Plan for business tax is weighed: Non-Nevada firms would be targeted

Friday, May 11, 2001 | 11:12 a.m.

CARSON CITY -- A plan to impose a tax on out-of-state companies, which would raise an estimated $60 million to $80 million annually, is the latest tactic in the drive to solve the state budget shortfall.

Sources at the Legislature said the leadership is leaning toward supporting the franchise tax, which doesn't go against Gov. Kenny Guinn's proposal against new taxes on Nevadans.

There is a question over whether it is constitutional because it would target out-of-state firms and not Nevada companies. An estimated 50,000 corporations are registered with the secretary of state. But there is no breakdown as to which would be subject to the tax.

The sources, who asked not to be identified, said the plan is an offshoot of a proposal made several weeks ago by Sen. Mark James, R-Las Vegas, who outlined a possible variety of taxes that might be raised. The state is facing a $121.5 million deficit.

The plan calls for out-of-state companies that don't have employees in Nevada to pay an extra $500 a year to the secretary of state.

Supporters are seeking legal opinions as to whether the plan violates the equal protection clause by having a dual taxation scheme.

Sources said the new tax proposal raises new issues. For instance, where will the money go? Will it be used to fill the $121.5 million deficit? Will it be put into pay raises for teachers? Or could it be used to help the University and Community College System of Nevada?

It also raises the question of whether companies that incorporate in Nevada might withdraw because of the tax.

Meanwhile the Las Vegas Chamber of Commerce sent a letter to Guinn applauding his resistance of "quick (tax) fixes to appease particular special-interest groups."

William Wells, chairman of the chamber, encouraged Guinn "to avoid haste and address the state's tax issues in their entirety." The chamber endorsed a study of the full tax structure, with any decision put off until 2003. The proposal would not affect any Nevada-based business.