Gibbons seeks legal opinion on tax plan

CARSON CITY -- Gov. Jim Gibbons submitted a formal request Wednesday to Attorney General Catherine Cortez Masto for a legal opinion on the ramifications of a bill that would suspend tax breaks for energy-efficient building projects.

Gibbons received Senate Bill 567 on Tuesday and is expected to act on the measure Monday.

Gibbons has indicated that he might veto the bill if it creates a liability against the state by companies now engaged in construction projects using what are known as Leadership in Energy and Environmental Design, or LEED, standards.

The Legislature in 2005 passed a bill providing tax breaks to companies that follow the standards, which are designed to lessen energy dependence.

One of the biggest already under way is the $7.4 billion CityCenter on the Strip.

Concern over the effect of the tax breaks on local government and public schools budgets led the Legislature this session to pass the bill suspending the program, at least temporarily.

In his letter, Gibbons said: "While I respect the Legislature's efforts to address the unanticipated economic consequences of Assembly Bill 3 (22nd Special Legislative Session), I am deeply concerned that Senate Bill 567 could expose the state to costly litigation brought by taxpayers who have relied upon LEEDS tax exemptions and abatements. Therefore, I hereby request an official opinion from your office analyzing the risk and potential consequences to Nevada should Senate Bill 567 become law."

Gibbons asked for a response by 8 a.m. Monday.

A letter dated Tuesday to Joshua Hicks, general counsel to Gibbons, from the Department of Taxation outlines some of the costs of the projects exempted or seeking an exemption from the sales and use tax.

The CityCenter project is eligible for an exemption on the local and schools portion of the sales tax on $1.74 billion worth of materials over three fiscal years, starting in fiscal year 2007-08.

This exemption would mean the loss of $100 million in local and schools sales and use taxes over three years.

A second project receiving a sales and use tax exemption was the Fontainebleau project in Las Vegas. The total project cost is $2.8 billion, with $659 million in exempt purchases. Over the three years, the local sales tax exemption is worth nearly $38 million.

A third such project is The Palazzo, being built by the Las Vegas Sands Corp. The $1.8 billion project has $424 million in exempt purchases, worth about $24 million in sales and use taxes.

Five other projects have received opinion letters from the Department of Taxation on how the exemption will be implemented. Those include the Molasky Corporate Center Project, Echelon Place Project, Panorama Towers Project, W Las Vegas Hotel project and Venetian/Lido expansion project.

The fiscal impact is unknown for all but the $4 billion Echelon project, which has $942 million in exempt purchases of materials for a sales and use tax break worth $54 million over three years.

A third category of projects requesting opinion letters includes two projects, the World Jewelry Center and the Wynn Encore Expansion. The fiscal impacts of the projects are not yet known.