Clarification of New Tax Law Sought

Nevada Legislature 2003
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Lobbyists and Nevada business owners are concerned that language in the bill that raises taxes by $836 million could unintentionally end up tripling business taxes, including those on casino companies.

Gambling industry lobbyist Greg Ferraro said there is an error in the tax increase just passed by the Legislature and that the industry intends to work with Sen. Randolph Townsend, R-Reno, the state Taxation Department and the Tax Commission to clarify that the Legislature did not intend to apply the new 2 percent payroll tax to the payrolls of casino companies. That law was meant to apply to banks and other financial institutions.

"It is a mistake that needs to be fixed,"Ferraro said Monday."No one believes it was intended for gaming. I think it was a drafting error."

Sierra Pacific Resources, holding company for subsidiaries Nevada Power and Sierra Pacific Power companies, also is studying the legislation.

"It adds a question mark for us. We'll need to investigate it further,"said Karl Walquist, spokesman for the state's largest utility.

During the public discussions before the law was approved July 21, the higher payroll tax never was mentioned as applying to the casino industry or any business other than financial institutions.

Gambling companies, like most other firms, will pay an 0.7 percent tax on their payrolls starting Oct. 1.

Gov. Kenny Guinn has been informed of the problem, but he is not even thinking about calling the Legislature back into session, according to a spokesman. The Legislature adjourned July 22 after a 120-day regular session and two special sessions.

Legislative Counsel Brenda Erdoes said she sees no problem in the new tax law. The law defines financial institutions as companies that are"primarily engaged"in various activities, including those"engaged in the business of lending money"and"providing credit,"according to Erdoes.

Though casinos carry out those activities, Erdoes noted, that is not their primary activity.State Taxation Director Chuck Chinnock agrees with Erdoes. He said he has been asked to look into the problem.

Chinnock added the Tax Commission will try to develop regulations before Oct. 1 that clarify the intent of the new tax law. The commission would hold public hearings on the regulations.

"One of the reasons we have public hearings is to get input as to what was intended by the Legislature,"Chinnock said.

Before any regulation is adopted, it must return to the Legislature for review to ensure it meets lawmakers'intent. Members of the Legislative Commission, a group of 12 legislators who meet in periods when the entire Legislature is not in session, conduct reviews of regulations.

Sam McMullen, lobbyist for the Nevada Bankers Association, said few outsiders got a look at the final tax plan before it was approved last week.

"It never had a hearing. There was no chance for input,"he said."The world is only now looking at the language and seeing what it means and whom it applies to."