The Committee on Taxation was called to order at 1:40 p.m., on Thursday, May 6, 1999. Chairman David Goldwater presided in Room 3142 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Mr. David Goldwater, Chairman

Mr. Roy Neighbors, Vice Chairman

Mr. Bernie Anderson

Mr. Morse Arberry, Jr.

Mr. Greg Brower

Mrs. Vivian Freeman

Ms. Dawn Gibbons

Mr. John Jay Lee

Mr. Mark Manendo

Mr. John Marvel

Mr. Harry Mortenson

Mr. Bob Price

Ms. Sandra Tiffany

COMMITTEE MEMBERS ABSENT:

Mr. John Jay Lee

GUEST LEGISLATORS PRESENT:

Senator Jon Porter, Clark County Senatorial District 1

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Chairman Goldwater opened the hearing on S.B. 259.

Included in the recorded was a summery of the changes to various section of S.B. 259 prepared by Ted Zuend, Fiscal Analyst (Exhibit C).

Senator Jon Porter, Clark County Senatorial District 1, greeted the committee and thanked them for the opportunity to talk about S.B. 259, which would help many different entities. He explained he would like to go through the bill section by section to further the understanding of the bill.

Senator Porter began with section 1, which provided for a reduction in several requirements for certain businesses to qualify for partial abatement of certain taxes imposed on the personal property of the businesses and counties with population over 100,000, if the business was primarily located in the city or town who’s population was less than 25,000. The intention of section 1 was to provide similar incentives rural Nevada had to the rural communities of urban Las Vegas. Senator Porter continued with section 2. It expanded the definition of "business" to include a business that created or produced motion pictures conducted in the state for less than sixty days. Once more, this would provide incentives for the motion picture industry.

Senator Porter related section 3 provided an exemption for businesses engaging in the creation or production of pictures deleted from Nevada Revised Statutes (NRS) 364A. He informed the committee he brought several experts to address any of the specific questions concerning section 3. He explained section 4 provided a reduction in a requirement for business exemption if it was located in a city or town with a population of less than 25,000.

Senator Porter noted section 5, provided the maximum sum for filing documents for foreign corporations went from $25,000 to $1,000. However, he believed they deleted it in the final language. Section 6 required a separate account for any money appropriated to the Commission of Economic Development for ordering grants to develop specific programs. The money in the separate account would not revert to the State General Fund at the end of the Fiscal Year.

Senator Porter further explained section 7 and section 8 were more incentive for the motion picture industry. He expounded section 8 deleted the exemption for obtaining a permit from the Labor Commissioner for a business producing motion pictures. Senator Porter asserted section 9 provided provisions, which waived a bond. Lastly, the balance of Section 10 changed the authority of division of motion pictures.

Senator Porter introduced Bob Shriver, an expert in the field, to answer any questions.

Bob Shriver, Executive Director, Commission on Economic Development, thanked Senator Porter and the committee for consideration of S.B. 259. He submitted an outline of his proposed amendments (Exhibit D). He commented the Senator implied the bill had a variety of issues associated with the work of the Commission on Economic Development.

Mr. Shriver stated Senator Porter addressed one issue also discussed at the tax studies during the interim. It dealt with the inequities in the rural communities within urban counties having to qualify such things as jobs in a similarly manner as metropolitan communities for incentives. For example, Mesquite in Clark County, a community of approximately 12,000, had to have job and investment numbers equal to those in Las Vegas to qualify for incentives. Along with Senator Porter, he felt S.B. 259 balanced the rural communities with their urban counter parts.

Additionally, Mr. Shriver said the bill addressed issues primarily related with the motion picture industry. He felt encouragement of film production in the state was in the best interest of Nevada. One of the problems inhibiting such production was collecting and administering a business license fee on motion picture productions in the state. Nevada was a great location for productions. The commission wanted Hollywood as well as the commercial industries in New York and elsewhere to hear this positive message by doing everything they could to encourage them to come.

Unfortunately, Mr. Shriver remarked other states also capitalized on the motion picture industry. If the state continually created barriers, however minor or small, it could steer the industry towards Arizona, Utah, or somewhere else, which did not have the same impediments. They felt having the sixty-day rule would entice the industry back to Nevada.

Mr. Shriver foreshadowed Robin Holabird, Deputy Director, The Nevada Film Office, who would testify on issues pertaining to the promoter and producer license, which the legislature changed in the 1997 session. They felt other issues arose during the interim, which needed tackling.

Robin Holabird, Deputy Director Nevada Film Office, introduced herself explaining she worked with the movie industry and the Nevada statutes, which affected them on a regular basis.

Ms. Holabird wished to reduce some of the paperwork currently required of motion picture production companies. She declared the business activity tax would be an exemption if the project shoots less than sixty days in Nevada. The producer-promoter license, through the Labor Commission, was more complex and the current document used needed changes.

Ms. Holabird pointed out some lines, previously deleted and not printed, reappeared consequently; they undermined the intent of the bill. She asked the committee to look at page 9, section 7, which formally requested the deletion of line 7 and 8, as well as lines 13 through 21. It was their intention to remove motion pictures from the type production covered by this law. She contended most motion picture projects were currently exempt. However, it was such a complicated process it discouraged a company from working in Nevada. They would find an alternative location without inquiring about exemption. She repeated their desire to remove the provision, which accidentally reappeared. It was not in the last printed version of the bill.

Ms. Holabird formally requested the deletion of "a television production" on line 8. She felt it was not the intention for the producer-promoter license. In conclusion, she asked if she could answer any of the questions the committee had.

Senator Porter interjected with an additional point. The part of S.B. 259 he thought was important to the Lieutenant Governor increased the number of members on the Commission on Tourism from seven to nine members. It also provided the Chief Administrative Officer of the County Affairs and Recreation Board or if applicable the Chairman of the Board of County Commissioners of the three counties that pay the greatest amount of transient lodging tax or ex-officio, but non-voting members of the commission. The Governor would appoint to the board, at least one member who was a resident of Clark County, at least one member who was a resident of Washoe County, and two members who were residents of counties with a population of fifty thousand or less, and one member who was a resident of any county in the state. Finally, it provided a television production, concert, trade show, exhibition, convention or sporting event was included in this term "production."

Senator Porter concluded it related to economic development and tourism to help promote business in the state of Nevada. He reported he agreed to the changes presented by Ms. Holabird.

Assemblyman Marvel asked if the fiscal note in the books was accurate. Chairman Goldwater replied it could not be accurate because it did not address the extra two commissioners. He inquired what the amount would be.

Andrea Reitan, Deputy Chief of Staff for the Lieutenant Governor, stated the fiscal impact would include three new members to the Board of Tourism. It was minimal because they would only receive eighty dollars a day for each monthly meeting they attended. She submitted written testimony supporting S.B. 259 which included a letter of support from Steve Teshara, executive director, Lake Tahoe Gaming Alliance (Exhibit E). The testimony discussed the new additions to the Nevada Commission on Tourism. It was vital to support the state’s tourism. The bill would help gaming and tourism statewide.

Ms. Holabird estimated the state would collect $3,000 to $4,000 in taxes if every production paid its tax. However, they did not have a way of actually tracing the exact figures. There was a special formula in effect for motion picture companies to try to simplify the tax. However, the sixty-day exemption simplified it even more. She felt the fiscal impact would be small, only several thousand dollars.

Senator Porter believed if the provisions in the bill enticed new businesses to move into the smaller communities and in southern Nevada, the collected taxes would create an economic impact. They would not base it on the lost revenues, which they currently received. They could see some abatement, which would cause less of a gain, than they currently would have without the abatement.

Mr. Marvel commented it worked both ways. Bob Shriver asserted without the incentives the communities would not attract the industries. Without the incentives, the movie industry would choose to film in Arizona or somewhere else and the communities would not receive any new revenues. They presented an econometric impact-modeling program to the individual communities showing them how the incentives would affect their bottom line.

Chairman Goldwater called for other questions from the committee.

Assemblyman Anderson explored the reference to NRS 231.020 which contained the language concerning the broadcast television, feature film movies made for broadcast television and television episodes. He asked if it was it their intent to reduce the opportunity for those productions to come Nevada. Ms. Holabird replied they believed the bill would reduce paperwork, which would encourage them to come to Nevada. The set of requirements and licensing in the bill would not affect them. Currently, almost everything was exempt from the provisions in the bill because there was another form covered under another part of the NRS for film registration. She felt it was all duplicated material.

Mr. Anderson confirmed her intention to include concerts, trade shows, exhibitions and conventions and sporting events although they may be of a similar nature. Ms. Holabird declared she did not manage those activities. Renny Ashleman contended with that section. From a motion picture and television standpoint, she was not concerned about those events. If Mr. Ashleman felt exemption for those events benefited him, she would not contest the point. Her concern was ensuring the exemption from this licensing for the motion picture and television production.

Renny Ashleman, Association of Theatrical and Stage Employees Local 720 (Local 720) related the motivation behind concerts, trade shows, exhibitions, conventions and sporting events for holding their events in Nevada was different than the motion picture industry. The motion pictures and the television productions often looked for colorful locations in the west. Nevada had plenty of competition persuading the industry to go elsewhere.

Mr. Ashleman explained the statutes included concerts, trade shows, exhibitions, conventions and sporting events because of a substantial amount of trouble it was getting the people who performed and helped put them on to pay. He explained Local 720 was in the business of promoting that kind of work. He did not believe those events would lose any work. He thought it protected the wage earners involved. He was involved with the bill, which originally put NRS 608.300 into legislation. He conveyed they did not agree with the additions and deletion in S.B. 259.

Mr. Ashleman’s answer surprised Mr. Anderson. He thought it would concern Mr. Ashleman. The motion picture industry often looked for locations in the rustic west. Additionally, many road shows also looked to beautiful Las Vegas for a backdrop. They shot their chase scene down the brightly-lit strip. Likewise, for the programs made in the north. The shows often utilized people hopefully from the Local 720. Mr. Anderson repeated how surprised he felt the protection did not concern him. He recalled the reason cited for the odd payments from some of those production companies Mr. Ashleman referred to, was some of those production companies were only in town for a short period of time and moved on quickly.

Mr. Ashleman commended Mr. Anderson’s memory and agreed he was right. However, there were alternative methods to insure payment with the motion picture and the TV folks to make sure we get our money, which was not the case with these others. Ms. Holabird agreed with Mr. Ashleman’s answers.

Assemblyman Mortenson wondered if they should remove the sixty days since the fees were small. He suggested they eliminate it all. Mr. Shiver agreed it would be beneficial for the state. He indicated the Senate hearing discussed time limits also. It included an argument for 120-day limit. He reveled the amount of reluctance concerning tax exemptions convinced him it was in the best interest of the bill to include a time limit on the exemption. He stated he would encourage an amendment raising the time limit on the exemption. Mr. Mortenson suggested if such an amendment was proposed, it would require a motion picture company to shoot the whole film in Nevada instead of a couple of scenes. Mr. Shriver agreed. Mr. Mortenson remarked the motion picture industry brought millions of dollars into the state’s economy. The small amount of tax revenue collected was not worth the risk of discouraging the industry from coming to Nevada

Chairman Goldwater commented on section 1. He said the state continually endeavored to help the rural communities. He had general concerns about the bill as a policy. He observed the committee frequently sat and listened to the plight of the rural counties. He related they dealt with the rural plight in the NRS 364 tax cap, as well as a number of other problems they have, including collection of little money the other taxes yield. Yet, they continually exempted the businesses, which would alleviate their reliance on the property tax, the mineral tax, and the net proceeds tax. He believed too many exemptions were harmful. He stated he had a very difficult time remaining consistent on that policy.

Chairman Goldwater’s second point of concern with the bill, was the question of what the communities got from the motion picture industry from creating the incentives. If Nevada was losing their business to the other states. Each state had their own incentives to attract their businesses. He asked for some examples of the positive contributions any of the production companies made after they took advantage of the exemptions. Chairman Goldwater asserted he understood the struggles Mr. Shriver described in southern Nevada and in other parts of the state. He contended if they created incentives and attracted industries, which did not contribute, then the state would end up paying for it. He maintained attracting the film industry was a terrific idea, but not at the expense of losing the little tax revenue some communities could rely on. He wondered what the calculated net benefits for it was. He asked for thoughts on the point from Mr. Shriver and the others.

Mr. Ashleman asked if he could make a brief point. He called attention to the fact the motion picture industry brought jobs to Nevada. He contended the jobs paid a competitive wage. The men and women of the Local 720 were pleased with the jobs the movie industry generated. For example, stagehands were well paid. The union received a great deal of business from a movie production. He argued their jobs did not directly help the state tax policy, but their members paid taxes on homes they owned and on products they bought. In addition, a production company purchased the material, supplies and equipment their members used constructing the sets and backgrounds.

Chairman Goldwater inquired whether they always employed Nevadans. Mr. Ashleman replied they did not use all Nevadans all the time, everywhere, but they did use a lot of them. Chairman Goldwater noted he received phone calls from constituents complaining the production companies did not hire them. He assumed other members of the committee had received similar phone calls. He contemplated the fact there were some people in the industry that were not working and when a production company came to town on the incentives we passed, they continually did not hire them. The state could not compel the companies to hire Nevada workers.

Ms. Holabird stated she did not consider the changes as incentives. The provisions currently on the books discouraged filming in Nevada. She hoped to eliminate the discouraging language. She asserted incentive programs they would like to see in the future were incentive programs for a local hiring program. She stated there was not a rule forcing the movie industry had to hire locally, but almost every project did employ some of the local community. It was an important way the film industry benefited Nevada.

Ms. Holabird added many local services used including hotels and food services. When they used craft services trucks they bought thousands of dollars of food a day, just to serve on set. Those who worked a movie received a per diem of nearly a $100 a day, which they usually spent in Nevada. When the production companies’ spending patterns were tracked, they usually spent about $100,000 a day on location. She conceded not every cent went through Nevada, but a large percentage of it did. She estimated production companies working in the state spent approximately $70 million, which was a percentage of the budget spent here.

Chairman Goldwater commended Ms. Holabird’s presentation. He questioned why Nevada treated the movie industry differently than any other high tech industry. He wondered how the committee would treat another industry making such a wonderful presentation with almost identical facts. Ms. Holabird replied the movie industry benefited Nevada the way most other industries could not. It promoted the region and the community worldwide.

Ms. Holabird argued the bill allowed for economic diversification because on average the movie industry paid better wages than most industries. The bill would bring the kind of industry to Nevada, which would otherwise not come there. They made special efforts bringing the industry to Nevada because without the efforts most projects would not come. The efforts would increase the amount of projects. Chairman Goldwater conceded her explanation was fair.

Chairman Goldwater asked someone to address his concerns for the rural communities. Senator Porter replied he would address the issue and asked the committee to look at language of the bill in section 1. Senator Porter agreed with the chair concerning the high amounts of financial problems in Nevada rural areas. He argued the counties north of Clark County were primarily the entities who were approaching bankruptcy. The intent of the bill was to entice business in the rural parts of Clark County, places such as Mesquite or Boulder City. He believed the rural parts of Clark County presented a different argument than the Chair made.

Mr. Shriver added one of the overriding issues was the fact the bill only affected Clark County, perhaps with an exception of Wadsworth in Washoe County. The issue about accountability, particularly section 1 of the bill dealt with the ongoing personal property tax abatement. When the legislature passed the ongoing personal property tax abatement in the 1997 session, it required locally affected government must approve the abatement before the Commission on Economic Development would grant it. It gave them the opportunity to assess whether or not they could accept the impact. It was specifically included in the bill because the commissioners would not jeopardize the welfare of the local governments. Chairman Goldwater thanked them for their helpful answers to his questions.

Mr. Mortenson asked if the film companies hired locals as extras for the big crowd scenes. He also inquired about the amount of money an extra made for such scenes. Ms. Holabird informed him they generally hired locals as extras. They paid them between $50 and $70 a day. They could work long days, but most of the people involved were excited about the opportunity to do the work. She announced a project starting in Reno in mid-May would employ 100 extras, and they would hire locals.

Assemblyman Price asked if he could relate some background information, which could help the committee understand the intent of the bill. He admitted he had a bit of bias concerning the topic because he helped create the Committee on Economic Development and Tourism and Mining. He was always proud it was his bill and idea. In the past, and Mr. Price assumed it probably was true today, Colorado was one of the first states, which formed a film commission. They started giving breaks encouraging movies to go there. His research showed it was a competitive business. States such as Arizona and others practiced those types of encouragement. He suggested they study and record the figures to see who they hired as well as how much money they brought into the community. He thought it would not generate as much money as a gaming hotel.

Mr. Price revealed he thought he would enjoy working as an extra, but he never had the time when the movie companies were around. Since his involvement creating the Economic Development and Tourism and Mining, he watched all the credits at the movies. It thrilled him seeing the Nevada Film Commission recognized for their help with the film. He also reminded the committee the film companies paid the police department and other city entities when they had them out on a job closing off one of the streets. He generally thought unless convinced otherwise, it was in the best interest of Nevada to help the motion picture industry.

Chairman Goldwater thanked Mr. Price for his valuable comments. He asked Mr. Marvel to proceed with his question. Mr. Marvel thanked the Chair and asked Senator Porter if it was a tailored bill for Washoe and Clark Counties. Senator Porter replied the bill actually addressed Clark County. The tax abatement for industry would entice them specifically to the smaller communities within Clark County. He felt the balance of the bill related to every community and every county in the state.

Assemblywoman Tiffany commented on the chairman’s question concerning the reasons the film industry should be exempted. She thought policy was the reason there should be an exemption. Nevada made a policy to be in the film business since the early 1980’s with Assemblyman Paul May. In her opinion, they were removing barriers to encourage them to make more movies in Nevada. It was not about losing dollars. She thought if they calculated it mathematically, it would probably end up even. More importantly, movies provided Nevada with name recognition. She argued the many films made in Las Vegas allowed people all over the United States, Europe, and even third world countries to identify Las Vegas. They saw Las Vegas in movies. They saw Nevada’s name in credits.

Ms. Tiffany remarked Nevada was an unusual state, which offered a diversity of settings. She thought it would be foolish not to pass this bill. She argued the decision concerning Nevada’s involvement in the movie industry created a policy long ago. That decision was enough to support removing those barriers for competition and bring some of those people in. She did not think the intent of the bill was about the pennies.

Assemblyman Manendo addressed Ms. Holabird’s comment concerning the movie production scheduled to shoot in mid-May. He said he worked as an extra in a movie and did not believe he received a paycheck. He related they asked him to donate money. He doubted much of the money actually went into the Nevada economy.

Ms. Holabird addressed the question. She explained extras were generally paid. She illustrated her experience as an extra for the movie "Showgirls." It paid 400 people $50 a day for about a 2-week period to be an audience watching topless Elizabeth Berkeley dance all day. When an extra was in a scene of 3 or 4 people or 50 other extras, state and federal law consider it contracted work for the day which should be paid. They considered the crowd scenes differently because it was rather complicated paying 4,000 people a day.

Ms. Holabird revealed a provision, which allowed some projects to shoot very large crowd scenes as on a charity basis. This was when 5,000 to 7,000 people sat in the crowd. For example, "Honeymoon in Vegas" was able to work a charitable donation. Also, "Kingpin" organized the crowd scenes filmed at the Bowling Stadium in Reno so there were chances to win raffle prizes and make donations to the local AIDS Organization. Most of the local casting companies discourage those kinds of undertakings.

Mr. Manendo asked how they distinguished how many people created a scene, which qualified for charity status. He felt 3 or 4 people earning $50 would not help Nevada’s economy. Ms. Holabird explained they did not have a formal policy defining the exact number of a crowd. Usually, it was several hundred people made a crowd. However, most companies found it more beneficial to pay their extras. If a volunteer only showed up for one day, it could harm the congruency of the production. Paid employees came back the next day. Therefore they would hire and pay for the people in the front sections of a crowd or in the repeated scenes.

Mr. Manendo asked Ms. Holabird to clarify the federal law she quoted. He asked her for the federal statute and inquired if there were exact numbers of people. Ms. Holabird replied she had copies of the references to it at her office. She did not know the code. She thought it defined extras as paid employees. However, she did not believe it defined a crowd scene with specific number.

Mr. Price volunteered to work as a subcommittee on the bill and investigate some of the movies. Chairman Goldwater asked Ms. Holabird if she could supply the committee with the proposed changes as well address Mr. Manendo’s concerns. He announced they would place the bill on work session as soon as they supplied the information to the committee. Mr. Shriver requested the removal of the 60-day exemption if it pleased the committee. Chairman Goldwater agreed with the removal if it was acceptable to Senator Porter.

Senator Porter added in regard economic development diversification and motion picture industry and tourism, they had to look at the world. Fifty percent of the world was in recession, gold prices were at an all-time low. There was an expansion of unregulated gaming throughout the country. Nevada needed to look at doing business differently than it ever had before. With demands of new rooms coming on, he thought diversification and some of the items presented in the bill promoted new avenues for Nevada’s business direction to take. He encouraged the committee’s support for the bill and thanked the committee for their consideration.

Chairman Goldwater thanked Senator Porter for the legislation. The Chairman called for more testimony on S. B. 259. Seeing none, Chairman Goldwater closed the hearing on S. B. 259 and opened the hearing on S. B. 287.

Included in the record was a summary the changes in section 1, sections 2 to 5, and section 6 to S.B. 287 prepared by Mr. Zuend (Exhibit F).

Senator Porter remarked the Nevada Taxpayer’s Association requested the presentation of S. B. 287. He introduced Carole Vilardo who would discuss S. B. 287.

Carole Vilardo, president, Nevada Taxpayers Association, told the members of the committee S. B. 287 was a simple bill. She explored the history of the issue. The 1997 Legislative Session approved the removal of the voter approval requirement. It concerned the aviation fuel tax issue relative to provisions in question 12 of the 1991 Legislative Authorization.

Ms. Vilardo explained two events triggered the motivation behind the bill. A bill from the 1995 Legislative Session made changes affecting small aircraft in some of the Grand Canyon carriers. Additionally, there were some requests from the Reno Airport concerning business losses to Truckee. The entities wanted the authority to remove aviation fuel tax. It did not represent a large amount of money, but they felt they were fixed-based operators. Additionally, it gave smaller Grand Canyon carriers and the airport the ability to attract smaller aircraft to fuel up in Nevada. While fueling up, they usually purchased other taxable services.

Ms. Vilardo said when the legislature removed the provision after the 1997 session they realized it was not consistent with taking out the provision for voter approval on the imposition of the jet fuel tax. They requested removal of the voter-approved provisions on the jet fuel and aviation fuel tax. S.B. 287 removed the voter-approval provision from the jet fuel tax. She thought those were specialized taxes. Most of the airports, including some places as small as Silver Springs, had an Airport Board which relied on their elected officials to decide whether a tax was needed or not.

Ms. Vilardo continued explaining when they established the aviation fuel last year, there was roughly ten cents imposed on airports. The two largest airports removed the tax. The Elko Airport imposed the tax at eight cents. Moreover, with the blessings of the aviation community using that airport because they wanted that money used for airport authorities.

Ms. Vilardo stated when she realized the bill did not include those provisions she contacted the airports. The counties and airports agreed to its removal. She remarked she met with Mr. Keith Lee who would testify on behalf of Southwest Airlines and he said the airlines were concerned. If an entity tried increasing the tax, the voter approval provided a barrier enabling the airlines another chance to prevent the passage of the increase.

Ms. Vilardo concluded with a discussion on the intent of amended version of the bill. Pages 1 and 2, lines 1 through 17, of the bill addressed a warning to the county commission who contemplated imposing the tax, to consider the impact it could inflict on arriving and departing flights.

Mr. Mortenson asked whether the fuel tax collected by Clark and Washoe County went into the general fund or not. Ms. Vilardo replied the tax went to the airport. She referred to a federal law change in approximately 1991 concerning the jet fuel tax. It required any taxes collected on jet fuel returned to the airports. Nevada law also required returning the tax to the county in which it originated for use by the airports. She explained in Battle Mountain the collected tax went directly to the airport. Mr. Mortenson exclaimed the airport reducing their tax revenue impressed him. It proved to him the tax needed reducing.

Mr. Anderson called attention to past failures of removing voter approval especially in northern Nevada. Two recent examples included the license plate and the railroad trench issues. The public was supposed to vote on both questions but never did. He articulated the voters’ perception of tax approval could become a contentious situation even with specialized taxes. He asked how the county commissioners would prove they were trustworthy and could make the right decisions considering their past exclusions of the voters. Ms. Vilardo indicated in many cases the county commissioners would never consider the tax increases because the airport authority board would make the decision. For example, an airport board governed Battle Mountain. In addition, the Washoe County Airport Authority governed the Reno Tahoe Airport. In those cases the airport authority board, not the county commission imposed the taxes.

Ms. Vilardo agreed excluding voters could cause resentment and whenever possible they should consult voters. However, when the tax was indirect or specialized it was less likely scrutinized as much as a direct tax. She repeated Washoe County more specialized because any increase would go through the airport authority not the county commissioners.

Keith Lee, representing Southwest Airlines, as well as on Steven Horsford’s authority America West, explained on first sight of the legislation, the airlines had some concerns. They observed Nevada profited from continuous commercial air travel into Reno and Las Vegas. Anything the state government did reducing the cost of the travel benefited the state. The industry felt apprehensive taking away another step to impose a tax. However, he explained after working with Senator Porter and Ms. Vilardo, they were pleased with the composition of the preamble language. He stated they support the bill.

Chairman Goldwater confirmed the airlines’ support of the bill. Mr. Lee repeated they supported the bill with the preamble language in there. He thanked the committee for their consideration.

Chairman Goldwater closed the hearing on S.B. 287 and opened the hearing on S.B. 362.

A summary prepared by Mr. Zuend on the various changes throughout the bill was included in the recorded (Exhibit G).

Ms. Vilardo explained the Nevada Taxpayers Association requested Senator O’Connell introduce S.B. 362. It was a product of a bill the committee heard in the 1997 session, commonly known as the Taxpayers’ Bill of Rights. She emphasized S.B. 362 was a complicated bill with seven major provisions drafted in analogous language. Since the bill covered Title 32 which was the administration of several taxes the language was added to insure the conformity and congruence with the rest of the bill. She provided an outline of the changes made to the bill (Exhibit H). Ms. Vilardo asked the Chair if he would like her to review the entire bill. Chairman Goldwater asked her only to examine the substantive sections.

Ms. Vilardo began by reminding the committee NRS 360 referred to the general administrative procedure of the Department of Tax and the Tax Commission. She explained section 2, page 1, line 3 through page 2, line 3 provided clarification regarding audit notification and audit extensions. Business owners accepted audits as a liability of running a business. However, if during an audit the Department of Tax requested an extension the taxpayer should not be responsible for penalties or interest accumulated during the extension. Sections 3 and 3.5 provided procedures for notifying the taxpayer of the outcome of the audit. In addition, it required the adoption of procedures concerning refunds.

Ms. Vilardo remarked section 4, page 2, lines 17 thought page 3, line 29 established an appeal process. In some instances, businesses found the Department of Tax did not have a statutory appeal process. The Department of Tax referred the aggrieved taxpayer to district court. The change allowed the taxpayer to appeal to the Tax Commission before the business and the state had incurred the legal expenses.

The next issue Ms. Vilardo referred to concerned the wording of the regulation concerning the county notification in A.B. 375 from the 1997 session. The contradictions prohibited its effectiveness. The Legislative Commission ruled they could not adopt the provision. S.B. 362 changed the language clarifying the county notification procedures. She felt the provision would need more elaboration in the future. Ms. Vilardo’s next point also related to provisions set forth in A.B. 375. In an appeal case, the Tax Commission and the Department of Tax would not file a simultaneous court action. The intent was to save money and hope the normal process for adjudication will processes all the states needs without additional burden on the business or the state.

Ms. Vilardo stated section 5 added two provisions to NRS 360.291. First, it required the Department of Tax to provide written instructions for bond procedures. Generally, a business posted a bond for the collection of sales tax. If the business went 36 consecutive months without a late payment, the business could request a reduction or release of the bond. The bill provided the taxpayer with written instructions explaining the procedures, which would reduce errors in the application process. Second, section 5 provided court cases concerning statutory conflicts regarding the collection or the remittance of taxes rewarded to the taxpayer. They based it on precedents of past court cases.

Ms. Vilardo continued explaining, section 7 had three changes, which were parallel to A.B. 12. First, it clarified the reliance upon written information from the Attorney General’s Office. If the Attorney General’s Office gave a taxpayer invalid information which affected their audit, the Department of Tax would not hold the taxpayer responsible for the penalty and interest for that audit. Second, it updated an older statute and increased the total amount of interest and penalties waived. The Department of Taxation suggested regulations would set the waived amount. The Tax Commission would set anything above the waived amount. To discourage abuse, the bill required a detailed report of the case to be submitted and filed.

Ms. Vilardo discussed the audit procedure. She contented the audits focused on specific business areas and did not extend to other areas. If targeted areas of the audited business were not deficient, yet another area was and discovered later, the taxpayer would not be responsible for the fine and back interest. She reported the Department of Tax would work out the procedures including a closure letter identifying the specific areas audited. Assuming the law remained the same, if they found a deficiency in the same areas during a subsequent audit the department could not collect a deficiency judgement. If it was a new area then they could collect the interest and penalties.

Ms. Vilardo described the graduated payment schedule in section 10, which they modeled after existing provisions in the proceeds chapter. Depending on the number of days of a late payment was where they started to escalate the percentage of the penalty. She believed the current 10 percent penalty for a day late payment was too harsh because they charged interest as well.

Ms. Vilardo explained section 13 provided an aggrieved taxpayer could file an appeal in Clark County as well as Carson City. It would give easier access. She commended the Tax Commission and Department of Tax for holding hearings in a location appealing to the appellant.

Ms. Vilardo remarked section 17, the net proceeds for tax on mines and minerals clarified the rights of taxpayers to file a claim for a refund. In addition, they changed provisions to conform to the provision in Assemblyman Marvel’s bill. Section 18 reduced an interest rate in an overlooked section of A.B. 375 to 1 percent conforming the section to the rest of the bill. The Department of Tax, the bill drafters, and the Nevada Taxpayers Association agreed to the suggested changes clarifying sections 20 through 24, on the business tax.

Ms. Vilardo stated sections 31 through 37 amended the sale and use tax act. She remarked in most cases concerning taxes, the businesses were told for the privilege of doing business in Nevada they get to post bonds and be audited. They excepted the responsibility. However, they thought since they were audited, they had the right to know what their liabilities were for collecting the tax. They wanted detailed descriptions and definitions such as the circumstances under which services and freight charges were taxable, as well as administration exemptions. The Department of Tax needed time to prepare the information; therefore, it would become effective one year after passage. The sections also provided conforming language concerning NRS 372 and NRS 374.

Ms. Vilardo discussed sections 44 through 49 regarding NRS 375A on the estate tax. The language clarified the appeals procedures. Lastly, section 54 gave the effective dates most of which were this year.

Chairman Goldwater commended Ms. Vilardo’s summary of the bill and called for questions from the committee.

Mr. Anderson questioned the filing procedure discussed in section 13. He realized Clark County had the largest population in Nevada. He asked for more clarification on the motivation for the change. He wanted to know if it was strictly because of the larger population or if there was another reason. Ms. Vilardo replied there were several reasons. Under the provisions in NRS 233B a taxpayer could file most contested cases within the appeal process with any court in the state. However, it required filing of certain cases in Carson City. She said she discussed the issue with several people at the Attorney General’s Office and the Department of Taxation including Mr. Pursell. They agreed the provisions should conform to those in NRS 233B. Clark County was a reasonable choice because of the number of businesses and offices, which could handle the load. Ms. Vilardo stated she would agree to other counties across the state, if it did not create an additional burden with the Attorney General’s Office.

Mr. Anderson thought it was the fact the Supreme Court was hearing appeals in Clark County. He repeated his question as to why Clark County should be the only one to receive the privilege. Ms. Vilardo referred the question to Mr. Pursell.

David Pursell, Executive Director, Department of Taxation, indicated when he spoke with Deputy Attorney General Norman Azevedo he understood they changed the provisions in the section 13 to conform with those in NRS 233B based on a population. He informed the committee if they needed further clarification he would discuss it with Mr. Azevedo and report back to them.

Mr. Anderson expressed curiosity as to why Clark County was the only county considered. He could understand if they chose it because of business registration or the appellate hearings. Ms. Vilardo remarked she requested Clark County because of the large number of cases from businesses in Clark County, which filed cases in Carson City. She said the Attorney General’s Office told her Clark County would not add a fiscal note. She mentioned extending the filing to the entire state could cause the addition of a fiscal note to the bill.

Mr. Anderson asserted he did not want to impede the bill. Although, he thought the information would be helpful. Chairman Goldwater asked if either Ms. Vilardo or Mr. Pursell could provide the information for the committee. Assemblyman Marvel felt the other counties were unaffected by the addition of Clark County because they currently filed in Carson City anyway.

Kami Dempsey, Las Vegas Chamber of Commerce, testified in place of Kara Kelley. She said as an organization which represented over 6,000 businesses they were always in favor of law which eased the burdens for businesses. They were happy with the way the bill provided clear notification and greater due process for all taxpayers.

Russ Fields, President, Nevada Mining Association voiced his support for S. B. 362. He was happy with the revisions to the Taxpayers’ Bill of Rights. He expressed approval of the net proceeds for tax on mines and minerals in section 17. Its inclusion was important. He thanked the Nevada Taxpayers Association and the Department of Taxation for their work on the bill.

Clay Thomas, Assistant Chief, Motor Carrier Bureau, Department of Motor Vehicles and Public Safety (DMV&PS) asked for clarification on the bill. The DMV&PS had reviewed the bill. They noticed on page 1, section 2 subsection 1, line 4 addressed provisions of the title such as using the wording the title encompasses part of what the Motor Carrier Bureau was responsible for in collecting taxes. It referenced the Department of Taxation. They wondered if it encompassed the Motor Carrier Bureau, and its function. They asked if they would still operate under their own statutes NRS 366, 702, and 482.

He informed the committee the Motor Carriers Bureau conducted over 400 audits. He explained their appeal process had four phases. Of the 400 audits they did not have any appeals beyond the second phase, their re-determination hearing. Chairman Goldwater asked if the bill would interfere with the expeditious appeals process of the Motor Carriers Bureau. Mr. Thomas replied he was unsure. The encompassing language in section 2 placed the statutes, which Motor Carriers Bureau followed under the jurisdiction of the bill. Therefore, it would allow the Tax Commission to hear the appeals of their audit. He felt the process they currently used was advantageous to the entities which used it. Chairman Goldwater thanked Mr. Thomas for calling attention to the matter. He said they would investigate it.

Chairman Goldwater confirmed the Department of Taxation acceptance of the bill. Mr. Pursell stated the department supported the bill. Chairman Goldwater closed the hearing on S. B. 362 and opened the hearing on S.B. 537.

Included in the record was a summary prepared by Mr. Zuend on the various changes throughout the bill (Exhibit I).

Ms. Vilardo spoke in support of the bill. She began by telling the history behind the bill. It derived from the Legislative Committee investigation on the effects of the tax distribution. One of the issues identified after the 1997 session was the numerous tax abatements for a variety of industries. Some people referred to them as an exemption. However, exemptions exempted businesses without a qualified time period. Abatements had a specific time period. Nevertheless, from a long list compiled on property tax abatements, a bill the committee heard earlier in the session emerged. It set up parameters and criteria for the abatement. It was expanded to cover property tax, personal property tax, business tax and the sales tax.

Ms. Vilardo explained it was common for the parameters to change to fit a particular business the state wanted to attract by exempting them. Generally, the state looked at the exempting of an appealing industry then created the parameters for the abatement. Unfortunately, each time the legislature passed an abatement it did not match anything else.

As a result, Ms Vilardo became a member of a subcommittee along with Mr. Hobbs, Mr. Shriver, members of the Economic Development Committee in Reno, and Southern Nevada Development Authority, which charted out the exemptions and variations to draft legislation which would give the abatement more consistency. Ms. Vilardo told the committee she would speak generally on the bill and Mr. Shriver would speak on its specifics.

Next, Ms. Vilardo outlined the revisions made by S.B. 537. First, they listed all the general abatement qualifications in NRS 360, which was the administrative section. After all, having them all in the same chapter made them easier to locate and monitor. Secondly, current provisions allowed the commission to reduce the conditions on a company which applied for exemption. She told the committee they increased the commission’s authority by adding provisions to each section allowing them to increase as well as reduce the abatement requirements on businesses.

Then Ms. Vilardo discussed NRS 361. They revised the statute reducing exemptions. Current statutes had exemption, which went as high as 100 percent. The changed language in property tax reads the exemption may be up to 50 percent. The next change concerned the amounts of time businesses were exempted for. The bill gave more latitude to the commission by changing the language from set amount of time to a time span. The commission could grant an exemption for up to 10 years or 20 years. Continuing with the business tax and sales tax sections, they deleted most of section 2 and added a schedule of allowable reductions. They reduced the type and the length of time of the sales tax abatements discussed in section 3. They also included the medical benefits package as a part of the criteria for eligibility.

Ms. Vilardo said section 5 added a new section requiring the Commission on Economic Development to submit a report every two years providing various information concerning tax abatements. It also provided a review procedures to evaluate the abatements’ value. They wanted a tracking system allowing the legislator to remain informed of the abatements’ success or failure. The bill also required the state to notify local governments of all abatements which potentially would go before the commission providing the local governments with greater input.

Ms Vilardo felt the bill provided consistency, conformity, and discretion. She also believed there was a conflict with the earlier bill concerning which would need to be addressed.

Mr. Shriver urged the passage of S.B. 537. He commended the work of Ms. Vilardo and the interim committee. He felt the bill made the statute easier to use more effectively yet not lose Nevada’s reputation as a "business friendly" state.

He discussed several discretionary issues. There was an increase of issues in the high tech industries, which hire a small number of highly paid employees. He expressed the desire to attract such industries. Under the current statutes, it would not allow abatements for such a business. The bill made positive changes for the future.

Assemblywoman Freeman wondered if the Commission on Economic Development helped in bringing about Amazon.com to Fernley. Mr. Shriver replied they did work in conjunction with the local government. Ms. Freeman asked if they would qualify under the new provisions. Mr. Shriver said they would qualify under some of the new provisions. However, they did not apply for any of the incentives.

Chairman Goldwater commented Ms. Freeman's question brought up a fascinating issue he was working on concerning the taxation of internet business. He said under current policy, if they were distribution centers or hubs of some type then they were subject to state taxation. Nevada was lucky they did not apply for several of the abatements because if they had the state would not collect the tax revenue. He believed it was a serious issue the committee would address in the future. Ms. Vilardo added the bill addressed the concern of the Chair by lowering several of the dollar amounts for industrial purposes and nonindustrial manufacturing purposes.

Mr. Zuend reviewed the bill and found a few problems. On page 9 line 23 through 27, there was a problem with the language. He suggested changing it to say a partial abatement in the current year if businesses were eligible for the abatement in the following fiscal year. In addition, they needed to extend the motion picture definition to encompass the entire section of the statute. It excluded the statute regarding the authority of the Economic Development Commission. Corrected, page 13, section 6, line 14, would read NRS 231.020 to 231.139.

Chairman Goldwater asked Ms. Vilardo and Mr. Shriver to work with Mr. Zuend to fix the problems. He thought it was a valuable bill. Chairman Goldwater closed the hearing on S.B. 537.

Chairman Goldwater asked the committee to turn to their work session document (Exhibit J). He commented the committee needed to vote on quite a few bills. Chairman Goldwater asked the committee to look at S.B. 244.

He explained the bill was still pending while they waited for the responses to their questions from the Legislative Counsel Bureau (LCB). Kim Morgan and Brenda Erdoes assured him they were working them and they would have the answers in a few days.

Chairman Goldwater turned to S.B. 383. He explained the bill dealt with the central and local assessments. It clarified the provision relating to the properties assessed by the Nevada Tax Commission. It had two important sections, 1 and 4. He referred to the descriptions of the sections on page 2 of the work session document. Section 1 revised to the definition of properties of an interstate or intercounty nature, and which of the entities would assess businesses which do not own such property. Section 4 clarified which of the entities would assess businesses owning and operating on properties of an interstate or intercounty nature.

Chairman Goldwater summarized the testimony as described in the work session document. The central businesses who felt they would be affected by the Nevada Tax Commission assuming the assessment of their property supported the bill. The Nevada League of Cities and Nevada Association of Counties expressed reservations about the bill. They were concerned for any potential future implication.

Chairman Goldwater believed the proponents argued the bill was a codification of existing practice. He thought the opponents feared codification of existing practices because it would limit their flexibility and choice of practices. Mr. Marvel pointed out if the need arose, they could always change a statute. Chairman Goldwater agreed.

ASSEMBLYMAN MARVEL MOVED TO DO PASS S.B. 383.

ASSEMBLYWOMAN TIFFANY SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

The committee turned to S.B. 262.

Chairman Goldwater summarized the explanation in the work session document. The bill created a statutory presumption, which would be used when deciding whether property intended for the use of commerce was tax exempt. He recapitulated the arguments presented during testimony on the bill. The proponents contended the bill would increase the taxpayer certainty over the issue of tax exempt property questioned by the Tax Commission. There was no opposition to the bill. A Department of Taxation representative indicated the bill codified current criteria used by the Tax Commission.

ASSEMBLYWOMAN TIFFANY MOVED TO DO PASS S.B. 262.

ASSEMBLYMAN PRICE SECONDED THE MOTION

THE MOTION CARRIED UNANIMOUSLY.

Chairman Goldwater explained S.B. 408 was described in the work session document. The bill created a consistent method of taxing residential mobile home construction in mobile home parks and individual owned lots. It would impose a rate not exceeding 80 percent of the tax rate for a residential dwelling unit in the jurisdiction during the preceding year. He reviewed the testimony on the bill. The proponents argued the counties and cities applied the statutes differently causing inconsistency throughout the state. The 80 percent maximum rate would create uniformity within the state. Chairman Goldwater did not recall any opposition to the bill.

ASSEMBLYWOMAN GIBBONS MOVED TO DO PASS S.B. 408.

ASSEMBLYMAN MORTENSON SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

The committee turned to S.B. 424. Chairman Goldwater recalled the bill exempted the proofs from sale and use taxes. He reviewed the testimony summarized in the work session document. The proponents of the bill claimed the proofs were not part of the sale. Therefore, it was not a taxable item. There was no opposition to the bill.

Chairman Goldwater inquired if all the committee’s questions were answered. Seeing they were, he called for the pleasure of the committee.

ASSEMBLYMAN MANENDO MOVED TO DO PASS S.B. 424.

ASSEMBLYMAN MORTENSON SECONDED THE MOTION.

THE MOTION PASSED UNANIMOUSLY

Chairman Goldwater brought S.B. 476 to the committee’s attention. He stated the bill seemed rather innocuous. However, it did affect the $3.64 property tax cap rate in the state. The S.B. 253 committee recommended the bill. It allowed the exclusion from the cap for local government whose combined personal property tax was $3.50 or more. He referred the committee to the work session document for the arguments given at the hearing. He noted they did not have to consider the bill at that time.

Assemblyman Neighbors offered an amendment to the bill. Chairman Goldwater thought he should work with Mr. Zuend. Mr. Marvel felt it needed a vote of the people. Chairman Goldwater agreed. He declared the committee would hold S.B. 476 to consider an amendment.

Chairman Goldwater stated they were waiting for some answers from the LCB to several questions so they would hold S.B. 521 as well.

The committee considered S.B. 529. Chairman Goldwater summarized the bill from the work session document. The S.B. 253 committee recommended the bill. It required a special district to separately identify the portions of its tax rate. The bill also provided the portion of the tax rate used to acquire plant and equipment was to be discontinued once those acquisition costs were fully paid. It would only apply to new special districts. It was supported by the Nevada Taxpayers Association.

ASSEMBLYMAN MARVEL MOVED TO DO PASS S.B. 529.

ASSEMBLYWOMAN TIFFANY SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

The committee considered S.B. 536. Chairman Goldwater summarized the bill as explained in the work session document. The S.B. 253 committee recommended the bill. It would prohibit the practice of buydowns. The effect of the practice was the taxpayers within the larger governments to support the operations of the smaller local government. The local governments and the Nevada Taxpayer Association supported the bill. The testimony noted the Nevada Tax Commission had refused to impose such buydowns and felt legislation was needed to resolve the issue. There was little opposition to the bill although one committee member remarked it could further restrict local governments who were having financial difficulties. There were ways local governments could devise to circumvent the prohibition. He explained the local governments could devise alternative systems such as a favor system.

Chairman Goldwater declared he wished they could address prohibiting the favor system, which could develop. He felt it would compromise the intent of the bill. However, he thought the issue was too contentious. If they attempted to address it, he was afraid the implications could be worse. The bill was a good first step.

ASSEMBLYWOMAN MOVED TO DO PASS S.B. 536.

ASSEMBLYMAN MARVEL SECONDED THE MOTION

THE MOTION CARRIED UNANIMOUSLY.

The committee considered S.B. 318. Chairman Goldwater announced the bill was not in the work session document. The bill revised the provision governing the collection of the real estate property transfer tax. The proponents argued the escrow companies, which were the collection agents of the tax, found it difficult to track down the taxpayers when additional taxes were due. They wanted the responsibility placed on the buyer or seller. The opponents argued the current method was more acceptable. They felt it was the escrow company’s duty to know what the tax was. They had additional issues, which needed work before the committee acted on the bill.

Mr. Mortenson thought the bill purpose was good. He agreed the escrow company should not be responsible for tracking down the additional taxes. However, the bill allowed the buyer and seller to contract one party or the other as responsible for the tax. Such an agreement did not affect the ability of the county recorder to collect the tax and any penalties from either the buyer or the seller. He felt it did not recognize the contractual agreement and could penalize the innocent party. He felt that it was wrong. Chairman Goldwater asked Mr. Zuend to draft an amendment recognizing Mr. Mortenson’s concerns.

Chairman Goldwater stated they would put the bills the committee did not act on as well as those which needed amendments on the next work session document. He called for any other issues to come before the committee. Seeing none, Chairman Goldwater adjourned the meeting at 3:30 p.m.

RESPECTFULLY SUBMITTED:

Lori Fitzgerald,

Transcribing Secretary

Nykki Kinsley,

Committee Secretary

APPROVED BY:

Assemblyman David Goldwater, Chairman

DATE: