Impact of tax breaks reduced
CARSON CITY — A revised “green” construction bill that would cut an estimated loss of nearly $1 billion in revenue for schools and local governments was unanimously approved by the Assembly on Saturday.
Lawmakers’ endorsement of Assembly Bill 621 paves the way for resolving one of the major obstacles to ending the 2007 legislative session. The bill also resolves concerns about a similar measure approved in 2005 that had property and sales tax breaks that were deemed too liberal by lawmakers.
AB621 would extend a partial sales tax break to several major building projects in Las Vegas initiated during a three-month period established in the 2005 legislation.
Among them is the $7.4 billion CityCenter complex on the Strip. The partial sales tax abatement amounts to nearly $100 million for the complex.
The exemption would continue through completion of the projects.
That was one of the major sticking points of the first version of the bill, which proposed limiting the sales tax exemption only to materials purchased during the three-month window from Oct. 1, 2005 through Dec. 31, 2005.
The sales tax exemption has a huge fiscal impact, both for the qualified projects and state and local governments and school districts.
If all the projects that applied for the sales tax exemption qualify, just under $300 million in sales tax exemptions would be provided under the bill.
But some projects applied for the exemption after Dec. 31, 2005, and would therefore be ineligible for the sales tax break in the new bill.
The new legislation, proposed to replace a more generous measure approved in 2005, would continue the financial incentive to construct energy efficient buildings without providing a “windfall” of tax breaks, said Assemblywoman Debbie Smith, D-Sparks.
The legislation is meant to apply a measure of fairness to projects without harming the financial stability of local governments, she said.
Also in the new measure is a change in property tax breaks for such projects, from up to 50 percent for 10 years in the original measure, to between 25 percent and 35 percent depending on the level of certification under LEED, or Leadership in Energy and Environmental Design, energy efficiency standards.
Property tax breaks would protect public schools budgets and would not apply to the value of the land, only improvements.
The Legislature in 2005 passed the tax breaks for LEED construction to encourage energy and water conservation in new buildings.
But an analysis based on the number of companies seeking the breaks showed nearly $1 billion in sales and property tax breaks would come at the expense of local governments and school districts.
The concerns prompted the Legislature to seek changes to the tax breaks to lessen the financial impact.
Smith said the overall fiscal impact of the new bill should be about half of the original bill.
The partial sales tax break, which applies to the portion of the tax provided to schools and local governments, is financially significant.
Limiting the break to those who applied during the three-month window in 2005 will mean several projects do not qualify.
Legal challenges to the new legislation could be forthcoming.
But a legal opinion from the Legislative Counsel Bureau issued earlier this week said the Legislature can change the breaks for any and all projects without any legal ramifications.
The Senate Commerce and Labor Committee is scheduled to hear testimony on the measure on Monday.
Lawmakers want to resolve the issue before they adjourn by June 4.