Landlords may get relief from tax

Wednesday, Aug. 25, 2004 | 9:09 a.m.

CARSON CITY -- Thousands of amateur landlords, surprised when they found out they had to pay a $100-a-year business tax, may get relief in the next Legislature.

The interim Legislative Committee on Taxation voted Tuesday to recommend that landlords who derive rental income from four or fewer dwellings be exempt from the business license fee.

Under the present law passed by the 2003 Legislature, a person who rents out a home or other dwelling, no matter the number, must pay the $100.

Sen. Mike McGinness, R-Fallon, chairman of the committee, said he has heard from people who never expected to be considered a business. He said a husband or a wife may have inherited a home on the death of their parents. "They didn't consider themselves landlords," he said.

Chuck Chinnock, director of the state Department of Taxation, told the committee there may be 300,000 people who have not paid the business license tax and many of those might be small landlords.

Carole Vilardo, executive director of the Nevada Taxpayers Association, estimated there could be as many as 20,000 people caught in this category.

Chinnock said the "phone has been ringing off the hook" from people calling about the business license fee. The complaints are coming from, "People who are in smaller business or who have a rental property or a person who says he's a small business and doesn't make any money and says, 'I lose money,' " he said.

He said, however, that businesses that lose money, unless they are a home-based business, must pay the tax. "If you make less than $22,000 a year in a home-based business, you are not required to have a business license," Chinnock said.

The division sent out 22,000 notices last month to those who may have to pay the tax. Chinnock said at that rate it will take two years "to catch up" with all the potential taxpayers.

But he said a new computer system that is being developed would speed up the process.

The Nevada Tax Commission has adopted a regulation that would give those persons or companies subject to the business license fee until Dec. 31 to pay without getting fined or paying interest. But until the 2005 Legislature acts, the landlords must pay the business license fee.

The committee voted to recommend that companies that produce movies in Nevada pay the $100 business license fee. They are now exempted in the law.

"I doubt that the $100 will be a disincentive to make a movie in Nevada, or it's not going to be a very good movie," Senate Majority Leader Bill Raggio, R-Reno, said.

The committee endorsed a recommendation that the method of how craft shows and other attractions pay the tax be changed.

Exhibitors currently must pay the $100 fee. Luke Puschnig of the Las Vegas Convention and Visitors Authority in previous testimony said he was concerned that such events as the Harvest Festival, craft shows and other events might be driven out of Nevada.

Under the recommendation adopted by the committee, a convention center could pay an annual $5,000 to cover the cost of these shows. Or the center could pay the tax based on the number of businesses taking part in the show multiplied by the number of days the show is held and then multiplied by $1.25.

The committee agreed to draft a proposed bill to redefine financial institutions that pay a higher modified business tax based on payroll. It would remove such companies as collection agencies and pawnshops from the higher levy.

Financial institutions are assessed a 2 percent tax on their payrolls compared with a 0.65 percent tax levy on other businesses.

Many of the other recommendations adopted by the committee are technical.