The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 1:35 p.m., on Tuesday, March 30, 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

STAFF MEMBERS PRESENT:

Alice Nevin, Committee Secretary

OTHERS PRESENT:

Chairman McGinness opened the hearing on S.B. 405.

Senator Neal said the two bills, S.B. 405 and S.B. 406, were similar in subject.

Senator Neal noted the bills were written to provide help for individuals and children with hearing impairments. He called attention to page 1, lines 10 -12, of S.B. 406 which said, "... Approximately one-third of Americans between the ages of 65 and 74 years and one-half of those 85 years and older have a hearing problem …." Hearing aids are expensive, Senator Neal commented, and this type of exemption is needed in the law, instead of an exemption for such things as art. Chairman McGinness clarified the Legislature could remove the sales tax, except for the 2-percent figure in the first bill; the second bill would have to go on the ballot.

Max Caristiansen, Concerned Citizen, testified in support of both bills. He said he could personally assure the committee a hearing impairment was a real handicap. Chairman McGinness clarified the cost of hearing aids could range from approximately $700 to $3,500 in price. Mr. Caristiansen said affordability was an issue. He said if he could find a hearing aid that cost $10,000, he would purchase it, if he could afford it, to have enhanced hearing.

There being no further testimony, Chairman McGinness closed the hearing on S.B. 405 and S.B. 406 and opened the hearing on S.B. 468.

Charles W. Joerg, Lobbyist, Nevada Marine Trade Association, testified the intent of the bill was to do for boats and vessels what was done for motor vehicles several years ago. He recalled several legislative sessions ago, legislation was passed which allowed a trade-in allowance for used vehicles, when traded through a dealer. He noted this meant people paid sales tax on the difference, not the gross price.

Mr. Joerg presented an amendment to the bill (Exhibit C), noting it included a second amendment requested by the Department of Taxation (pages 4 and 5). He said the Division of Wildlife had requested a meeting to work out details of the bill and additional revisions could be forthcoming following that meeting.

Linda J. Nelson, Corporate Secretary, Gripentog Enterprises Inc., presented her remarks for the record (Exhibit D). She said this bill was very important to the Nevada marine industry. She noted it would increase all aspects of sales; make local economies stronger; tax casual sales; give credit for trade-ins; make sales easier for nonresidents; facilitate registration of documented vessels; increase sales and provide needed tax dollars for the state.

Chairman McGinness inquired about the fiscal impact of the bill. Mr. Joerg said he anticipated it to be revenue-neutral or possibly a revenue-raiser. Fred Messmann, Deputy Chief Game Warden, Bureau of Law Enforcement, Division of Wildlife, Department of Conservation and Natural Resources, said the division supported many of the issues addressed in the bill but had concerns, as well. He commented he had been working with Mr. Joerg and the marine association to revise some of the mechanics of the bill and he thought, after an additional meeting, the department would be in total support of the bill.

Patty J. Wagner, Program Officer, Division of Wildlife, Department of Conservation and Natural Resources, said the fiscal note was based on the first version of the bill. She explained the fiscal needs if the bill passed: one new position $33,000; six new appraiser positions at $34,900 each; upgrade supervisor pay $20,624; training $2,000; travel $2,000; subscriptions and guides $936; office space and equipment for seven new employees $105,000; three new vehicles totaling $60,000. She noted in addition, funding would be needed to pay for a new computer system. She concluded start-up costs would be about $433,000 with ongoing costs of about $268,000. She noted approximately $27,970 would be generated in revenue each year.

Senator O’Connell asked if the department’s budget was closed and the answer was no. Senator Townsend clarified the boat industry did not have an appreciation schedule as does the car industry. Mr. Messman said the division did not want to be involved in appraisals and depreciation of boats and he hoped to discuss these issues in the upcoming meeting.

Clarence C. Nelson, Owner, Cal’s Blue Water Marine, said a common problem in dealing with the casual sale of used boats was people do not want to pay sales tax on private party sales. Senator Townsend said the car business had books to use as guidelines and this would need to be developed for the boat industry.

David Pursell, Executive Director, Department of Taxation, discussed the fiscal note for the bill. He said the department canvassed boat dealers in Las Vegas and Reno to determine how the credit allowance would affect revenues. He noted section 8, which identified sellers not registered as retailers, would provide revenue from taxing sales between parties. He stated he would be glad to work with Mr. Joerg on amending section 7 of the bill.

Chairman McGinness reminded testifiers of the short deadline for passing bills out of committee. He said if a new agreement could be reached, with updated fiscal information, time would be reserved to hear additional testimony.

There was no further testimony and Chairman McGinness closed the hearing on S.B. 468 and opened the work session on S.B. 424.

Tony Scodwell, Owner, Tony Scodwell Photography, testified in support of this bill. He referred to page 372-17 of the Nevada Administrative Code (NAC) 372.330. He read into the record,

Mr. Scodwell stated the language in the current statute needed clarification. He testified it was not a matter of avoiding payment of sales tax on proofs, but he considered the proofs to be part of the service. Senator Schneider testified he supported Mr. Scodwell.

Chairman McGinness closed the work session and opened the hearing on S.B. 523. 

Madelyn Shipman, Lobbyist, Assistant District Attorney, Civil Division, Office of District Attorney, Washoe County, spoke in support of S.B. 523. She said Carson City, Lyon, and Douglas counties also supported the bill. She gave a short summary of the bill and said it had not received opposition from anyone in the county. Bill Whitney, Open Space Planner, Washoe County, referred to A Proposal to Enable an Additional Method of Open Space Acquisition (Exhibit E).  Mr. Whitney read from the summary on page 3. He said he supported the bill.

Chairman McGinness clarified if property adjacent to a property owner was delinquent; the first option to bid on the property would go to the governmental entity, not the property owner. Ms. Shipman replied if the space was designated as an open space, the governmental entity would have the first option to the property.

Ms. Shipman said in Washoe County when parcels are tax delinquent and are listed by the Washoe County Treasurer’s Office, the parcel numbers are sent out to all of the local governments who are eligible under the statute, including the university system. She continued there was always a public hearing and anyone seeking to acquire a parcel that was tax delinquent could make their interest known at that time. She continued the board of county commissioners made final determinations about the parcels, but the adjacent property owner would be given an opportunity for input into the process.

Senator O’Connell asked if this issue had been discussed in an open meeting with the board of county commissioners. Ms. Shipman said the bill was specifically approved as part of a package reviewed by the commission. Senator O’Connell asked if there had been public testimony and Ms. Shipman answered no, it was an agenda item and did not generate any public testimony.

Chairman McGinness closed the hearing on S.B. 523 and opened the hearing on Senate Joint Resolution (S.J.R.) 20.

Senator O’Connell said the purpose of this bill was to establish some criteria in the law that the Legislature could review and use as a measurement tool for property tax exemptions. She presented the Report to the Legislative Commission of the Legislative Committee to Study the Distribution Among Local Governments of the Revenue from State and Local Taxes (Senate Bill 253) (Exhibit F).

Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, said he was the staff liaison when the S.B. 253 of the Sixty-ninth Session committee looked at this issue and Nevada’s lack of tax policy on exemptions. He noted Nevada did not have a comprehensive plan for the state regarding exemptions. He stated the committee wanted to provide a framework in the constitution by which the Legislature could establish a clear and concise tax policy with regard to exemptions.

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, spoke in support of S.J.R. 20. She said the bill paralleled what the voters approved for the sales tax issue. She noted when the S.B. 253 of the Sixty-ninth Session committee discussed economic development exemptions, it was noted many bills providing exemptions passed into law each legislative session. She stressed as a result, inconsistent criteria and conditions currently exist. She commented it was hoped to set some qualifying conditions for the Legislature to review before granting an exemption.

Ms. Vilardo said this was an important enough issue to be brought forward for a constitutional change. She continued the authority and general parameters of granting exemptions would be reviewed and the Legislature would enact legislation that further refined and defined some of the conditions for exemptions. She said at least, when dealing with tax exemptions, there would be a specific provision to turn to that defined what must be looked at in terms of evaluation.

Senator O’Connell said this issue had been discussed many times. She noted the problem was how to set up criteria to be looked at before a decision to grant an exemption is made. She said worthy causes are generally approved but the criteria needed to be established and then all of the exemptions could be examined.

Senator Rhoads called attention to page 2, lines 10-12, of the bill, which stated the Legislature would look at exemptions every 6 years. He noted the language was not clear on when exemptions would be reviewed and he would like to see the word "retroactive" included in the bill. Ms. Vilardo answered the fact that it stated "at least once every 6 years" meant that it could be no longer than 6 years. Senator Rhoads concluded if the bill passed, he would like to have the process of reviewing exemptions begun immediately.

Ms. Vilardo said she served on a subcommittee of the S.B. 253 of the Sixty-ninth Session committee which looked at the issue of exemptions and tried to formulate recommendations on exemptions. She said, for example in the property tax area, there were eight pages of exemptions currently in the statutes. She emphasized this bill was important in the process of reviewing the state tax structure and forming tax policy.

Senator Neal called attention to page 1, line 8, which stated, " …the exemption will achieve a bona fide social or economic purpose;" He questioned the intent of the wording, saying it was too broad and could be misconstrued by the public and the Legislature. Ms. Vilardo responded while serving on the subcommittee, an attempt was made to put exemptions in categories. She said the categories established by the subcommittee were: abatements or conditional exemptions which had timeframes, requirements, and conditions; people exemptions based on need; people exemptions granted because they were politically palatable and expedient prior to elections. She noted there were many examples of exemptions that needed to be reviewed because they did not appear to have a bona fide use.

Senator Neal asked Ms. Vilardo if the evaluation of exemptions would jeopardize the tax status of 501(c)3 organizations. She replied she did not foresee a problem. Senator Coffin said he had tried to conduct research on current exemptions and found it hard to get useful information. Ms. Vilardo said there were $667 million in exemptions, including the fuel tax. Senator O’Connell repeated consistency for exemptions had to be reviewed.

Senator Neal asked for an explanation of the difference between exemption and inclusion. Ms. Vilardo said inclusion meant exemptions granted such as an exemption for government in sales and use tax. Senator Coffin declared he would not vote for any exemptions this session. Senator Townsend said Governor Guinn said he would go through each line item of each state budget and look at needs, agency rules and responsibilities, cost-benefit analysis, and performance standards. He commented this committee would have to deal with the results in the next session. Chairman McGinness said Ted Zuend, Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, did an update on current exemptions and each committee member should have received a copy.

Harvey Whittemore, Lobbyist, Lionel Sawyer and Collins, testified in support of the bill. He said he would argue the notion that exemptions did not serve a state purpose. He maintained the art tax exemption was one example, which served a bona fide social purpose but also met an economic purpose. He said the test for exemptions was whether they met a social and economic purpose. He stated whether or not they should be reviewed every 6 years was a policy decision for the Legislature to make by determining whether or not an exemption had a positive or adverse effect on this state.

Mr. Whittemore said he was very concerned about discussions that there should not be exemptions. He said a full analysis of the impact of exemptions should be done before submitting something to a vote of the people. He said S.J.R. 20 properly puts before the people the notion that this should be a debate which is engaged in at the legislative level.

Senator Coffin said Mr. Whittemore, as a lobbyist for the casino industry, should be opposed to exemptions. He commented every time the tax base was thinned out, by granting an exemption to the business tax or sales tax, the gaming tax issue was reevaluated. Mr. Whittemore said that was why he testified in favor of this bill. He said the gaming industry and his clients would benefit from the steps put in place by the Legislature to prevent additional exemptions, except through a thorough review process. He noted this bill would make it very clear that there were not going to be exemptions except in those circumstances where there was an articulated state purpose being met. He said the construct set out in the bill was appropriate and would allow a review as to whether or not exemptions should be granted.

There was no further testimony and Chairman McGinness closed the hearing on S.J.R. 20 and returned to the work session.

SENATOR SCHNEIDER MOVED TO DO PASS S.B. 424.

SENATOR RHOADS SECONDED THE MOTION.

Chairman McGinness announced S.B. 523 would be placed on hold so that further testimony could be heard at a later date.

SENATOR O’CONNELL MOVED TO DO PASS S.J.R. 20.

SENATOR RHOADS SECONDED THE MOTION.

RESPECTFULLY SUBMITTED:

Alice Nevin,

Committee Secretary

APPROVED BY:

Senator Mike McGinness, Chairman

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