Panel: Commission should rewrite rule on art tax breaks

Brendan Riley

Wednesday, Dec. 5, 2001 | 10:34 a.m.

CARSON CITY -- At the request of MGM MIRAGE lawyers, a legislative panel voted Tuesday for another holdup in a long-delayed rule on art tax breaks.

The Legislative Commission's Committee to Review Regulations decided unanimously that the state Tax Commission should rewrite its proposed rule because it goes beyond lawmakers' intent in authorizing the tax breaks in 1997 and 1999.

But the regulation review panel agreed with the Tax Commission that it's the responsibility of applicants for an art tax break to prove up front that they qualify -- and not put the burden on state auditors to make that analysis.

The Tax Commission's proposed rule said interest on borrowed money used to acquire art could be included in figuring the tax break -- but the loan would have to be specifically for the art purchase.

MGM MIRAGE, which acquired and later sold part of Nevada casino mogul Steve Wynn's art collection, pressed for a broader interpretation, such as interest on part of a general line of credit that's used for art deals.

The state maintained that meant its auditors would have to take time to verify the interest expense -- an amount that run into the millions given the high cost of some art works.

Harvey Whittemore, representing MGM MIRAGE, said critics of the tax break in 1997 argued it seemed too broad -- and that's what was ultimately approved.

Whittemore added the specific-loan requirement on art deals pushed by the Tax Commission would be "a major problem to the taxpayer."

Tax Commission lawyer Norm Azevedo countered that lawmakers have directed the commission and state Taxation Department to be clear on tax breaks and "put taxpayers on notice about what's expected of them."

Sen. Mark James, R-Las Vegas, moved for the regulation revision, and Sen. Mark Amodei, R-Carson City, backed the motion. But Amodei said he agreed with Azevedo's argument that the burden is on the applicant to qualify for a tax break -- so the rule needs "not a big tuneup ... It's headed in the right direction."

The delay is the latest of many in the drafting and adoption of rules that stemmed from the 1997 law designed to help Wynn avoid taxes on hundreds of millions of dollars worth of paintings he bought for display at the art gallery at the Bellagio megaresort on the Las Vegas Strip. Wynn has since sold the property to MGM MIRAGE.

The 1997 bill caused much protest. Initially, sponsors didn't identify Wynn as the source of the legislation. Assembly Speaker Joe Dini, who introduced the original bill, maintained it would promote the ownership of fine art in Nevada.

Under the law approved in 1997 and revised in 1999, any person buying fine art valued at more than $25,000 can get breaks on most of the due sales taxes, along with annual personal property tax exemptions.

The law allows the breaks if the art owner agrees to publicly display the art at least 20 hours per week during 35 weeks in a year.

Wynn also was permitted to charge admission to his Bellagio gallery and still get the exemptions. But any money he earned from admissions, minus costs of operating the gallery, had to go to a nonprofit charitable organization.