How Trump reveals a hole in Nevada’s property tax law

By Daniel Rothberg

Thursday, Nov. 3, 2016 | 2 a.m.

The Trump International Hotel, completed in 2008, opened its doors during the first wave of the economic meltdown. At the epicenter of the real estate bubble, Nevada was hit especially hard. Property values tumbled, and Trump International’s high-end condos were difficult to sell.

Nevada officials responded, and two years later the State Board of Equalization slashed the hotel-condo’s value by 95 percent of what the county assessor said it was worth. The Signature at MGM Grand, a three-tower condominium project, got a similar reduction, as did other large commercial properties like the Palms and the Westgate (then known as the Las Vegas Hilton).

The portion of Trump International not leased out as condos — the lobby, its base structure — went from a valuation of about $180 million to about $8.5 million, county tax records show. Though Trump pays other taxes on the project, the tax on the land dropped from about $757,000 in 2009 to $6,927 in 2010.

The reduction by the board of equalization, coupled with advantageous language in Nevada’s statutes, have allowed Trump International and many other large commercial properties to keep their taxes low even as their property values bounced back from the recession. Trump’s tower provides a clear illustration: In 2013, it was valued around $48 million but paid $7,834.

Sources: County Assessor’s Office, County Treasurer’s Office and State Department of Taxation (*In lieu of assessor data, the property value for 2014-15 is estimated using taxation department documents). “Real property” is the land and improvements.

Through Donald Trump’s campaign for president, opponents and media outlets have scrutinized his personal and business dealings. After a New York Times report, Trump acknowledged and even boasted about not having paid federal income taxes for years. And last week, a story in the Huffington Post cited the Nevada project as an example of how Trump has nickel-and-dimed local governments. While he benefited from Nevada’s tax code legally, Trump’s tax bill offers a window into an issue Clark County has faced for several years.

Because Nevada caps tax increases, the real property tax that the Trump tower pays on its base structure has stayed around $8,000 for several years, even as the property value has increased. Trump’s taxes are tied to the low valuation from 2010, which set the base standard for his taxes. As a result, the cap has saved Trump about $1.9 million in property taxes since 2010.

And Trump International is not alone. It’s a timely example of the thousands of residential and commercial properties around the valley that have benefited from the caps. The Sun reported that during the last fiscal year government agencies missed out on about $403 million in funding for services because of the cap, which fluctuates on a formula. So it could hit the county harder this year, as it will lock tax increases at 0.2 percent, meaning commercial and residential property owners will see virtually no increase in their taxes.

“The caps throughout the valley have had a large effect on local government’s ability to provide services, because we’ve not seen revenues keeping up with the growth,” said Erik Pappa, a spokesman for Clark County. “At a time when we need more police officers, it would be really nice to have that revenue back. At a time when I think most people in the community believe the education system is not appropriately funded, it would be nice to have that revenue back.”

Trump’s property and others do pay additional taxes to the county. Last year, the tower’s management paid $39,401 in personal property taxes, according to county records, as well as $958,513 in taxes on 475 condos that the building had yet to rent. An analysis shows that these charges brought its full bill to the county to about $1 million, despite the low tax on its land.

In 2010, the state tax board granted a number of buildings on and off the Strip reductions on the property values determined by the county assessor, ranging from 22 to 92 percent breaks.

These reductions, which apply to both real property value and personal property like furniture, continued in other years and often left a legacy of taxes capped indefinitely at the low values.

Source: Department of Taxation (depending on the building type, reductions were made after considering obsolescence, market factors and how large properties are bought and sold).

Some properties, including Trump International, have applied for reductions in their appraisals, though it wouldn’t affect their taxes in the short term. Last year, the Clark County Assessor recommended that the hotel portion of the property be valued at around $45 million, but the state tax board determined that the value should be $25 million. Because of the cap, it didn’t affect the taxes on the land, which remained near $8,500.

Property owners are worried about long-term taxes if the cap changes. Trump’s application last year was a preemptive move. With the strain that the tax cap has placed on the county, legislators are likely to make reforms to it during the next session in 2017. That could make taxes more commensurate with property value, and Trump and his peers want to be ready.