The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 2:10 p.m., on Tuesday, February 16, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Mike McGinness, Chairman

Senator Dean A. Rhoads, Vice Chairman

Senator Randolph J. Townsend

Senator Ann O’Connell

Senator Joseph M. Neal, Jr.

Senator Bob Coffin

Senator Michael Schneider

GUEST LEGISLATORS PRESENT:

Senator Raymond C. Shaffer, Clark County Senatorial District No. 2

Senator Terry John Care, Clark County Senatorial District No. 7

Senator Mark A. James, Clark County Senatorial District No. 8

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Kit Carson Weaver, Assessor’s Office, Carson City

Dino DiCianno, Deputy Executive Director, Department of Taxation

Eric E. Scheetz, Fiscal Analyst, Registration Division, Department of Motor Vehicles and Public Safety

Michael R. Reed, Lobbyist, Nevada National Guard Association

Charles G. Abbott, Executive Director, Office of the Director for Veterans Affairs

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association

Robert S. Hadfield, Lobbyist, Nevada Association of Counties

Marvin A. Leavitt, Lobbyist, City of Las Vegas

SENATOR RHOADS MOVED TO INTRODUCE BDR 32-668.

SENATOR TOWNSEND SECONDED THE MOTION.

Chairman McGinness introduced Bill Draft Request (BDR) 32-1594.

SENATOR O’CONNELL MOVED TO INTRODUCE BDR 32-1594.

SENATOR RHOADS SECONDED THE MOTION.

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Harvey Whittemore, Lobbyist, Mirage Resorts, testified Senator Neal introduced Senate Bill (S.B.) 90, a bill repealing the language which was codified in Assembly Bill (A.B.) 536 of the Sixty-ninth Session.

Mr. Whittemore said it was clear there were a number of issues still pending with respect to the intent of this legislation. He explained this bill would describe the period of time that fine art has to be put into use to qualify for the exemption. He noted, for example, in order to qualify for the exemption, art must be acquired over a period of 2 years and not displayed for a period of 5 years. He asked if the intent of the Legislature was to allow the initial acquisition to be tax exempt and while the museum was being built it would continue to be exempt from personal property tax. He questioned what art is which is primarily held for resale. He said there is an issue of how to describe the art as inventory. He stated after studying the legislation enacted in the last session, a proposal was formulated which would clarify the intent of the legislation.

Mr. Whittemore said he was requesting a BDR. He stated if Senator Neal’s bill passes, legislation would not be needed to clarify the legislative intent. He noted it was anticipated that S.B. 90 would have a full discussion in hearing but if the bill were not passed, he would proceed, contingent upon committee approval.

Senator Neal said if the legislation needs to be clarified, it would be a function of the tax commission. Mr. Whittemore answered it was clear, based upon the Nevada Tax Commission’s presentation to the joint taxation committees, that they were asking for legislative clarification. He said the commission was leaving it up to the taxpayers and those individuals that would be impacted to request clarification. Mr. Whittemore said the commission also indicated there was an issue as to the proper definition of inventory and whether or not these items are held for resale.

Senator Neal said if this BDR is processed there might be issues that should be entertained in court.

Mr. Whittemore replied a tax exemption is clearly the province of the Legislature. He said as was discussed recently, the clear import of A.B. 536 of the Sixty-ninth Session was to provide a tax exemption. He noted the limits and scope of the exemption should be determined by the Legislature and it should not be a function of the court or the tax commission to divine legislative intent. He noted a number of issues have been raised during the course of attempting to define this law and he felt the Legislature should decide this issue.

Senator Neal said he had a problem with this request because, as he understood it, Mr. Whittemore’s client had a secondhand art dealer’s license. He pointed out it was a question as to whether or not he was really an art dealer. He continued if the tax commission finds that he is not, then he must pay inventory tax. He said he thought the client was requesting another exemption to go on this bill and it was not a clarification of the old law at all.

Chairman McGinness said because of the new rules for BDRs, there will not be an opportunity to wait until there is action on Senator Neal’s bill. Mr. Whittemore said the deadline to submit committee BDRs is Monday, February 22, and he requested the committee’s authorization to at least start the process of writing a BDR.

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Senator O’Connell said even though she voted to support the bill draft request it does not mean that she would support the bill at a later date. Chairman McGinness concurred voting to support a bill draft request does not mean you must support the bill.

Chairman McGinness requested the Local Government Comprehensive Fiscal Report be presented to the committee. Mary A. Matheus, Local Government Budget Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, presented the Local Financial Report, Statewide Summary Report, Counties, Cities and School Districts, Revenues and Expenditures (Exhibit C. Original is on file in the Research Library.). Ms. Matheus said this report was first produced in 1984 and was designed to provide financial and budgetary data for local government entities in one centralized report. She said information in this report was from local government budget documents and audited financial statements filed with the Department of Taxation and the Legislative Council Bureau (LCB). She continued the report follows the same basic format used in the 1997 Legislative Session. It includes complete revenue and expenditure data for counties, cities and school districts. She noted in the future a new data-base system and agencies working together would make it possible to better track financial information.

Ms. Matheus explained the report consisted of five sections. The first part of each section shows total revenue and expenditures for all the counties added together. Individual county reports begin on page 3. She continued information was included on square miles, population rank by area, assessed values and the combined tax rates. She said all information includes actual data for 1996 and 1997, estimated data for 1998 and budgeted data for 1999. She commented additional information was available upon request.

Chairman McGinness said the handbook would be a good resource document for those who represent several counties and cities. He then introduced Ted Zuend, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, to report on the Economic Forum. Mr. Zuend presented the Summary of Information Discussed and Determined by Economic Forum at Meeting on December 1, 1998 (Exhibit D). He read from this report which contains information regarding the revenue outlook for the upcoming biennium.

Senator Neal asked if the effect of California Proposition 5 was calculated into the projections made by the Economic Forum. Mr. Zuend replied they did not calculate a direct effect. He explained that prior to the meeting the technical advisory committee was asked to provide some information concerning California Proposition 5. He noted they were very concerned that by 2001 there would be an impact because of the increase in Indian gaming in California. Mr. Zuend said the forum also thought the newly elected Governor of California had a more conciliatory attitude toward Indian gaming and this would affect Nevada at a later date.

Senator Neal asked how many forum appointees represented gaming. Mr. Zuend replied only one was appointed from gaming. He said the Governor had three appointments and the majority leader and speaker had one appointment each.

Senator O’Connell said the gaming industry had done surveys on actual visits from people in California and in past years they had averaged 12 visits per year (to Las Vegas) but in 1998 actual visits dropped to 7 per year. She said that might have been one of the components to drop the average as far as the income coming into the state.

Mr. Zuend replied the budget office produces a gaming revenue forecast, the fiscal division and gaming control board also produce forecasts and a forecast is received from a national economic consulting group. He clarified the Economic Forum group looks at all of the information that has been gathered and makes their own forecast decisions.

Senator Neal asked if they took into account the number of people going through the airport. Mr. Zuend said the forum received information from the Las Vegas Convention and Visitors Authority. He noted last year the counts were relatively flat both for airport volume and room-nights occupied. He said there was no indication of a major increase at that time. He commented since the forum met on December 1, sales and gaming tax revenues had been better than expected. Sales tax growth had approached double digits and continued construction and the opening of several new properties in Las Vegas will keep those revenues pretty strong for the next 6 months. He said there was a big surge in gaming taxes but it was misleading. Percentage fees collected in November and December (1998) were up by more than 20 percent compared to the same months in 1997, but gaming win in the comparable period increased by only 4 percent. He stated the surge was really due to how gaming taxes were actually collected not to underlying strength in the gaming market at this time. He noted because of the surge in revenues, gaming may reverse itself in the coming months and provide negative numbers.

Senator Neal asked for clarification of the term gaming win. Mr. Zuend said it is the take from the customer. He continued taxable gaming revenue is based on the cash flow through the casino so that credit markers (which is a big share of play) are only taxed when actually collected. He said gaming wins are up by only 4 percent but taxable revenue has been much stronger. He stated the win a casino pays the taxes for this month is actually prepayment for 3 months ahead because they are obligated to prepay. He noted they must compare the prepayment with their actual business and make an adjustment. This may produce wide swings in the actual amount of taxes collected. Senator Neal asked if this could allow the indicators to be false. Mr. Zuend said he thought the gaming win indicator was a true indicator because it was actual activity at the tables. He said customers are dropping 4 percent more now than they did at the same period last year.

Senator O’Connell asked if they took into consideration the revenue that is lost through contractual agreements with the federal government, as in the Nevada Operational Multi-Automatic Data System (NOMAD) situation. Mr. Zuend said the Economic Forum was charged with estimating General Fund revenue. They had no role in appropriations or how the state should spend or might want to spend funds. He commented the forum was simply a body that made an independent decision based on the information that was given from various sources.

Chairman McGinness introduced Brenda J. Erdoes, Legislative Counsel, Legal Division, Legislative Counsel Bureau. Ms. Erdoes gave an overview of Taxation Bill Draft Requests (BDRs) and presented Coming Attractions (Exhibit E). Ms. Erdoes explained this was a list of BDRs which should come to the Senate Committee on Taxation and possibly to the Assembly Committee on Taxation. She explained there were 65 BDRs listed and they were separated into the kind of tax they affect. She said most of the requests were related to property tax or sales and use taxes. She noted there were no new proposed taxes so far this session, although there were additional taxes requested by various local governments. She commented there were fewer requests than the last session.

Chairman McGinness asked Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, to talk about the Revenue Reference Manual, February 1999 (Exhibit F. Original is on file in the Research Library.). Mr. Welsh said this reference manual originated in 1985 and has grown from 27 pages to over 100 pages. He noted the document was specifically designed for use by members of the taxation committees. He said this document contains answers to questions that have been asked in the past and it will provide resource information to help in answering constituent questions. He explained the manual contains historical data from as far back as 1979 and contains information on old issues and how they were dealt with in previous sessions.

Senator Coffin asked Mr. Welsh if he had seen the report on exemptions from the Department of Taxation. Mr. Welsh said his office had received it and looked at the impact of a sales tax exemption on food and services. He said the Nevada tax base should be diversified so it is less susceptible to downturns in economy. Senator Rhoads asked if anything had been done to streamline the process of getting a fiscal note. He said a heavy fiscal note could kill a bill. He asked if it would be possible to get a second opinion on fiscal notes. Mr. Welsh said actually the process to write a fiscal note contains more steps than ever before. He said the Fiscal Analysis Division had discussed the problems associated with fiscal notes. Mr. Welsh noted the Fiscal Analysis Division had a review process to catch errors and the Department of Administration had an audit responsibility but that nothing else is done at this time. Senator Rhoads suggested this is an issue the committee should look into at some point.

Chairman McGinness opened the hearing on S.B. 33 and announced arrangements were made to videoconference this portion of the meeting to the Grant Sawyer Office Building, Room 4401, Las Vegas, Nevada.

Senator Raymond C. Shaffer, Clark County Senatorial District No. 2, introduced Ed Gobel, Lobbyist, Council of Nevada Veterans Organization (CNVO); Director, Veterans in Politics; member, Disabled American Veterans (DAV); member, Vietnam Vets America and Jewish War Veterans. Mr. Gobel testified for S.B. 33, which would help Nevada’s veterans. He explained S.B. 182 established the first veterans’ property tax exemption in 1953 and there have no increases since that time.

Mr. Gobel presented Nevada’s Attempt to Honor Its Promise Made to Veterans in 1953 (Exhibit G). He noted it was researched by the CNVO and contains information to show why S.B. 33 should be passed. He said discussions were held with Nevada’s counties and it was felt this exemption would not impose any catastrophic effect on county budgets. Mr. Gobel said the bill also helps senior citizens who have earned benefits. He introduced Archie Pozzi, Nick Condos and Ed Johnson, supporters of this bill.

Senator Rhoads said the fiscal note appears to contain some contradictions.

Senator Terry John Care, Clark County Senatorial District No. 7, testified for S.B. 33. Senator Care, member, American Legion Post 40 and lifetime member, Disabled American Veterans, said under the full disclosure law he would benefit from this legislation but he benefits under the current statute. Senator Care said he had requested a BDR, similar to Senator Shaffer’s bill, except it doubled the amount of exemptions and provided exemptions for a greater range of disability. He said he had not received a fiscal note for his bill at this time. He submitted letters of support (Exhibit H).

Senator Ray C. Shaffer, Clark County Senatorial District No. 2, said he was a member of several veterans’ organizations and asked the committee to please give S.B. 33 due consideration.

Senator Coffin said he liked the concept of grading the exemption based on disability. He stated he felt those who served stateside should be treated a little differently than those who served in a combat theatre.

Senator O’Connell asked Senator Care if he were planning to withdraw his bill. Senator Care said he would withdraw his bill but hoped some of the language could be incorporated into Senator Shaffer’s bill.

Chairman McGinness said Senator Care’s bill is S.B. 164 and it was introduced after S.B. 33. He said a constituent had asked him to include more recent conflict dates into this law.

SENATE BILL 164: Increases amount of exemptions from property and vehicle privilege taxes for veterans. (BDR 32-1223)

In answer to a question, Mr. Gobel said Clark County gives property tax exemptions to the Gulf War veterans. He said he did not want to discuss differentiation between the veterans who served in combat and those who remained stateside. He emphasized veterans must not be turned against each other.

David Mofchum, Officer, Military Order of the Purple Heart, testified for S.B. 33.

He noted every man that served had their place in winning wars.

Juanita Clark, Member, Veterans in Politics, testified she was a blood donor and taxpayer and supported S.B. 33.

Kit Carson Weaver, Assessor’s Office, Carson City, also representing the Assessor’s Association of Nevada, said S.B.164  tripled the benefits requested in S.B. 33. He suggested the total fiscal impact could be over $2 million. He said both bills have vague descriptions on the definition of active duty and it is very difficult for assessors to determine eligibility. He asked if the Legislative Council Bureau could look at the bill and try to clarify the language. Mr. Weaver said the rate for the motor vehicle privilege tax is $4 per $100 of the valuation of the vehicle and the average veteran will get up to a $40 benefit when registering a car in the Carson City area. Chairman McGinness asked how many veterans were taking advantage of the exemption now. Mr. Weaver said 2,500 are taking advantage of the exemption at this time.

Mr. Welsh said the fiscal note on this bill is currently awaiting approval from the Department of Administration.

Dino DiCianno, Deputy Executive Director, Department of Taxation, referred to the fiscal note, pages 4 and 5. He said this document should clarify the financial effect of enactment of S.B. 33 as far as the property tax fiscal impact. The Department of Motor Vehicles and Public Safety is providing the fiscal impact from additional exemptions associated with the vehicle privilege tax, but the information is not included in the exhibit materials presented today. He said if S.B. 33 were amended to include language from S.B. 164, the fiscal note would have to be amended. Eric E. Scheetz, Fiscal Analyst, Registration Division, Department of Motor Vehicles and Public Safety, said a fiscal note has been prepared and is being reviewed by the Department of Administration. He stated he could not give dollar amounts until the fiscal note is approved.

Michael R. Reed, Lobbyist, Nevada National Guard Association, said he supported the intent of S.B. 33. He said section 1, lines 12 to 14, talks about Public Law 102-1. He clarified this is Presidential authority to declare a national emergency and call for either full or partial mobilization. He said assessors need to know how to interpret this information. Mr. Reed said regular deployments of the National Guard and reserves or regular deployments of active duty personnel are not covered but national emergencies are covered.

Charles G. Abbott, Executive Director, Office of the Director for Veterans Affairs, said he had researched other states throughout the country to find what benefits are offered to veterans. He stated some states offer extremely low interest rates for home loans, other states offer tuition assistance to their veterans and some states provide cash bonuses to veterans of wartime service. He noted Nevada has the veteran’s tax exemption. Mr. Abbott said he would recommend do pass on this bill. He said this is probably the one benefit that affects most veterans in our state. He remarked the majority of complaints are eligibility questions from Gulf War veterans.

Carole A. Vilardo, Lobbyist, Nevada Taxpayer’s Association, said she was not speaking to the issue of the veteran’s exemption but speaking to a couple of the issues with the bill and in opposition of the effective date of the bill. She said the July 1, 1999, date infers this will impact the budgets which will be finalized this year for next year. Ms. Vilardo said if you are a veteran, you have the option of deciding if you want the property tax or the vehicle privilege tax exemption. She stated the majority of veterans take the vehicle privilege tax. Ms. Vilardo continued for point of clarification, as additional military actions have been added and the state has grown, more and more people are eligible. She said this could have an impact. She said the original phrasing in the bill was found to be discriminatory and the attorney general changed the wording in 1983 to broaden the exemption. Ms. Vilardo urged the committee to defer to pass this. She also asked the committee to look at sending this to the S.B. 253 of the Sixty-ninth Session committee which has been looking at exemptions for consistency.

Robert S. Hadfield, Lobbyist, Nevada Association of Counties, said to determine fiscal information, questionnaires are sent to all counties and information received is then tabulated. He said conclusions are not drawn as to whether or not the information is accurate although he thought county assessors provided the information, he could not guarantee it. He said the collective impact of all of the exemptions would need to be studied. He noted Mr. Gobel took the time to understand the issue and he commended him for that. He said this is a small issue and least impacted in terms of the two taxes involved.

Marvin A. Leavitt, Lobbyist, City of Las Vegas, said one of the difficulties with fiscal notes is the effect is different in different places. For instance, it is fairly easy to compute the effect if the exemption is taken off the motor vehicle privilege tax because there are really only two rates. He noted if the exemption is taken on regular property tax, that property tax rate is composed of many different parts. He said the effect on various governments is very different and this issue is much more complicated than it looks.

Chairman McGinness closed the hearing on S.B. 33 and opened the hearing on S.B. 36.

Senator Mark A. James, Clark County Senatorial District No. 8, testified a constituent had contacted him about this problem. He said the constituent was a senior citizen with a modest income and had to save money to pay her property taxes. He noted she often relied on the tax refund from the previous year to make the current year’s tax payment. He explained the property tax refund from the previous year came after she had to pay the first installment of her property taxes and sometimes not until after she paid the second installment. He explained the first quarterly installment is due on the third Monday of August and the second installment on the first Monday in October. He noted the Legislature, rather than tightening the deadlines for payment of these refunds, gave the Department of Taxation more time to process them. A.B. 513 of the Sixty-ninth Session stipulated the department must pay the tax refund by September 30.

Senator James said the deadline for mailing refund checks is just a few days before the second tax installment is due. The law requires taxpayers file claims for refunds between Jan 15 and April 30. He said the county assessor must send the claims within 45 days, so claims filed as late as April 30 would have to be sent by June 15. He noted the department has until Sept 30 to pay the refund. He stated Mr. DiCianno said the bill was passed because the department found it difficult to make the payments on time and because county assessors were late in forwarding the claims for refunds to the department. Senator James said there are two amendments that would help them accelerate the refund so it would be received before the new payment was due. He said if the committee agrees with the amendments, it will help people get the refund before they pay the second installment. He stressed this would be very helpful to the senior citizens affected by this.

Senator O’Connell said she had a similar situation and she planned to introduce a bill to allow for an abatement so that a person does not lose their home over a tax situation. Senator James said he would support that, too. He noted he did not care whether this bill passes or a similar bill, he wanted to alleviate this problem.

Dino DiCianno, Deputy Executive Director, Department of Taxation, presented Proposed Amendments to S.B. 36 (Exhibit I). He said he spoke with Senator James prior to the hearing and outlined some concerns the department had in administering the senior citizens property tax assistance act. Based on the timelines suggested in S.B. 36, he prepared proposed amendments to the bill. He said for the record, the Department of Taxation takes no position on the bill, but they do administer this rebate. He noted one staff individual coordinates this program with all 17 county assessors. She provides guidance to the county assessor’s offices to assist them when claimants come forward to fill out the application form. He stated in order to make sure the refunds are sent out before the first installment of property taxes, changes need to be made in the existing law to shorten the up-front deadlines. He said this will assist people in getting refunds in a more timely manner. He noted the majority of the refunds are out by July, but to ensure applicants qualify for the exemption sometimes the time frame goes beyond the deadline. Mr. DiCianno noted nearly 13,000 applications were processed annually. He suggested amending the dates and adding a new section to the bill that would amend Nevada Revised Statues (NRS) 361.838 by shortening the filing time for claimants and shortening the review process by the county assessors’ offices. He noted the effective date would be changed to January 1, 2000, upon passage and approval.

Chairman McGinness closed the hearing on S.B. 36 and adjourned the meeting at 4:00 p.m.

RESPECTFULLY SUBMITTED

Alice Nevin,

Committee Secretary

APPROVED BY:

Senator Mike McGinness, Chairman

DATE: