho and Montana, all have mechanisms in the statutes which promote the utilization of alternative fuels, and particularly propane.  He said Utah defines propane to be a clean fuel and its use is promoted, as it is in California.  He explained they utilize a sticker tax as opposed to taxing on a per-gallon basis, as an incentive to use a clean fuel.

 

Mr. Fagan remarked that S.B. 455 is a significant step backwards from promoting clean air.

 

Senator Adler inquired how the tax is calculated.  Mr. Fagan explained:

 

      We try to determine how much vaporous propane was burned.  To do that we have to utilize a conversion factor that finds the amount of cubic feet of propane that was introduced into the ignition system at normal atmospheric conditions, pressure and temperature.  It is not normal for this fuel to be a liquid.  It is colder there and it is under pressure.  So we find a standard scientific equivalent and utilizing that equivalent, we find the total amount of the vapor that was consumed in propelling the vehicle, as required by NRS 366.540, and then once we find the total cubic feet, we apply the conversion factor found in NRS 366.197.

 

Senator Adler asked if the tax is paid on 125 cubic feet of vapor based upon atmospheric conditions, to which Mr. Fagan replied, "That is correct."

 

Discussion ensued.

 

Chairman Rhoads asked Mr. Owens the approximate cost of converting a vehicle engine from gasoline to propane.  Mr. Owens said, commercially, it would cost between $1,500 to $2,000.  He said his company had invested about $l.5 million in the fueling and storage facility and the conversion program of the 300 units owned by the Yellow-Checker-Star Cab Companies.  He said Clark County is hoping to encourage other fleet-type businesses to convert to propane use.

 

Mr. Owens said the main reason his cab company converted to propane fuel was primarily for fear of losing availability of some kind of fuel.

 

Mr. Sparks came forward to further remark that the Department of Motor Vehicles and Public Safety is not anti-environmental on the position of propane use.  He said the "department's" position is that it is simply an administrative issue.

 

Further discussion ensued.

 

Chairman Rhoads closed the hearing on S.B. 455 and formally opened the hearing on S.B. 454.

 

Mr. Sparks spoke to S.B. 454, then asked Ms. Blackwell to go through the handout (Exhibit E) which addressed a number of changes introduced to better administer existing programs.

 

Daryl Capurro, Lobbyist, Nevada Motor Transport Association, came forward in support of S.B. 454.

 

Chairman Rhoads closed the hearing on S.B. 454.

 

There being no further business to come before the committee, the meeting was adjourned at 2:50 p.m.

 

 

     

                                                                                                     RESPECTFULLY SUBMITTED:

 

 

 

                                            ________________________

                                            Billie Brinkman,

                                            Committee Secretary

     

 

                                              

           

 

APPROVED BY:

 

 

 

 

                                

Senator Dean A. Rhoads, Chairman

 

 

DATE:                           

??

 

 

 

 

 

 

 

Senate Committee on Taxation

May 18, 1993

Page 1