The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 2:10 p.m., on Tuesday, March 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 Jon C. Porter, Sr., Clark County Senatorial District No. 1

STAFF MEMBERS PRESENT:

Alice Nevin, Committee Secretary

OTHERS PRESENT:

Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1, testified economic diversification and development is a priority in this state. He said this bill was written with input from the Nevada Development Authority and the Commission on Economic Development.

Senator Porter introduced Robert E. Shriver, Executive Director, Division of Economic Development, Commission on Economic Development, who testified for S.B. 259. He said the bill addressed some issues needing clarification. He noted section 1 amended the personal property tax abatement passed in the 1997 Legislative Session. He pointed out rural communities and towns, within larger counties, would have the same qualification standards as rural counties. He cited Mesquite, with a population of fewer than 15,000, which is held to the same standards as those of an urban city with over 100,000 people. Mr. Shriver said amending this bill would lower the number of job standards which must be met and be more realistic for smaller communities. Mr. Shriver pointed out section 2 of the bill amends the business tax abatement and is good for a small community in an urban county.

Mr. Shriver said this bill affects the motion pictures industry because production companies must pay the business tax. He said the change would exempt productions who are here less than 60 days. He stressed the state would like to attract the motion picture industry to Nevada more frequently because the industry is big business. He emphasized the industry has tax lawyers who look at the statutes of states they consider doing business with and to provide an exemption to them would be worthwhile for Nevada.

Mr. Shriver noted section 5 of the bill addresses the par valuation and fees paid by foreign corporations incorporating in Nevada. He stated this has to do with one particular corporation which requested help from the state.

Mr. Shriver introduced Charles W. Van Geel Jr., Vice President of Client Services, Nevada Development Authority. Mr. Van Geel spoke about a corporation which leased a building in the Las Vegas Valley to locate a backup and disaster recovery computer operation for their company. He said the office was to be manned by 20 highly paid computer technicians. He noted the company wanted to register the parent company and the subsidiary as foreign corporations. He continued as they began to obtain the necessary permits and licenses to begin operations, they discovered because of the par value of the parent company, and registering as a foreign corporation, the cost would be $25,000. He said if the subsidiary company had not had a low par value, the company would not have set up operations in Las Vegas, which meant 20 high-tech jobs and a potential 200 jobs within 2 years would have been lost to the state. He commented the concern was using the par value could deter other companies from considering Nevada as a location for expansion. He said the Office of the Secretary of State might be able to answer the following questions: (1) Does the par value have the legal significance that it had in the past? (2) Do Delaware and other states use par value as a basis for registration fees when registering foreign corporations? (3) Are registration fees in other states lower than in Nevada? (4) Is Nevada competitive with the other states?

Senator Rhoads said page 7, lines 7, 8 and 9, of the bill, show a change in population requirements and it might affect his county. Mr. Shriver said that the change was written specifically to help the town of Mesquite. Senator Neal stated the change in population numbers to designate a particular city within a county might not be constitutional. Mr. Shriver said the intent was to create lower standards for the smaller communities within an urban county so that they will be able to attract more businesses. Senator Neal said this could fall within the category of special legislation which is prohibited by the Nevada Constitution.

Senator Rhoads said the Fiscal Note for the bill indicated small counties could lose as much as $7,000 in tax funds. Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, said the fiscal information was incomplete because additional responses were anticipated from several counties and from the Office of the Secretary of State, as well.

Senator O’Connell said additional legislation was forthcoming and she suggested holding this bill until it could be determined how the bills would impact each other. Marvin A. Leavitt, Lobbyist, City of Las Vegas, said he felt the other bills would not impact this bill.

Scott W. Anderson, Deputy Secretary, Commercial Recordings Division, Office of the Secretary of State, said the office is opposed to section 5 of S.B. 259, which has to do with changing the fees charged to foreign corporations qualifying to do business in Nevada. He argued the current fee schedule had a graduated scale ranging from $125 to a maximum of $25,000, based on the capitalization of the corporation qualifying to do business in Nevada. He stated the current fee structure was determined by the Business Law Section of the State Bar of Nevada during the 1991 rewrite of Title 7 of the Nevada Revised Statutes (NRS). He pointed out fee reduction would mean 25 corporations must file organizational documents for every corporation that would have paid the maximum fee, in order to maintain current revenue flows. He noted the reduction of fees would also set up a preferential class of corporations allowing foreign corporations to pay a smaller fee than domestic corporations. Mr. Anderson stressed Nevada corporations would be penalized for organizing pursuant to the laws of this state. He noted corporations wishing to organize or qualify to do business in Nevada, which are required to pay the maximum fees, do so with little hesitation. Mr. Anderson said these are large corporations and fees paid are considered the cost of doing business.

Mr. Anderson stated the Office of the Secretary of State is investigating possible changes to the fee structure, which might be more attractive to potential corporations, while enhancing the revenue-generating ability of their office. He emphasized a more comprehensive study is necessary before making any changes to the current fee structure.

Mr. Anderson presented a proposal for an amendment to S.B. 259 (Exhibit C). He responded to the questions asked in earlier testimony: (1) Does the par value have the legal significance that it had in the past? Mr. Anderson deferred the question because it is a legal question. He will meet with John P. Fowler, Chairman, Business Law Section, State Bar of Nevada, to provide that information. (2) Do Delaware and other states use par value as a basis for registration fees when registering foreign corporations? Mr. Anderson said Nevada has touted itself to be the Delaware of the west and has tried to follow Delaware in making the state attractive to businesses. He said Delaware has a minimal initial filing fee but they have an annual filing fee which ranges from $125,000 to $150,000, based upon the capitalization. He noted there are many corporations in Nevada that pay a $25,000 fee here and would be required to pay a much higher fee if an annual filing fee were required in this state. (3) Are registration fees in other states lower than in Nevada? The Office of the Secretary of State has begun investigating other states, mainly the states who are perceived to be Nevada’s competitors. (4) Is Nevada competitive with the other states? Mr. Anderson said time is needed to study this issue. Chairman McGinness asked Mr. Anderson to provide the committee with a copy of the answer to question 1 following his meeting with Mr. Fowler.

Robin P. Holabird, Deputy Director, Nevada Film Office, Motion Picture Division, Commission on Economic Development, addressed section 7 of the bill. She said the producer/promoter license was developed 20 years ago and even though some exemptions are still in place, studio heads who research states for film sites are not aware that Nevada can be a viable option for them. She explained if a movie company uses an authorized payroll company, they receive an exemption in Nevada. She said a big concern was some companies may have been scared away by the current law because it does not function the way it was meant to work years ago.

Senator O’Connell asked if the fact that sections of the pertinent laws were spread throughout the NRS had caused a problem. Ms. Holabird said the amendments in the bill would help solve the problem.

Mr. Shriver concurred with Mr. Anderson to remove page 8, section 5, lines 10-25 of the bill. He said film production is a major corporate business now and this legislation will help Nevada be more competitive. Mr. Shriver said his agency would like to work more closely with the Office of the Secretary of State in how to market the incorporation aspects of Nevada.

Charles Geocaris, Director, Nevada Film Office, Motion Picture Division, Commission on Economic Development, said it is important to be competitive and anything that would encourage more people to work here in an easy film- friendly manner is vital to the state. Ms. Holabird said the issue is film production companies do not want to pay for things in Nevada that they do not pay for in other states.

Senator O’Connell asked how workers’ compensation in Nevada compares with other states. Ms. Holabird said Nevada has some obstacles, compared to the other states. Mr. Geocaris said he received a call from a production company which said it was so difficult to work in Nevada, as a result of the current insurance laws, that they made the decision to bring in a crew from another state rather than hire local people.

Colleen A. Wilson-Pappa, Lobbyist, Clark County, testified Clark County supported S.B. 259 because the bill will further streamline the one-stop film permitting process.

Ivan R. Ashleman II, Lobbyist, International Alliance of Theatrical and Stage Employees, Local 720, proposed an amendment to the bill (Exhibit D).

Andrea L. Reitan, Deputy Chief of Staff, Office of the Lieutenant Governor, proposed an amendment to the bill (Exhibit E), which would add board members (non-voting) to the Commission on Tourism. Senator Neal asked where this amendment would be placed in the bill. Ms. Reitan said this would be an addition to the bill because tourism and economic development come under the same NRS.

Carole A. Vilardo, Lobbyist, Nevada Taypayers Association, said the association would like to see some consistency in statutes and numbers. She requested looking at counties with population numbers under 50,000 as opposed to 55,000. Ms. Reitan said the existing statute required appointment of people in counties with population less than 35,000. She noted because of the growth in the state, the request was to raise the number to under 55,000 to allow room for growth in rural counties.

Chairman McGinness closed the hearing on S.B. 259 and opened the hearing on S.B. 287.

Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1, testified this bill was requested by the Nevada Taxpayers Association. He asked Ms. Vilardo to comment on the bill. She said in the 1997 Legislative Session, a bill was passed that eliminated the vote from the aviation gas tax. She said the provision for the vote came about originally with Clark County and was then expanded to include every county. She continued because Clark County had voted the provisions in, all other counties were required to vote on the provisions. She noted Senator Porter and his constituents, along with representatives from small airports around the state, had discussed the issue of eliminating the voter requirement. She pointed out many felt the issue of raising aviation taxes for fuel should be left to airport authorities and people using the airports. Ms. Vilardo explained a provision for jet fuel tax had been omitted from the original bill. She commented the bill would add consistency to the legislation from the last session and asked for support of the bill.

Senator Neal inquired about the constitutional amendment which requires a two-thirds vote to raise taxes and fees. Ms. Vilardo said it was her understanding that the Legislative Counsel Bureau had issued a letter that said only those taxes and fees that were at a state level required a two-thirds vote. Chairman McGinness asked Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, to provide a copy of the letter.

Keith L. Lee, Lobbyist, Southwest Airlines, testified in opposition to S.B. 287. He said Southwest Airlines, the largest carrier in Las Vegas, opposed this bill because the current legislation is adequate and this bill is not necessary.

Chairman McGinness closed the hearing on S.B. 287 and opened the work session on S.B. 88.

SENATE BILL 88: Increases state license fee on gaming. (BDR 41-76)

Senator Neal said the last tax increase for gaming was S.B. 24 of the Sixty-fourth Session.

Senator Neal recalled S.B. 24 of the Sixty-fourth Session was sponsored by Senators Mello, Raggio, Gibson, Wagner, Neal, Townsend and Beyer. He noted this bill revisits the same issue. He said in the last 2 weeks, a Las Vegas television station commissioned a poll which indicated 80 percent of the people contacted thought this raise was a good idea. He stated only 15 percent of the people were opposed to the idea. He stressed with issues such as budget shortfall, it is time to raise this particular tax. He concluded the people have shown they want the tax increase.

After a short discussion, Senator Neal requested delaying the vote on this bill until the Economic Forum met next month. He suggested maybe the bill could be amended to meet whatever shortfall was determined to exist. He commented this tax issue will go forward at some point because the people will present it to the Legislature through initiative petition. Chairman McGinness clarified if Senator Neal wanted to hold this bill until the economic forecast is announced and Senator Neal answered yes.

Chairman McGinness opened the work session on S.B. 244.

SENATE BILL 244: Makes various changes relating to sale of cigarettes. (BDR 32-1190)

Amy Halley Hill, Lobbyist, Retail Association of Nevada, and Philip Morris Management Corporation, distributed an Amendment to Senate Bill 244 (Exhibit F). She said Exhibit F amends the bill as a whole, replaces some of the language and eliminates section 4.

Chairman McGinness distributed copies of letters faxed from the Landmark Cigar Distributors, and Dodo Enterprises Inc., which opposed the bill (Exhibit G).

SENATOR TOWNSEND SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

*****

Chairman McGinness adjourned the meeting at 3:20 p.m.

RESPECTFULLY SUBMITTED:

Alice Nevin,

Committee Secretary

APPROVED BY:

Senator Mike McGinness, Chairman

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