The Strip looking north near the Tropicana Las Vegas, MGM Grand and New York-New York as seen in October 2019. (Le Basco / Las Vegas Review-Journal)
Nevada Legislature Building in Carson City. (Ellen Schmidt / Las Vegas Review-Journal)
Assembly members Toby Yurek, R-Henderson, left, and Steve Yeager, D-Las Vegas, greet each other in February 2023 in Carson City. (Ellen Schmidt / Las Vegas Review-Journal)
Councilwoman Sandra Jauregui, D-Las Vegas, is seen during the first day of the 82nd session of the Legislature in Carson City in February 2023. (Ellen Schmidt / Las Vegas Review-Journal)
Experts say legislation to close a loophole that has cost Nevada governments millions of dollars in revenue is an “unsophisticated” approach and will do little to get businesses to pay taxes.
Last month, an Assembly committee approved Bill 448 (AB448), which was introduced after a Las Vegas Review-Journal investigation found that casinos and other large landowners were paying property transfer taxes on lucrative sales. were avoiding doing. The bill will require payment of tax if the asset is transferred to a business entity “incorporated for the purpose of avoiding such taxes”.
Legal experts said the move could help close the loophole on short sales. But if the bill becomes law, high-priced lawyers and accountants will still find ways to help clients avoid taxes, he said.
“It strikes me as a rather unsophisticated way of approaching the issue,” said corporate attorney Bob Mahon, president of the tax practice at legal giant Perkins Coie.
Former Clark County Deputy District Attorney Clifford Jeffers, who worked for years on real estate civil cases, doesn’t believe the measure will be effective.
“It’s like putting a bandage on a much more serious problem,” Jeffers said.
Both Mahon and former tax attorney Don Griswold say Nevada has a stronger way of closing the loophole in these complex transactions: a tax on the sale of the entity that owns the real estate.
Assembly Speaker Steve Yeager and Assembly Majority Leader Sandra Jauregui, the Las Vegas Democrats who introduced the bill, did not respond to requests for comment.
Tom Blanchard, president of Nevada Realtors, said the real estate association supports any effort to review exemptions that, under state law, allow some offers to avoid the transfer tax. He said AB448 is a step in that direction and his group commends Yeager for introducing the bill.
“Hard-working Nevadans pay the (transfer tax) whether they are a first-time home buyer or a long-time property owner,” Blanchard said in a statement. “However, large corporate entities can avoid paying (taxes) because of these exemptions, draining state and local government coffers of millions of dollars. Fundamentally, this is unfair to Nevadans.”
Nevada’s legislative session is set to end on June 5. The Transfer Tax Bill was not fixed for further hearing.
‘It is very easy to avoid this case’
Griswold, who used to help businesses cut their taxes but is now a critic of tax evasion, said AB448 is a positive change for Nevada, but it is not as strong as it should be.
One potential problem: The bill raises the question of intent.
Jeffers said the notion of proving intent on these sales is “ridiculous”, as advisers would know how to create an entity for a legitimate purpose that would also allow clients to avoid transfer tax.
Proving intent may require costly litigation, Griswold said, noting that authorities may simply dust off an old shell company to use in new transactions. Thus, they can say that the entity was set up long before the sale and the transaction could not have been created with the intention of evading asset transfer tax.
“It’s very easy to avoid the issue,” said Griswold, who previously worked for major accounting firms KPMG and PwC as well as large law firms.
The Nevada Resort Association declined to comment on the bill.
The Las Vegas Chamber is monitoring the legislation, but the trade group has not yet taken a position on it, said spokeswoman Kara Clark.
Great Sale, No Transfer Tax
Transfer taxes cover 0.51 percent of the sale price of a property in Clark County, with the proceeds going to the Nevada general fund, schools, low-income housing and other services. The state earned more than $330 million in transfer tax revenue last fiscal year.
But over the years, Las Vegas has seen several high-priced deals that don’t pay a dime of this tax.
At least $27.5 billion in transactions in the Las Vegas area — including nearly two dozen sales of hotel-casinos, malls and other properties, mostly on or near the Strip — have been publicly disclosed since 2007 without any real property transfer taxes. have stopped, the Review-Journal reported last spring.
In this type of transaction, investors often acquire an entity that owns the asset, rather than buying it outright, and often invoke the asset transfer tax exemption permitted by state law when the asset is transferred to the subsidiary. is transferred to.
One way to capture income from these operations is by levying a sales tax on limited liability companies or other entities that own real estate. A total of 17 states implement or allow these so-called controlled interest transfer taxes, according to a spring 2020 report by Holly Anak, vice president of transaction tax services at commercial real estate brokerage CBRE Group.
Nevada is not one of them.
As Anak wrote, states expanded their laws to include this tax when they realized a loophole that allowed property owners to avoid real estate transfer fees.
Griswold said the controlled interest tax isn’t bulletproof, noting that lawmakers in the private sector face smart advisors.
“Specific anti-abuse rules sound great at first glance, and if you’re going to do nothing else, do this,” he said. “But anyone who engages in dodging of taxes can get around almost any specific anti-abuse rule.”
