State to add auditors to ensure insurers pay their taxes

By Cy Ryan (contact)

Thursday, Oct. 1, 2009 | 2 a.m.

Carson City — The state might have lost $93 million to $163 million in tax revenue over the past seven years by not checking the accuracy of insurance companies’ tax returns, according to a state audit.

The Taxation Department doesn’t currently examine returns to determine whether deductions are correct.

The state collected $260 million with the insurance premium tax in fiscal year 2007.

State Insurance Commissioner Scott Kipper disputed that insurance companies have underpaid their taxes by up to $163 million. But Kipper agreed to include in his 2011-2013 budget money to hire two additional auditors to check the accuracy of the tax payments.

Auditor Vita Ozoude estimates that each auditor hired by the state would generate an added $481,000 a year in insurance premium taxes.

Ozoude said the $163 million figure is based on reports to the National Association of Insurance Commissioners of the premiums written by companies in Nevada.

The audit was presented to the Executive Branch Audit Committee, headed by Gov. Jim Gibbons.

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The state Division of Internal Audits also reported that the state Transportation Department has a cache of little-used equipment it might want to sell.

“Our review found 69 heavy-equipment vehicles might not be necessary,” auditor Mike Colburn said. Getting rid of the equipment would save the state an estimated $657,000 a year in operating costs such as insurance and preventive maintenance.

State Treasurer Kate Marshall questioned whether some equipment might be needed in times of disaster. But Richard Nelson, assistant director of operations for the Transportation Department, said the department contracts with private companies when equipment is needed during emergencies.

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A proposed $800,000 expansion to the veterans cemetery in Fernley is threatened by a new Veterans Affairs Department rule requiring that private companies, and not state agencies, administer and manage such construction projects.

The state Public Works Board is digging in its heels, citing state law that places that responsibility with the board. The board is refusing to grant an exemption to allow the state’s Office of Veterans Services to hire a private contractor for the project.

Gus Nunez, manager of the board, said private companies don’t have the experience to handle protests over construction bids and contests over the state’s prevailing wage law, which have grown more common in the recession.

Tim Tetz, executive director of the Office of Veterans Services, told the board the deadlock could cost the state $800,000 in federal funding.

The problem arose after Veterans Affairs changed its rules this summer. Tetz said he has asked the federal agency for an exemption but it has not been granted.

Tetz said he will likely have to raise $20,000 in private money to pay the Public Works Board to oversee the project, which would add four acres and 900 burial plots to the cemetery.

Meanwhile, the veterans cemetery has run out of space for burial of single veterans and has started to use a section of the cemetery reserved for the burial of family members.