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
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.
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
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."
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
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."
following is the entire text of an analysis prepared by the Nevada
Legislative Counsel Bureau.
State of Nevada
Legislative Counsel Bureau
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
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
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.
FROM THE SENATE FLOOR STATEMENT
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
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.
NEVADA SALES & USE TAX LOOPHOLES
TOTAL $677 MILLION PER YEAR
(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
"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
history of the 1999 expansion, including how lawmakers voted
Sen. Joe Neal, D-North Las Vegas
to the Editor
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
Greedy Mr. Wynnderfull wants more from the taxpayers with Nov. 2