Friday, Sept. 26, 2003 | 9:25 a.m.
CARSON CITY -- Employers who will be hit with a payroll tax starting next week are eligible to deduct payments made for health care, not only for their employees but also for their dependents.
That was one of the clarifications of Nevada's new tax law included in a legal opinion released Thursday by lawyers for the Legislature.
The opinion said employers will be able to also claim deductions for payments made for vision and dental care and providing on-site medical clinics. The opinion, addressed to Sen. Randolph Townsend, R-Reno, was released at a meeting of state taxation officials who are developing regulations for implementing the $836 million tax package.
Townsend said tax commissioners asked him several weeks ago about specific sections in the tax bill and how they applied. He didn't have answers for them because there had been no debate on the bill. So he sought a legal opinion.
"We wanted to give health care deductions," Townsend said, referring to discussion during the Legislature in drafting the tax plan. He said there was one proposal to allow up to $100 in deductions per employer. But he said that was discarded because every employer would have probably qualified even if they didn't really provide substantial health care. Some could cheat, legislators figured, by saying they provided $100 in coverage when they really only gave a worker an aspirin.
"We then decided on a dollar-for-dollar against the tax," Townsend said.
Starting Oct. 1, a quarterly tax based on 0.7 percent of gross payroll will be imposed minus deductions for health insurance benefits paid by the employer. The rate is 2 percent of gross payroll for financial institutions, including banks and savings and loans.
The 0.7 percent rate for general business will be reduced to 0.65 percent of gross wages in July 2004. And the current $100 per employee business tax is repealed as of Oct. 1 to be replaced by the payroll levy.
Deputy Legislative Counsel Joel Benton and Principal Deputy Legislative Counsel Scott McKenna said the new law on the payroll tax focuses on the amount paid for health insurance and that should include the amount spent for dependent care.
The opinion also confirms what Union Pacific Railroad lobbyist Joe Guild told state tax officials last week that the company is not subject to the payroll tax. Benton and McKenna said a railroad company does not come under the definition of employer in the tax bill. Thus it would not be subject to the excise tax on wages.
The state Taxation Commission will meet Oct. 6 to start adopting regulations for business to follow in figuring their tax liability. And tax officials will continue their workshops Oct. 9 trying to hammer out the definition of rules.
Pat Sanderson, who identified himself as "a working man," told state taxation officials in Carson City Thursday that "whatever you can do to help employees to have health insurance, it will be a great thing for Nevada."
He said the health care exemption encourages employers to provide health coverage for the workers. And if the workers are not covered by group insurance, the cost falls on government.
Tax Commission Chairwoman Barbara Campbell told Sanderson, "The Legislature intended to reward companies with health care."
The legislative legal opinion also said that mortgage brokers are subject to the 2 percent payroll tax on financial institutions. Mortgage brokers arrange loans with other people's money and there was a question as to whether they could be grouped in this financial institutions category, rather than paying the lower 0.7 percent.
Benton and McKenna said the "clear and unambiguous language" in the law shows that brokers are considered financial institutions for the purpose of paying the 2 percent tax.
The 2 percent financial institutions tax, said Benton and McKenna does not apply to casinos that extend credit to patrons, retail businesses that provide charge accounts or issue credit cards for use only for the purchase of goods or services from that business and doctors and other health care providers that extend credit or allow patients to pay in installments.
The legal opinion said these businesses do not engage primarily in one of the 18 listed activities conducted by financial institutions.
The opinion also cleared up who must pay an annual $100 business license fee. A business operated from a home and that earns less than 66 2/3 of the average annual wage is exempt from registering with the state and exempt from the fee.
Benton and McKenna said the exemption is computed on the previous year's wage, not the present year.
The opinion said employers could release information to the state Taxation Department about health issues of workers without violating the federal health care privacy act.
These records are not likely to be "protected health information." And names of the individual patients should not be released.
archive
