MINUTES OF THE
SENATE COMMITTEE ON TAXATION
Sixty-seventh Session
June 29, 1993
The Senate Committee on Taxation was called to order by Chairman Dean A. Rhoads, at 2:40 p.m., on Tuesday, June 29, 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 Dina Titus, Senate District No. 7
STAFF MEMBERS PRESENT:
Kevin Welsh, Deputy Fiscal Analyst
Billie Brinkman, Committee Secretary
OTHERS PRESENT:
Samuel P. McMullen, Lobbyist, Reno-Sparks Convention & Visitors
Authority
Judy Matteucci, Director, Budget Division
Harlan Elges, Chief of Administration, Gaming Control Board
Denny Weddle, Lobbyist, United Gaming, Inc.
J. Emmett Sullivan, Executive Vice President, Jackpot
Enterprises, Inc.
Debbie Shelter, Owner, Short Stop Food Stores
Leonard Loper, Owner, Rainbow Market
Helen Foley, Lobbyist, 7-Eleven Franchise Owners Association
James J. Avance, Lobbyist, Jackpot Enterprises, Inc.
John S. Bartlett, Deputy Attorney General, Department of Taxation
Howard E. Barrett, Lobbyist, Nevada Taxpayers Association
Daryl Capurro, Lobbyist, Nevada Franchised Auto Dealers Association
Stan Warren, Lobbyist, Nevada Car Owners Association
Brian Cram, Superintendent of Schools, Clark County School District
Judy Witt, President, Board of School Trustees, Clark County School
District
Pat Coward, Lobbyist, Nevada Association of Realtors
Patsy S. Redmond, Lobbyist, Nevada Association of Realtors
Darrell L. Clark, Staff Attorney, Nevada Association of Realtors
John Pappageorge, Lobbyist, Clark County
Charles W. Joerg, Lobbyist, Eureka County
Perry Comeaux, Executive Director, Department of Taxation
Donna Wadey, Assistant Chief, Registration Division, Department
of Motor Vehicles and Public Safety
Harvey Whittemore, Lobbyist, R. J. Raynolds Tobacco, USA
Samuel P. McMullen, Lobbyist, Reno-Sparks Convention & Visitors Authority, came before the committee to present Amendment No. 1181 to Senate Bill (S.B.) 560.
SENATE BILL 560: Facilitates enforcement of taxes upon transient lodging.
Mr. McMullen explained Amendment No. 1181 allows Fair and Recreation Boards the authority to suspend the business tax license issued by a local government entity to a transient lodging facility, and the closure of a transient lodging facility for failure to pay the tax on transient lodging. He stressed there is no criminal provision in Amendment No. 1181.
Mr. McMullen thanked the committee for its indulgence in hearing the suggested amended language before the committee.
Chairman Rhoads opened the hearing on Assembly Bill (A.B.) 786.
ASSEMBLY BILL 786: Increases certain fee collected from restricted gaming licensees.
Judy Matteucci, Director, Budget Division, explained this measure simply increases the flat rate per slot machine for restricted operations. She indicated Assemblyman Bob Price had testified in the assembly that this bill would raise about $990,000, and not require an expenditure of approximately $500,000 in the gaming control board budget. Ms. Matteucci suggested Harlan Elges, Chief of Administration, Gaming Control Board, explain a proposed problem with A.B. 786.
Mr. Elges pointed out that line 7 of A.B. 786 reads, "license fee of $225." He said if the change of $61 per slot machine, as proposed in line 5, is processed, then the language in line 7 should read $305 rather than $225. However, he said the end result would still be approximately $980,000.
Chairman Rhoads ask Ms. Matteucci to expand on the revenue proposals pending in the legislature. Ms. Matteucci said the revenue proposals which she and the assembly fiscal analyst had worked out included $2 million each year for the assembly and $3 million each year for the administration. She said A.B. 786 would not quite cover those budgets, but that she did understand there were other tax proposals that will be necessary in order to balance both of the budgets.
Denny Weddle, Lobbyist, United Gaming, Inc., came forward in support of A.B. 786. He said United Gaming, Inc., was fearful of any increase in taxes for the slot route industry. He said they look at any tax which is against the industry, since the moratorium was on no new taxes as an attempt to be punitive and he would like to cite that.
Mr. Weddle said for the record:
We know with this, even though it is not a great deal of money for the budget, that many of our slot operations out in the small areas, in the rurals or in other areas where maybe there is an $18,000 potential at a particular operation, this is going to affect them, and I think we have to be prepared for that with the loss of some small businesses. But, in whole and on the overview, we have to say that we will support this, but no more, and we would hope that you would at least hold the line to this amount.
Senator O'Connell asked Mr. Weddle to outline the background on the slot machine tax.
Mr. Weddle complied with the request, saying A.B. 786 originated as a budget request from the Governor's office. He continued with the history of the measure and how the revenue was finalized at $64 per slot machine per annum. He said there are 15,477 slot machines in the slot route industry, which creates the approximately $980,000 new revenue referred to by Mr. Elges.
J. Emmett Sullivan, Executive Vice President, Jackpot Enterprises, Inc., came forward in support of A.B. 786. He walked the committee through a packet (Exhibit C, on file in the research libarary) which he had distributed to the members. He summed up the presentation by reading the last paragraph of a letter addressed to Assemblyman Robert Price, Chairman, Assembly Standing Committee on Taxation, written by himself:
We would like to draw your attention to the fact that none of the comments in the B/V (Bernard, Vogler Study) Response disputed the financial figures shown in our report. As such, it should be clear to the Committee that the B/V Study was, in fact, grossly misleading, as we had previously indicated.
Mr. Sullivan continued explaining Exhibit C.
Debbie Shelter, Owner, Short Stop Food Stores, and Leonard Loper, Owner, Rainbow Market, came forward to address A.B. 786.
Ms. Shelter commented that small independent owner/operators had not been addressed in the "study." She said there are approximately 250 independent/owner operators that are not run by slot route operators. Ms. Shelter pointed out there is an average of seven slot machines at each of those locations. She said she felt she already is paying her proportionate share of gaming taxes. She emphasized her store already works on a very small margin. She said the original intent was not to include the small independent markets with a limited number of slot machines in the raise proposed in A.B. 786, however, they had been included. She concluded the "hit" to the small independent operator will be difficult.
Mr. Loper concurred with the remarks by Ms. Shelter. He opposed A.B. 786. He indicated he would find some way to meet the increase as his responsibility to help the state budget. He said he presently pays 6.3 percent of the gross from his slot machines to the state, and Ms. Shelter informed the committee she is paying 6.4 percent of her gross from the slot machines in her store.
Senator O'Connell remarked she feels the tax structure is hurting the small businesses.
Ms. Shelter implored the committee to take the small independent/owner operators out of A.B. 786. She pointed out the ramifications to the small operator had not been considered.
Helen Foley, Lobbyist, 7-Eleven Franchise Owners Association, said the 7-Eleven Franchise Owners do contract with the slot route operators rather than being independent, however she said the same issues apply as were discussed in the previous testimony. She indicated increasing the slot machine tax from $45 to $61 per machine per quarter does not only hit the slot route operators, but the individual business people. She said to go any higher than $61 is totally unfair. She declared the individual business person does not like the increase, but they would pay it.
James J. Avance, Lobbyist, Jackpot Enterprises, Inc., said licenses had not been renewed this month on 24 locations with slot machines because they found those locations were not profitable. He indicated that Jackpot Enterprises, Inc., does pay its fair share of state taxes. He remarked he did not think it was necessary to tax the small people of Nevada to balance the budget. He said in summation, he opposes A.B. 786.
Chairman Rhoads closed the hearing on A.B. 786 and indicated it would be on the work session later in the meeting.
Chairman Rhoads opened the hearing on Senate Bill (S.B.) 558.
SENATE BILL 558: Requires real estate brokers to include associated real estate salesmen and broker-salesmen as employees for payment of business tax.
Following a lengthy pause awaiting the arrival of Senator Dina Titus, Senate District No. 7, sponsor of S.B. 558, Chairman Rhoads opened the hearing on Senate Bill (S.B.) 565.
SENATE BILL 565: Makes various changes relating to collection of taxes.
John S. Bartlett, Deputy Attorney General, Department of Taxation, explained S.B. 565 primarily consolidates and clarifies existing practices in existing statutes. Following a brief explanation of the provisions of S.B. 565, and a period of answering questions, he summed up S.B. 565 as being basically a clean-up measure, and pointed out all the statutes having to do with specific taxes had been consolidated in Chapter 360 of the Nevada Revised Statutes (NRS).
Senator O'Connell questioned the language referring to "trust fund."
Senator Townsend discussed the language referring to the taxing policy of classic vehicles.
Mr. Bartlett presented a proposed amendment to S.B. 565 (Exhibit D) which he explained would enhance the ability of the state to collect taxes which are administered by the Department of Taxation.
Mr. Bartlett pointed out, finally, the criminal penalties for violating all tax laws had been increased from a misdemeanor to a gross misdemeanor.
Howard E. Barrett, Lobbyist, Nevada Taxpayers Association, said he felt S.B. 565 should have come out as a number of bills because it does cover a number of subjects. He said his association supports the area of the measure having to do with clarification of the general taxing powers of the Department of Taxation, and the consolidation of that subject. Mr. Barrett said he also questioned the language referring to a "trust fund."
Mr. Barrett commented another measure, Assembly Bill (A.B.) 680, addresses classic cars, so he felt that subject should be amended out of S.B. 565.
ASSEMBLY BILL 680: Allows copy of notarized bill of sale signed by buyer or seller to be used in lieu of authorized appraisal in computing sales tax for certain motor vehicles.
Chairman Rhoads asked Mr. Bartlett and Mr. Barrett to work on new language in reference to the term, "trust fund."
Daryl Capurro, Lobbyist, Nevada Franchised Auto Dealers Association, came forward to endorse the remarks made by Mr. Barrett. He added he had concerns about some of the language in S.B. 565 and outlined the specific sections containing language which distressed him. Mr. Capurro said he recommended A.B. 680.
In the interest of time, Chairman Rhoads interrupted the testimony by Mr. Capurro and said he would take additional testimony on S.B. 565 at another time.
Stan Warren, Lobbyist, Nevada Car Owners Association, requested the opportunity to have classic car owners from around the state stand and be recognized by the committee. Five people stood in opposition to S.B. 565.
Chairman Rhoads closed the hearing on S.B. 565 and opened the hearing on Assembly Bill (A.B.) 100.
ASSEMBLY BILL 100: Extends time within which board of county commissioners may impose tax for enhancing safety and security of public schools within county school district.
Brian Cram, Superintendent of Schools, Clark County School District,
and Judy Witt, President, Board of School Trustees, Clark County School District, came forward in support of A.B. 100. Mr. Cram explained this measure extends the time for the Board of School Trustees of Clark County to put before the voters a request for a tax to enhance the safety and security of public schools in Clark County. Mr. Cram said he felt student safety should be a right, not a privilege.
Ms. Witt concurred with the remarks of Mr. Cram.
Chairman Rhoads closed the hearing on A.B. 100.
Chairman Rhoads opened the hearing on S.B. 558.
Senator Titus appeared before the committee to explain S.B. 558 would add realtors to the business tax. She said there probably would be an argument against this measure as some would indicate it was unconstitutional because a special group cannot be singled out and be taxed in a special way. Knowing of this possibility, Senator Titus read a memorandum she had received from Jan Needham, Principal Deputy Legislative Counsel, concerning the subject. The memorandum said in part:
........NRS 364a.020 excludes independent contractors from the definition of business for purposes of Chapter 364a. Your request would require one particular group of independent contractors to pay the business tax. The equal protection clause of the U. S. Constitution prohibits making such a distinction, unless that distinction has a rational basis and there is a legitimate state interest in making the distinction. So long as it can be argued that there is a legitimate state interest in collecting a business tax from realtors and not from other groups of independent contractors, the distinction is constitutional.
Senator Titus argued for the state interest and for the tax. She said there were approximately 1,800 broker/salesmen and 5,700 salesmen active in Nevada. The fiscal division had calculated this measure would raise about $750,000 annually at the rate of $25 per broker/salesman and salesman per quarter.
Pat Coward, Lobbyist, Nevada Association of Realtors, Patsy S. Redmond, Lobbyist, Nevada Association of Realtors, and Darrell L. Clark, Staff Attorney, Nevada Association of Realtors, came forward in opposition to S.B. 558.
Ms. Redmond gave a brief background of the realty business and stressed that broker/salesmen and salesmen are classified as independent contractors, so that the provisions in S.B. 558 would put tax on an individual rather than qualify as a business tax.
Chairman Rhoads closed the hearing on S.B. 558 and opened the hearing on Assembly Bill (A.B.) 102.
ASSEMBLY BILL 102: Revises duties of county treasurer regarding payment of property taxes.
John Pappageorge, Lobbyist, Clark County, explained the measure is a clean-up bill.
Chairman Rhoads closed the hearing on A.B. 102 and opened the hearing on Assembly Bill (A.B.) 752.
ASSEMBLY BILL 752: Authorizes counties to set aside portion of revenue from net proceeds of mines to mitigate adverse effects from opening or closing of mines.
Charles W. Joerg, Lobbyist, Eureka County, came forward in support of A.B. 752. He said this measure simply allows a board of county commissioners to set up a fund out of the net proceeds of mines that they may be collecting, to mitigate the effects of a mine closure.
Chairman Rhoads closed the hearing on A.B. 752 and opened the hearing on Assembly Bill (A.B.) 763.
ASSEMBLY BILL 763: Repeals temporarily provisions establishing permanent net proceeds fund.
Perry Comeaux, Executive Director, Department of Taxation, testified the effect of A.B. 763 is to temporarily do away with the permanent net proceeds fund that was established in 1989. Mr. Comeaux said currently there is $892,000 in that particular fund. He pointed out that similar amounts of money would be placed in said fund in August, 1993, and again in August, 1994. He indicated that is over $2 million that A.B. 763 would make this available into the General Fund for the forthcoming biennium. He said the bill provides that on July 1, 1995, the permanent net proceeds fund would become re-established.
Mr. Barrett testified that A.B. 763 was one of the more confusing measures introduced. He said he did not necessarily oppose the bill, however, he thought the language was confusing.
Senator Adler inquired why the permanent net proceeds fund had originally been estabished. Chairman Rhoads said it was a "rainy day" fund.
Chairman Rhoads closed the hearing on A.B. 763 and opened the hearing on A.B. 680.
Donna Wadey, Assistant Chief, Registration Division, Department of Motor Vehicles and Public Safety, stated this bill is an attempt to simplify the process for the collection of the use and sales tax at the time of registration of a motor vehicle. She said it should make the process easier for the general public to understand.
Discussion followed in reference to appraisals of motor vehicles and the language provided in A.B. 680 concerning qualified appraisers.
Mr. Comeaux pointed out that A.B. 680 is the measure which Mr. Barrett and Mr. Capurro referred to during testimony on S.B. 565 concerning taxation of classic vehicles. He said this bill does not address a large loophole available to collectors of antique automobiles, however, he reiterated that section 51 of S.B. 565 "leans real heavy" on a bill of sale or other evidence of the sales price of a collector vehicle.
Chairman Rhoads closed the hearing on A.B.680 and guided the committee into a work session with S.B. 560.
Kevin Welsh, Deputy Fiscal Analyst, explained the proposed Amendment No. 1181 to S.B. 560.
Senator O'Connell questioned the need for this measure. Mr. Comeaux explained that transient lodging tax is out of the area of the Department of Taxation. He said that tax is imposed by county ordinance.
Chairman Rhoads did not call for action on S.B. 560.
Chairman Rhoads called for a motion on A.B. 786.
SENATOR SHAFFER MOVED TO DO PASS A.B.786.
SENATOR ADLER SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS COFFIN, TOWNSEND AND O'CONNELL DECLARED CONFLICTS, THEREFORE, THEY ABSTAINED FROM THE VOTE.)
*****
Chairman Rhoads called for action on A.B. 100.
SENATOR COFFIN MOVED TO DO PASS A.B. 100.
SENATOR LOWDEN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Rhoads called for a motion on A.B. 102.
SENATOR O'CONNELL MOVED TO DO PASS A.B. 102.
SENATOR COFFIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Rhoads asked for a motion on A.B. 752.
SENATOR ADLER MOVED TO DO PASS A.B. 752.
SENATOR O'CONNELL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Rhoads called for a motion on A.B. 763.
SENATOR O'CONNELL MOVED TO INDEFINITELY POSTPONE A.B. 763.
SENATOR LOWDEN SECONDED THE MOTION.
It was noted by Chairman Rhoads the proceeds of this measure was in the executive budget. Senator O'Connell said she felt it was a very bad use of the "rainy day" fund.
THE MOTION FAILED. (SENATORS RHOADS, COFFIN, ADLER, SHAFFER AND TOWNSEND VOTED NO.)
Chairman Rhoads indicated he would accept another motion on A.B. 763.
SENATOR COFFIN MOVED TO DO PASS A.B. 763.
SENATOR ADLER SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS O'CONNELL AND LOWDEN VOTED NO. SENATOR TOWNSEND ABSTAINED FROM THE VOTE.)
****
Chairman Rhoads asked for a motion on Senate Bill (S.B.) 37.
SENATE BILL 37: Eliminates exemption of certain household goods and furniture from property tax.
SENATOR ADLER MOVED TO INDEFINITELY POSTPONE S.B. 37.
SENATOR O'CONNELL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Rhoads called for a motion on Senate Bill (S.B.) 39.
SENATE BILL 39: Requires regional transportation commission in certain counties to develop transportation plans and programs in compliance with federal law.
SENATOR TOWNSEND MOVED TO INDEFINITELY POSTPONE S.B. 39.
SENATOR O'CONNELL SECONDED THE MOTION.
THE MOTION CAARRIED UNANIMOUSLY.
*****
Chairman Rhoads called for a motion on Senate Bill (S.B.) 40.
SENATE BILL 40: Repeals provision exempting from vehicle privilege tax certain vehicles registered by dealer.
SENATOR TOWNSEND MOVED TO INDEFINITELY POSTPONE S.B. 40.
SENATOR O'CONNELL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR COFFIN VOTED NO.)
*****
Chairman Rhoads called for a motion on Senate Bill (S.B.) 46.
SENATE BILL 46: Requires vehicle to be registered in county where owner of vehicle resides.
SENATOR SHAFFER MOVED TO INDEFINITELY POSTPONE S.B. 46.
SENATOR ADLER SECONDED THE MOTION.
Following discussion, Chairman Rhoads asked that the motion and second to the motion be withdrawn. Senators Shaffer and Adler complied.
*****
Chairman Rhoads called for a motion on Senate Bill (S.B.) 146.
SENATE BILL 146: Allows importation without license of wine by certain persons for personal use.
SENATOR O'CONNELL MOVED TO INDEFINITELY POSTPONE S.B. 146.
SENATOR ADLER SECONDED THE MOTION.
Senator Coffin requested a 1 minute recess for discussion.
Chairman Rhoads indicated S.B. 146 would be held for another committee hearing.
*****
Chairman Rhoads called for a motion on Senate Bill (S.B.) 326.
SENATE BILL 326: Provides exceptions to statutory limit on tax rate ad valorem.
SENATOR O'CONNELL MOVED TO INDEFINITELY POSTPONE S.B. 326.
SENATOR ADLER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Rhoads called for action on Senate Bill (S.B.) 534.
SENATE BILL 534: Shifts part of taxes for schools from sales to property.
SENATOR O'CONNELL MOVED TO INDEFINITELY POSTPONE S.B. 534.
SENATOR ADLER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Rhoads called for action on Senate Bill (S.B.) 548.
SENATE BILL 548: Revises provisions governing distribution of revenue from supplemental city-county relief tax.
SENATOR O'CONNELL MOVED TO INDEFINITELY POSTPONE S.B. 548.
SENATOR TOWNSEND SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Rhoads asked Mr. McMullen to come forward to explain the Amendment No. 1181 to S.B. 560. Senator O'Connell asked if the problem of deliquent tax by transient lodging could be handled on the local level rather than have a law placed in the statutes. Mr. McMullen said he understood there needs to be a specific statement of authority in the law and he expounded on that statement. He further said there needs to be statutory authority and that he understands that could not be done by ordinance.
Chairman Rhoads called for a motion on S.B. 560.
SENATOR ADLER MOVED TO AMEND AND DO PASS S.B. 560.
SENATOR LOWDEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS O'CONNELL AND TOWNSEND ABSTAINED FROM THE VOTE.)
*****
Chairman Rhoads asked for action on Assembly Bill (A.B.) 735.
ASSEMBLY BILL 735: Provides manner of assessing value of certain possessory interests and beneficial uses for imposition of property taxes.
SENATOR COFFIN MOVED TO DO PASS A.B. 735.
SENATOR ADLER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Rhoads asked Harvey Whittemore, Lobbyist, R. J. Reynolds Tobacco, USA, to make comments on Assembly Bill (A.B.) 295, a measure which is forthcoming to this committee.
ASSEMBLY BILL 295: Clarifies provisions governing sale of cigarettes by wholesale dealers.
Mr. Whittemore explained through A.B. 295, the wholesalers in Nevada were attempting to establish a basic cost of cigarettes. He said it had been agreed throughout the industry, that a 2.5 percent deduction would be allowed from the manufacturers invoice which would include all the cash discounts, electronic fund transfer discounts, all the rebate discounts, and then set the price. He said issues had been resolved with some clarity and would provide some fairness.
There being no further business to come before the committee, the meeting was adjourned at 4:56 p.m.
RESPECTFULLY SUBMITTED:
Billie Brinkman,
Committee Secretary
APPROVED BY:
Senator Dean A. Rhoads, Chairman
DATE:
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Senate Committee on Taxation
June 29, 1993
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