The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 2:05 p.m., on Tuesday, March 23, 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 Randolph J. Townsend

Senator Ann O’Connell

Senator Joseph M. Neal, Jr.

Senator Bob Coffin

Senator Michael Schneider

COMMITTEE MEMBERS ABSENT:

Senator Dean A. Rhoads, Vice Chairman (Excused)

GUEST LEGISLATORS PRESENT:

Senator Valerie Wiener, Clark County Senatorial District No. 3

Senator Lawrence E. Jacobsen, Western Nevada Senatorial District

Senator Maurice E. Washington, Washoe County Senatorial District No. 2

Assemblyman Lynn C. Hettrick, Douglas County, Carson City Assembly District No. 39

STAFF MEMBERS PRESENT:

Alice Nevin, Committee Secretary

OTHERS PRESENT:

Senator Valerie Wiener, Clark County Senatorial District No. 3, presented testimony entitled Senior Day Care Tax Credits (Exhibit C).

Senator Coffin asked about the fiscal impact of the bill. Senator Wiener said it was difficult to estimate how many companies would participate in the program. She emphasized this bill would provide employment for people who were currently unable to work because they provided care for adults in their home.

Senator Wiener introduced Pat Huhtelin, Social Services Manager I, Aging Services Division, Department of Human Resources. Ms. Huhtelin read from testimony entitled Division for Aging Services Testimony Regarding S.B. 317 (Exhibit D). Senator Neal asked if other states had programs similar to this one where dependents were allowed on the employer’s property. Ms. Huhtelin said she did not have that information.

Denise Hund, Coordinator, Adult Day Program, The Continuum, testified the agency was an outpatient rehabilitation agency where all ages are treated. She noted there were three licensed adult day care programs in the Reno area. She said primary caregivers who work outside the home have a dual role called the "sandwich generation." She stated this was where older parents, responsible for a child under 18, were also involved in the care of their own aging parents. She said there was a great need for support services for those people who needed to continue working. Ms. Hund said their mission was to create a supportive environment for their participants and their families.

Senator McGinness asked if this bill would provide a tool to help this problem. Ms. Hund said yes, and the director of The Continuum had met with local businesses to discuss this issue. She said their program would be happy to form an alliance with businesses to set up a program that would be appropriate for their family members.

Senator Neal clarified the employee is subsidized for care provided in a licensed facility. He asked if this bill anticipated care other than daytime care. Senator Wiener answered based on the nature of business in this state, it was hoped to include licensed facilities that were available during other hours. She said she would be glad to support an amendment to draft language to expand the hours to 24 hours a day. Chairman McGinness suggested asking legal counsel for a definition of daytime. Senator O’Connell asked for specifics on how the bill could actually work. Senator Wiener said she could not address the mechanics of the bill.

C. Edwin (Ed) Fend, Lobbyist, American Association of Retired Persons (AARP), Western Regional Office, testified AARP strongly supported the bill. He said the State of Texas had a program similar to the proposal in the bill. Ramona Hayes, Director, Adult Day Care, The Meeting Place, spoke in favor of the bill. She said many families are overburdened with child care and the care of aging parents. She noted, for example, an Alzheimer’s patient cannot be taken shopping, to church, or out into the community. Roberta Gang, Lobbyist, Nevada Women’s Lobby, spoke in support of the bill saying women are often the caregivers and it is a burdensome responsibility.

Senator Coffin inquired about the fiscal impact. David Pursell, Executive Director, Department of Taxation, said page 2, lines 1 through 3 of the bill would require discussion of what "calculated without the allowance" meant. He also voiced concern about how to determine if a business met the criteria specified in page 1, section 1, of the bill. Chairman McGinness suggested Senator Wiener meet with Mr. Pursell to discuss these concerns.

Chairman McGinness closed the hearing on S.B. 317 and opened the hearing on S.B. 349.

Daryl E. Capurro, Lobbyist, Nevada Motor Transport Association, said the bill referred to dyed fuel, which was for off-highway use and was untaxed. He commented there were increasingly more instances where dyed fuel was used for highway operations, evading payment of the tax. He said, in essence, S.B. 349 would improve enforcement of the law regarding the special fuel tax and give the highway patrol division the tools they needed to enforce the laws.

Donald P. Tuohy, Lieutenant/Commander, Federal Projects, Nevada Highway Patrol Division, Department of Motor Vehicles and Public Safety, testified in support of the bill. He clarified diesel fuel was dyed to reduce air pollution and was deemed not suitable for highway use. He noted this bill would help reduce tax cheating by identifying fuel on which taxes had not been paid. He said Nevada has fashioned their program after four other states that are active in enforcing payment of the special fuel tax. He said the Nevada Department of Transportation prepared a contract with the highway patrol division and would provide funding of dyed fuel enforcement for tax evasion purposes. Edgar L. Harney, Nevada Highway Patrol Division, Department of Motor Vehicles and Public Safety, also testified he supported the bill.

Senator Neal said the tax would not be imposed on the fuel, but on the usage, and he wondered how individuals who evaded the tax would be located. Peter D. Krueger, Lobbyist, Nevada Petroleum Marketers and Convenience Store Association, clarified this did not have to do with "cargo tanks," but tanks used to propel vehicles down the highway. He said, for example, if a vehicle was propelled down the highway with dyed fuel in its tanks to propel the vehicle, it violated federal and state law. Mr. Krueger referred to Proposed Amendments to S.B. 349 (Exhibit E), which was presented to clarify verbiage for this bill. Chairman McGinness asked if people in the natural gas business had been included in discussions about changing the factor for natural gas. Mr. Krueger said the intent was that natural gas would not be affected. He noted there was a companion bill in the Nevada Assembly at this time.

Senator Lawrence E. Jacobsen, Western Nevada Senatorial District, said he had 40 years of experience in this area and would appreciate support for the bill.

K. Neena Laxalt, Lobbyist, Nevada Propane Dealers Association (NTA), presented an amendment to the bill (Exhibit F), amending the bonding floor level from $1,000 to $100 for a special fuel dealer. She noted this would be a new section to the bill. Blair V. Poulsen, Nevada Propane Dealers Association, said people were trying to get into the alternative fuel market and this would make it easier for businesses who dispensed propane. He explained it would ensure the product was available for those who wanted to have clean air by use of propane in their vehicles. Mr. Capurro testified the Nevada Motor Transport Association supported both amendments to the bill.

Senator Maurice E. Washington, Washoe County Senatorial District No. 2, explained the bill exempted nonprofit organizations from payment of taxes, after obtaining property either through ownership or a donation. He defined nonprofit organizations as 501(c)3 status of the Internal Revenue Service (IRS) code. Senator O’Connell asked for clarification of IRS 501(c)3 status, and Senator Washington said it was nonprofit status because funding came from donations, contributions, and grants.

J. Douglas Driggs Jr., Attorney, Volunteers of America (VOA), said this bill would clarify the requirements for qualification of an exemption in the Nevada Revised Statutes (NRS) 361.086 and 361.157. He said the reason this bill was requested was to enable a facility in Boulder City to qualify for an exemption. He added there was a tremendous amount of ambiguity in the language of the statute. He noted passage of this bill would mean a true nonprofit organization, providing care at an affordable price with the intent to serve the community, would be eligible to receive the exemption.

Mr. Driggs explained the current rate charged at the Boulder City facility was $1,600 to $2,200, which was the break-even point. He noted this facility provided a variety of services for people who could not take care of themselves and needed to reside in an assisted living facility. Mr. Driggs continued Volunteers of America was created to make available a facility where people could live in dignity and with some independence, at the lowest possible cost. Senator O’Connell questioned if this would be fair to private businesses who are required to pay tax. Mr. Driggs said VOA had a charitable purpose but they would be competing, to some degree, with for-profit organizations.

Kim Crandel, Administrator, Boulder City Hospital, said this particular proposal was for an assisted living facility attached to the Boulder City Hospital and would benefit people living in Boulder City. He said currently the Boulder City Hospital was the only nonprofit private hospital in the Las Vegas area. He stated this project came about as a result of people asking for an assisted living facility for the residents of Boulder City. He noted this was a partnership between a hospital and an assisted living facility.

Senator O’Connell asked what happened if a senior citizen was in the hospital and needed to go to the assisted living facility, but could not afford the price. Wayne Olson, Vice President of Operations, Volunteers of America, responded the VOA had a benevolence fund which assisted individuals in this situation. Senator Coffin asked Mr. Crandel to estimate the amount of tax funds saved by passage of this bill. Mr. Crandel estimated between $65,000 and $70,000 per year. Senator Coffin commented he and other senators were looking for ways to reduce exemptions during this session. Mr. Driggs said this bill would clarify a statute that already provided an exemption but clarification would provide a more definite standard for the meaning of nonprofit. He stressed again, they were not trying to gain an exemption that did not exist, but to clarify an existing exemption. He noted currently the Department of Taxation had made a determination, which excluded the assisted living facility from an exemption. He said this is land not currently taxed because the hospital had an exemption and the assisted living facility was developed as part of the hospital campus.

Senator Neal clarified this facility would seem to qualify, but if the Department of Taxation had a problem with the "donated land" issue, the facility would not be exempt from payment of taxes on the land. Mr. Driggs said the problem was the language in the statute. He noted services must be offered at a reduced rate and it was nearly impossible to establish that standard. He noted page 3, lines 4 through 6 of the bill stated, "Property owned by a nonprofit corporation or governmental entity and used to provide shelter at a reduced rate or housing to elderly or handicapped persons or persons having low incomes;" He said if a nonprofit corporation operated just to cover their costs, the difficulty had to do with the language "reduced rate."

Chairman McGinness asked if the tax commission refused the request on the basis of the reduced rate standard. Mr. Driggs said yes, the refusal was for a request for exemption of sales tax, which had similar language. He asked if the $65,000 to $70,000 estimate given earlier included tangible property, as well. Mr. Driggs answered it was an estimated amount of property tax. Chairman McGinness asked if the facility would continue if the words "reduced rate" were changed in the statute. He answered housing would still be offered to persons with low income. Mr. Olson said yes, given the definition of affordability. He said VOA had a strong history of providing services to low-income families and senior citizens. He noted there were four additional projects in Nevada that provided housing to senior citizens and low-income families. He explained this assisted living project, for senior citizens, did not have the same infrastructure support from the state or federal government, and VOA made a commitment to provide affordable services for people who needed assisted living services in the community of Boulder City. He commented this distinguished it from for-profit providers, whose motivation was a good rate of return.

Chairman McGinness clarified in order to qualify, the housing must be offered to persons with low income. Mr. Driggs replied it could be elderly persons or persons with low income. He said the charge was the lowest possible rate, and most of the people living there could afford that rate. He stressed it is not low-income housing; it was for the senior citizens and others with limited incomes, who were not able to live independently.

Dan Holler, County Manager, Douglas County, testified against S.B. 402, saying the primary concern was the fiscal note for the bill. He noted Douglas County had three facilities. He noted two facilities might be able to convert to nonprofit, but the assessed value of the property was $3 million and the overall impact to Douglas County would be about $450,000. He stated he was concerned that this would widen the gap. He agreed trying to define "reduced rate" was a problem. He commented this was an emerging field and he anticipated seeing a number of these facilities emerge, especially because of rise in the numbers of aging population.

Mr. Pursell testified the department would have the fiscal note ready in a few days. He clarified the Nevada Tax Commission had made a determination on this issue but used the criteria in NRS chapter 372 (the sales tax statute) to arrive at the determination, instead of the criteria in the property tax statute. He said the decision was based primarily on the $25,000 annual income criteria and the 1 percent of the service, which was gratuitous. He emphasized the commission did not use NRS chapter 361 to establish the reason for their determination. Senator O’Connell requested a copy of the opinion and Mr. Pursell will provide it for the committee.

Chairman McGinness closed the hearing on S.B. 402 and opened the hearing on S.B. 428.

without license. (BDR 32-1238)

Senator Michael A. Schneider, Clark County Senatorial District No. 8, testified this bill would allow residents of Nevada to buy wine from wineries across the nation. He submitted a letter of support (Exhibit  G). He said he received mail order catalogs regularly allowing him to purchase clothes, distinctive gifts, books, and bedding, but wine cannot be bought in this manner. He noted constituents requested a bill to allow the purchase of wine from out of state. This is a free-trade issue, he commented, and last year consumers purchased $46 billion in goods from mail order catalogs. He concluded this bill would allow people to buy quality wine at their convenience. He said wholesalers in Nevada cannot stock all of the wine produced in the 1,772 wineries in this country. He told the committee today people buy over the Internet and through catalogs. He said currently six bottles of wine may be ordered, per month, and this bill would raise the limit and allow people in this state to participate in the free market.

Harvey Whittemore, Lobbyist, Nevada Beer Wholesalers Association, testified against the bill. He said the bill failed to cover some important issues with respect to this industry. He said there are companies who are shipping into Nevada without paying the tax. He asked to meet with Senator Schneider to devise a compromise to meet the needs of both groups. He said he represented over 50,000 employees of this industry, throughout the state, who could be impacted by this bill. He noted there were proposed amendments which could be drafted into the bill.

Chairman McGinness closed the hearing on S.B. 428 and opened the hearing on Assembly Bill (A.B.) 174.

Mr. Holler testified for the bill saying the bill would allow Douglas County to raise the sales- and use-tax rate one-quarter of 1 percent (.0025) for certain purposes. He requested expedition of the bill for possible implementation on July 1, 1999. He noted the raise in sales tax would amount to approximately a $300,000 increase for the first quarter of the year. He provided a letter containing information to support the bill (Exhibit H). Assemblyman Lynn C. Hettrick, Douglas County, Carson City Assembly District No. 39, said he supported the bill and would appreciate committee support. Bernie Curtis, Board of Commissioners, Douglas County, and Don Minor, Board of Commissioners, Douglas County, testified in support of the bill.

Mr. Whittemore said, for the record as a homeowner at Glenbrook, he supported the bill.

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, spoke in support of S.B. 362. She said the bill clarified some issues from the original taxpayer bill of rights and the amendments in S.B. 375 of the Sixty-ninth Session.

SENATE BILL 375 OF THE SIXTY-NINTH SESSION: Clarifies authority of Nevada tax commission and makes various other changes concerning taxation. (BDR 32-1050)

Ms. Vilardo said the bill sets up a very specific procedure for determining audit dates, hearings and appeals; claims procedures; a specific procedure on the issue of deficiency determinations or overages; what procedures will be used for refunds. She noted it clarifies two provisions from S.B. 375 of the Sixty-ninth Session. Ms. Vilardo referred to Proposed Amendments to S.B. 362 (Exhibit I).

Senator O’Connell said the bill allows the filing of a court action in Clark County. She questioned why the two counties (Clark and Carson City) were specified, as opposed to allowing filing in other jurisdictions. Ms. Vilardo said originally all of the filings were in Carson City because the attorney general’s office was located in Carson City. She noted the business tax was the first and only time there was a provision made that if a court action was to be filed it could be filed in Clark County, as well as Carson City. She said the attorney general’s office would be the best one to answer why it could not be filed in other courts of competent jurisdiction in Nevada. Senator O’Connell said she would like to investigate that question. Ms. Vilardo explained the amendments to the bill and said she had worked with Mr. Pursell, from the Department of Taxation, and Norman J. Azevedo, Deputy Attorney General, Taxation Section, Office of the Attorney General, on the amendments. She said the biggest thing that could be accomplished for the taxpayer and the state was to have a clear, consistent set of rules.

Mr. Pursell referred to Section by Section Outline of S.B. 362 (Exhibit J). He called attention to page 5, section 7, lines 30-35 of the bill, recommending rather than setting the thresholds in statute, let the Nevada Tax Commission regulate the amount of taxes, penalties and interest that could be considered for a waiver. He said a statement would need to be prepared, to keep on file at the department, with the specifics of the waiver.

Senator Neal asked for an explanation of the words "net deficiency" found on page 6, section 8, line 13 of the bill. Ms. Vilardo gave examples of how this could happen. Senator O’Connell clarified the language said there was a full year to try to balance the situation. Ms. Vilardo said there would be the reporting period and a need to balance out within the 3-year audit period. She concluded by asking for support of the bill.

Senator O’Connell asked why page 29, section 54, lines 20 and 21, specified the effective time of the act was July 1, 1999 at 12:01 a.m. Dino DiCianno, Deputy Executive Director, Department of Taxation said it had to do with the calculation of interest and penalties. Mr. Pursell stated this whole process would help him in his own budget because his revenue officers and auditors had performance indicators, and this would change the focus to education of the taxpayer and making sure the department was consistent when departing information on tax collection.

Senator Neal asked about the phrase "tax extensions." Ms. Vilardo referred to page 1, section 2, lines 10-13, saying the extension had to be caused by the department, not the taxpayer. She said if it was not the fault of the taxpayer, he would not be subject to interest and penalties. Senator Neal said under the doctrine of our law, if it is not stated, it is excluded. He clarified if the tax department audited a company and the needed records for the stated period of time could not be located, application had to be made for an extension. He continued, once an extension was requested, the company cannot be charged for the period of the extension. He noted the language is not clear on this issue. Ms. Vilardo said page 1, section 2, lines 10 - 13 says,

After a short discussion, Ms. Vilardo said she would ask legal counsel to meet

with Senator Neal to draft some additional wording in this section.

Senator O’Connell asked for clarification of the filing of a court action to any competent court-of-jurisdiction issue from the bill. She suggested removing the language referring to filing of a court action could be only in Carson City or Clark County. Mr. Azevedo said this particular provision was addressed in NRS chapter 232B and he did not see a problem with it being brought to other courts in the state. He explained the purpose of this bill and what it would achieve. He said the amendments clarified the language with great specificity so that in almost every instance the sequence would be a hearing officer, the tax commission, and, if it went to a court, it would be pursuant to NRS chapter 233B in the form of a petition for judicial review. He said NRS chapter 233B would address most sales- and use-tax statutes that go to the commission. Chairman McGinness asked him to review this section and send an opinion back to the committee. Senator O’Connell asked for a draft of the amendment to be brought back to the committee. Chairman McGinness summarized the amendments proposed by Ms. Vilardo; Senator Neal’s concern about the language on page 1, section 2, subsection 3; the clarifying statement on the competency of the court will be reviewed.

.

Stephanie Tyler, Lobbyist, Nevada Bell, also representing Sprint and AT&T, testified in support of the bill. She said the business community was pleased to see additional clarification. There were protections for the taxpayers and the entities that would be receiving revenues as a result of these actions. She noted the stability of those revenues was important, as was establishing a clear set of rules for the taxpayers with regard to their abilities, rights, and their processes of appeal.

Amy Halley Hill, Lobbyist, Las Vegas Chamber of Commerce, and Barrick Goldstrike Mines Inc., and Retail Association of America, said for the record she supported this legislation.

SENATOR COFFIN MOVED TO DO PASS A.B. 174.

SENATOR O’CONNELL SECONDED THE MOTION.

*****

*****

Chairman McGinness adjourned the meeting at 5:10 p.m.

RESPECTFULLY SUBMITTED:

Alice Nevin,

Committee Secretary

APPROVED BY:

Senator Mike McGinness, Chairman

DATE: