Las Vegas Sun

March 28, 2024

Monorail seems to fit tax status

The Las Vegas Monorail Co., which in 2003 took advantage of state and federal tax laws to gain nonprofit status, can expect to improve its bottom line as a result of the new tax status, a top local accountant said Monday.

The monorail operator gets to avoid millions of dollars in income, property and sales taxes because of its tax-exempt status as a "501c4" organization.

Under current state and federal tax law, the Las Vegas Monorail Co., which went before the Nevada Tax Commission to ask for the tax exemption, could essentially operate as a for-profit business with unlimited profit potential, said Howard Levy, senior principal and director of technical services for Las Vegas-based Piercy, Bowler, Taylor & Kern.

The difference, Levy said, is that the monorail benefits from legal language that grants it tax-exempt status as a "social welfare organization."

"The monorail fits into that (IRS designation) because of the civic benefit people see from having a monorail," said Levy, who has advised nonprofit organizations for more than 30 years. "I can't think of any one (designation) the monorail would fit into better than 501c4."

Under that designation, the Las Vegas Monorail Co., the nonprofit arm of the project tasked with running the system, is free to operate like the more common 501c3, except donations to the company are not tax deductible.

The 501c3 status is the most widely used designation, most commonly sought by schools, churches and homeless shelters, said Raphael Tulino, a spokesman for the IRS.

As a 501c4, the monorail is in more diverse company, sharing the designation with everything from the National Association of Asian American Professionals to the California-based Wild Women on Wine group. The IRS in 1999 denied a 501c4 designation to the conservative Christian Coalition on the basis that the group's political ventures kept it from operating as a nonprofit.

But while the monorail is free to earn profit like a traditional business, many of its records are not afforded the same confidentiality as other corporations, Tulino said.

"When you're a tax-exempt company you have a couple documents that are more visible to the public," he said.

The monorail was fully funded through a $650 million tax-free bond issue, and the company took out a $23 million insurance policy to offset potential losses.

The project took in more than $98,000 when it opened for public service July 15, according to a statement from the company.

Monorail spokesman Todd Walker wouldn't estimate the system's first weekend open to the public but said foot traffic was "very strong."

The project opened for public service July 15 after a succession of computer and mechanical glitches delayed the opening more than six months. The system shuttles passengers along a roughly 4-mile route from the MGM Grand to the Sahara with five stops in between. Plans are currently in the works to connect the route to downtown Las Vegas and, eventually, to McCarran International Airport.

Walker said the decision to apply for nonprofit status was made by accountants for the project who sold the company on the project's potential to fit the public service criteria.

"We said, 'We agree,' and logically we applied for a tax exemption after that," Walker said, saying the business was run more like a for-profit enterprise. "We just financed it like it would not be tax exempt."

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