Las Vegas Sun

March 28, 2024

Nevada Supreme Court rules tax extension unconstitutional

CARSON CITY — The Nevada Supreme Court has declared a 2019 payroll tax and Department of Motor Vehicles fee extension unconstitutional, setting up a question mark in the state’s budgeting process with days left to go in the legislative session.

The decision upholds a District Court ruling and ends a protracted legal fight that has been ongoing since soon after the 2019 legislative session.

In the final days of the 2019 session, Democrats voted to extend both the payroll tax and a DMV transaction fee on a party line vote. That vote raised the ire of Republicans, as tax increases in Nevada require a two-thirds vote and Democrats did not hold a supermajority in the Senate.

Senate Minority Leader James Settelmeyer, R-Gardnerville, said immediately after the 2019 vote that legal challenges would be filed. Attorneys with the Legislative Counsel Bureau had presented an opinion that the extension of the taxes did not require a two-thirds vote — an opinion that state courts ultimately rejected.

The tax extension salvaged a $100 million funding stream that was scheduled to expire. Democrats at the time argued that it was necessary for issues including education and school safety funding.

Settelmeyer, in an interview with Nevada Newsmakers on Tuesday, estimated the state would have to repay about $107 million in tax revenue. The ruling comes after the state’s Economic Forum gave Nevada a rosy economic forecast, with $586 million more than previously predicted now expected in the next biennium.

Assembly Minority Leader Robin Titus, R-Wellington, applauded the decision in a brief statement.

“The Supreme Court’s decision today is consistent with the intention of the law — to protect citizens from unfair taxation,” she said.

Gov. Steve Sisolak said in statement that his office would work with legislative leadership on budget implications and that state officials will analyze the decision to determine the best next steps.

In a joint statement, Senate Majority Leader Nicole Cannizzaro, D-Las Vegas, and Assembly Speaker Jason Frierson, D-Las Vegas, expressed their disappointment with the decision, accusing Republicans of “playing partisan politics with our children’s education dollars.”

“Despite their misguided decision to push forward, even in the face of unprecedented shortfalls to our state's budget this past year, we will continue to seek ways to require large, profitable corporations to pay their fair share and support Nevada families,” the statement said. “Going forward, we call on our colleagues to work with us on meaningful revenue legislation this session.”