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The Fight to get Nevada casinos to pay a fair share

Senate Bill 521
Steve Wynn's art tax loophole will become a budgetary hemorrhage


Senate Bill 521 makes a bad situation worse. The Nevada Tax Commission, following the mandates of the 1997 law and normal rulemaking practices, defined tax exempt art as that which is non-functional. This bill changes all that so that just about anything might qualify as art.

The tax commmisson now requires the casino displaying the art to outreach its availability to school districts, universities and private schools. The proposed law seems to put the shoe on the other foot.

85 PERCENT CUT IN STUDENT VIEWING -- Under SB 521, student viewing will be cut from 20 hours per week, 35 weeks per year, per painting, to the following (noted on page 4, lines 1 through 5, of the amended bill): "'Fine art for public display' means a work of art which:...(4) Is on display in a facility that is available for group tours by pupils or students for at least 5 hours on at least 20 days of each full year for which the exemption is claimed, during which the facility in which it is displayed is open, by prior appointment and at reasonable times, without charge."

The latter paragraph means 100 hours per year whenever the hotel judges the time reasonable. Under the current law, each painting would have to be available to students at no charge for 700 hours per year (35 weeks times 20 hours). That's an 85.7 percent cutback in viewing.

According to the April 12, 1999, New York Times, Bellagio has waiting lines of three to four hours at practically all times. Sometimes, the wait is six hours. Restricting Nevada resident half-price admission to between 6:00 p.m. and 12:00 midnight for 25 hours per week will tend to severely diminish Nevadan half-price attendance. Mr. Wynn recently raised the admission price from $10 to $12 per person and rumors in Las Vegas talk of another increase to $14 or perhaps more.


Legislative Counsel Bureau Opinion: "It seems unlikely that the owner of a casino would pay any tax on the works of art."

The following is the entire text of an analysis prepared by the Nevada Legislative Counsel Bureau.

State of Nevada
Legislative Counsel Bureau
Legislative Building
401 S. Carson Street
Carson City, NV 89701-4747


DATE: April 15, 1999
TO: Senator Joseph M. Neal, Jr.
FROM: Paul Mouritsen, Principal Reseach Analyst, Research Division
SUBJECT: Tax exemption for Art

This memorandum is written in response to your request for an analysis of Senate Bill 521 (First Reprint).

Senate Bill 521 amends the law enacted in 1997 which exempted works of fine art on public display from property taxes and sales taxes. The bill preserves the exemption granted in 1997, expands it in some ways, and protects it against possible legal challenges. Some of the key provisions of this bill are summarized below.

1. The bill explicitly authorizes an exhibitor to charge a fee for viewing works of art, but requires that Nevada residents be given a discount of 50 percent during the evening hours and that school children be allowed to view the exhibit without charge if the school makes prior arrangements. This point has been in controversy since the bill passed in 1997 and has led the Nevada Department of Taxation, in at least one case, to deny an exemption to the owner of a casino who wished to charge an admission fee.

2. The bill provides that works of art are taxed not on their value, but on the amount of net receipts from fees charged for exhibiting them. To arrive at a figure for net receipts, the owner is allowed to deduct some very significant items. First, he can deduct any costs associated with owning or exhibiting the art. These costs could include such things as the imputed rent on the area where they are exhibited, the costs of security guards for the exhibit, costs of insuring the art, and the costs of heating, air conditioning, and lighting the exhibit area, among other items. Second, the owner can deduct any contributions he makes to art programs for juvenile delinquents or charitable organizations. This deduction is interesting since these items would also be deductible from the owner's gross income for federal income taxes. Third, the owner may deduct the costs of educational programs associated with the exhibit. These costs could include brochures, programs, and advertising. Fourth, the owner may deduct personal property taxes due on other property. For the owner of a casino, this deduction would include personal property taxes on all the furniture, equipment, vehicles and so forth used by the casino. Since this amount is so large, it seems unlikely that the owner of a casino would pay any tax on the works of art.

3. The bill expands the exemption for works of fine art that are leased for display. Under current law, some leased items could be subject to property and sales taxes if the value of the lease is less than $25,000 even though the value of the work is much greater. Under provisions of S.B. 521, the lease would be exempt since the taxable value is based on the price of the work rather than the value of the lease.

4. Property that is held as inventory by a merchant is exempt from taxes under current Nevada law. The bill makes it clear that works of art that are for sale are considered inventory items even though a fee is charged for viewing them.

5. Current law requires that art be displayed to the public in order to qualify for a tax exemption. Senate Bill 521 relaxes this requirement to allow the exemption to apply to art that is acquired up to two years before the opening of the gallery in which it will be displayed. The bill also makes it clear that the exemption applies to art that is held only part of the year, providing it is on display for two-thirds of that time.

6. Finally, there is one provision in the bill that may require clarification. The bill provides that works of art are considered business inventory even though they are "used for purposes other than viewing." This provision occurs in Section 4, page 4, lines 13 and 14; in Section 5, page 5, lines 40 and 41, in Section 7, page 7, lines 6 and 7; and again in Section 9, page 7, lines 32 and 33. I am not certain of the intent of this provision. Would it, for example, allow antique furniture, automobiles, chandeliers or other such items that have a practical use to (be) treated as art and be exempted from property and sales taxes? If so, these sections may need to be examined more closely.

Please call me if you need other information.




The following comes from the "Floor Statement" Memorandum prepared by the Legislative Counsel Bureau's Fiscal Analysis Division for the Senate Committee on Taxation. It was presented with the committee's do-pass recommendation. The Floor Statement is dated April 15, 1999 and is unsigned.:

"Section 3 clarifies that the exemption for fine art for public display extends to lessors of fine art who lease the art for public display."

Barbano comment: The tax commission last year held that art purchased by a collector to generate lease income is not the same as art purchased for sale and thus could not qualify for an exemption. Mr. Wynn apparently leases some of his personal possessions to his own company.

"Section 11 provides that if a facility containing an area for exhibition is under development or construction on July 1, 1997, the 1997 act shall apply to works of art purchased before that date and displayed in that facility within two years after purchase."

Barbano comment: This is a textbook definition of a law passed to benefit just one person, something we decry in the congress. Perhaps Harvey Whittemore will place some of his personal collection of Renoirs on his new pier at Lake Tahoe. He may then complete the circle of self-interest by applying for a tax exemption.


(37.61 percent of total collections)

The following comes from the minutes of a joint meeting of the senate and assembly committees on taxation held on 2-9-99.

"Mr. (Michael) Pitlock (Executive Director, Department of Taxation) distributed the 'Executive Director's Exemption and Refund Report'...He stated that the document attempts to quantify the fiscal impact of all the constitutional or statutory exemptions currently in the law. He commented you have heard discussions centered on the sales and use tax and the narrowness of the tax base. He explained based on the latest estimate of the sales and use tax, exemptions add up to about $677 million annually. He noted the total sales and use tax collected last fiscal year, including both the state and local government portions, was about 1.8 billion.

"Mr. Pitlock pointed out Nevada currently has exemptions in excess of 30 percent of the remaining tax burden. One exemption highlighted in this report was the fine art exemption."

(Op cit., at pages 6 and 7)


For more information about this issue, see:

How the Wynn tax first got passed

Complete history of the 1999 expansion, including how lawmakers voted

Updates from Sen. Joe Neal, D-North Las Vegas

Letters to the Editor

"Casino alchemist Wynn turns high art into low taxes"

From the New York Times: Casino Seeks Tax Break for Art's Sake

Guinn waffles while Wynn wins again

2004 UPDATE: Greedy Mr. Wynnderfull wants more from the taxpayers with Nov. 2 ballot question






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