Nevada's mortgage brokers will be subject to the 2 percent payroll tax intended for banks, according to testimony at last week's workshop on the new tax law.
Sen.
Randolph Townsend (R-Washoe County) told members of the Nevada Tax Commission, which is developing regulations for the state's new taxes, that the language of the bill passed by the Legislature this summer left no room for doubt.
"That may or may not have been the intent of the legislation, and perhaps they should not have been included," said Townsend, referring to mortgage brokers.
"But there is no leeway for the commission."
"We didn't expect to be excluded and we figured we'd have to deal with this for the next 24 months," said Thomas Powell, president of intoHomes Mortgage Services in Reno.
"But it does put local mortgage brokers at a disadvantage."
Powell, who testified at an earlier commission workshop, said most mortgage bankers employ processors outside the state that won't be subject to the modified business tax on financial institutions.
In contrast, intoHomes employs about 30 workers here in Nevada, whose wages will be taxed by the new levy.
"It's essentially a 2 percent bottom line hit," he said.
"We should be treated like a business, yet we'll be paying three times what other businesses pay.
The modified business tax rate for businesses other than financial institutions is .7 percent, versus 2 percent for banks.
As a result, Powell said he will be reevaluating the company's benefits plan when its health insurance comes up for renewal soon.
He also expects to increase fees starting in October to help offset some of the new costs.
But Powell said he is encouraged that the Legislature will take up the mortgage brokers' cause in the next legislative session.
Townsend said during his testimony that as chair of the Legislative Commission, which oversees the Legislative Counsel Bureau between legislative sessions, he had already asked the LCB to begin work on what he called a clean-up bill.
That bill for the 2005 session will clear up any ambiguities or mistakes made in the recently passed tax bill.
Townsend recently met with LCB staff to clarify for the commission how the existing bill should be interpreted.
In addition to the inclusion of mortgage brokers,Townsend testified about the definition of a financial institution, the deduction for employer healthcare costs, the allowable deduction for Taft Hartley trusts, and the status of railroad companies - all provisions of the bill that have come under scrutiny.
Townsend said that contributions to Taft Hartley trusts used by the gaming, construction and other unionized industries, should be allowed to deduct health and welfare benefits, which includes disability and life insurance.
He said to require the trusts to break out non-heath care costs such as disability would cost the employers more than the deduction.
"If we create an obligation to audit the trust that is greater than the benefit that would be absurd," said Townsend.
The commission meets again to discuss the modified business tax on Oct.
9.
On Oct.
6, the full commission meets to vote on the definition of a business and the modified business tax on financial institutions.
