Rocky road from tax bill to regs

The Nevada Tax Commission is meeting this week to continue work on the modified business tax that officially took effect at the beginning of this month.

The commission has been holding a series of informal workshops for the last two months to draft regulations for the new taxes passed by the state's Legislature.

Once that's completed, the eight-member panel still has to meet to vote on the regulations.

The commission, which oversees the state's Department of Taxation, is still determining the scope of the healthcare deduction, including what administrative costs it can include, as well as the definition for financial institutions.

The definition of financial institutions is important because under the modified business tax, which is a tax on a business' payroll, banks and other financial firms will pay a higher rate than other businesses - 2 percent versus 0.7 percent.

The tax gained notoriety almost as soon as the tax bill was passed when the gaming industry became concerned that it might include in the financial institution category the holding companies that own some of the larger casinos.

At a commission meeting two weeks ago, several lawmakers acknowledged that the bill rushed through a special session was ambiguous.

"It was not LCB's fault," said Sen.

Randolph Townsend (R-Washoe County), referring to the Legislative Counsel Bureau, which drafted the bill.

"It was our fault for not giving as clear direction as we could have given the time constraints of the second special session."

Assemblyman Joe Hardy (R-Clark County) testified to what he said was the Legislature's intent when it created the bill.

"We may have made too wide a loop and lassoed in more organizations than we wanted to," he said.

"We wanted banks and mortgage banks as opposed to other businesses."

"To get to your intent we almost have to ignore the language in the bill," replied David Turner, a commissioner and CPA.

Turner said the bill's language can be interpreted to include mortgage brokers.

Tom Powell, president of IntoHomes, a Reno-based mortgage broker, testified that as a mortgage broker he arranges and processes mortgages but does not lend money.

He said mortgage banks often process their loans in other states, such as Arizona and California, and would not be subject to the payroll tax on those out-of-state employees.

"I have 14 employees that cannot be moved out of state, nor would I want to," said Powell.

"If we're included in financial institutions that will give mortgage bankers an advantage."

The commission also debated the healthcare deduction, including how to account for funds contributed to a Taft- Hartley trust.

Such trusts are established in unionized industries, such as construction and gaming, and cover costs for healthcare, disability and other benefits.

Bob Ostrovsky, representing the Nevada Resort Association, said he'd like to see language in the regulations requiring the auditors of the such trusts to provide the breakout of healthcare costs to employers.

A lobbyist for the Nevada Chapter of the Associated General Contractors said the amount of money in most Taft- Hartley trusts not dedicated to healthcare is miniscule and any extra deduction a company would get would be negligible, while accounting for it would be a logistical nightmare.

"No one said this would be easy," said Barbara Smith Campbell, chair of the commission and Mandalay Development controller.

"I'm sure it will be cumbersome, but my concern is we don't give one employer an advantage over another by treating one type of taxpayer differently than another."