Las Vegas Sun

March 28, 2024

Despite legal setback, group to keep battling Nevada’s commerce tax

Controller

AP Photo/Lisa J. Tolda

Nevada’s Assistant State Controller Geoffrey Lawrence, left, State Controller Ron Knecht and Assemblyman Jim Wheeler, R-Minden, present an alternative tax plan to Gov. Brian Sandoval’s plan during a budget hearing Thursday, May 14, 2015, inside the Nevada Legislative Building in Carson City.

A conservative group isn't giving up its fight to repeal a tax passed by the Nevada Legislature last spring, despite a major blow dealt to its efforts Wednesday by the Nevada Supreme Court.

In a ruling focusing on a petition circulated last fall by the group, RIP Commerce Tax, justices concluded that a summary accompanying the petition did not adequately explain the effect that a repeal of Nevada's new commerce tax would have on the state budget. One of the main proponents of the anti-tax initiative, state Controller Ron Knecht, however, believes the court erred in its opinion and didn’t understand the nuances of the issue as well as the trial court judge, who ruled in the group’s favor.

In their opinion, the justices wrote that “even though the tax’s disapproval will necessarily unbalance the budget approved by the Legislature in 2015 … the (accompanying summary, known as a description of effect) makes no mention whatsoever of this critical requirement.” They added that the current description is “deceptive” for not identifying “the practical ramifications” of what repealing the tax would mean.

The commerce tax, which only applies to businesses that generate more than $4 million each year in revenue in the state, was one portion of an omnibus tax plan passed by the Legislature in 2015. The commerce tax and other tax measures passed by the Legislature allowed the state to allocate extra money to K-12 education in Nevada in its 2015-17 budget.

But Knecht maintains that the court did not understand the way the commerce tax would be collected.

The way the tax is structured, the money it generates is allocated to be spent during the current fiscal year, but isn’t collected until after the end of the fiscal year. That means the first round of the tax will be collected in August — which the ballot measure wouldn’t be able to stop, since voters won’t weigh in until November. The second round will be collected in August 2017.

Knecht argues that since the Legislature will meet before the second round is collected, it could fix the budget hole that a repeal would create. “Our point is that there is zero effect in this biennium,” Knecht said. “There’s no hole in the budget.”

Justice Nancy Saitta, in her concurring opinion, strongly disagreed with that argument.

“By ignoring the significant effect the referendum would have on the balanced budget mandate, the description of effect suggests that no such effect exists and is thus materially misleading,” Saitta wrote. “As a result, the petition’s signers have been both deceived and misled.”

Proponents of the repeal initiative have contended that argument fundamentally ignores the way that budgets are put together and the fact that they depend on the future collection of revenue.

Knecht also suggested that the Supreme Court justice hadn’t “done all the homework” like the lower court judge, James Wilson, had.

“Judge Wilson had read and understood everything and, quite frankly, he was able to see through the budget process,” Knecht said. “For some reason (the Supreme Court) decided to reverse the trial court even though the trial court judge obviously had done all the homework and knew the facts and details better.”

The court did, however, rule in favor of RIP Commerce Tax on other issues, including validating the integrity of the petition itself.

Lawyer Matt Griffin, who represented the pro-commerce tax Coalition for Nevada’s Future, called it a “well-reasoned opinion” and thanked the court for getting an answer out so quickly.

Knecht agreed with the latter assessment, saying he had originally thought the court would take maybe a month to reach its decision after the oral arguments on May 2 — not just a little over a week.

“If we’re going to have any chance to deal with it, it’s a good thing they made it earlier rather than later,” Knecht said.

Knecht and other opponents of the commerce tax are mulling their options, since they only have about a month and a half left before the June 21 filing deadline to turn in a valid petition with 55,000 signatures.

One option Knecht posed is asking the Supreme Court to revisit the matter. Under Nevada court rules, the Supreme Court may rehear or reconsider the matter under a limited set of circumstances. In the case of reconsiderations, the rules state they are “not favored and ordinarily will not be ordered.”

“If they want to request a reconsideration, they can do that, but the opinion stands on its own,” Griffin said.

Another option Knecht suggested is going back to the lower court to come up with new language for the description and to start collecting the signatures from scratch — since the court invalidated the 20,000 they had collected thus far in its ruling.

Knecht said that the group likely needs to collect 70,000 signatures, just in case some of them are invalidated. Under the current timeline, he said, getting that many signatures would be difficult.

RIP Commerce Tax had been working with the conservative nonprofit group Americans For Prosperity for a couple of weeks to gather signatures in addition to its own volunteer-based efforts. Knecht retains some hope that gathering enough signatures would be possible before the June 21 deadline.

“That looks not very likely at the moment, but it’s not beyond possibility,” he said. “We’ve got lawyers and we have operations people and the RIP Commerce Tax board, all of us looking at this and trying to make a decision.”

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