Democrats challenge Nevada green building tax break rules

Assembly Democrats argued Thursday that even those projects that already received letters qualifying them for the so-called "green building" tax cuts may not be entitled.

AB621 was passed by the 2007 Legislature to reduce the financial hit on the state and local governments and schools from the original 2005 law, which gave huge property and sales tax breaks to anyone willing to build energy efficient buildings.

But lawmakers and the state panicked when they discovered the total loss in tax revenue for just the 10 projects that applied by last April would have been $974 million over the next 15 years and dozens more were lining up to apply.

AB621 greatly reduced those property and sales tax breaks. But in the process, several projects were grandfathered under the old law because they had already received letters of opinion from Taxation and an application filed with the Governor's Energy Office granting them the breaks. Lawmakers established what they described as a "bright line" test to determine who qualified for the breaks under the original law and who didn't.

Thursday, Assembly Speaker Barbara Buckley, D-Las Vegas, argued that companies who also had a pre-construction contract in place at the time they applied would qualify.

"You can't say they have a contract because they have an opinion letter," she said.

She said projects must have all three elements - the Energy Office application and approval, Taxation approval and a pre-construction contract.

The trouble is, the pre-construction contract wasn't required under the 2005 law.

Taxation Director Dino Dicianno said he believes six projects received Taxation and Energy Office letters saying they qualify before the law was changed. He said the Tax Commission interprets them as qualifying.

He said he doesn't know how many of them actually had a pre-construction contract when they applied. He said changing the rules now and adding that requirement "voids the opinion letter."

"It doesn't matter that you issued an opinion letter," said Buckley. "You must follow the new law."

Assemblywoman Debbie Smith, D-Reno, joined her, saying even those six projects don't have final approval because "there is still a process to go through."

Sen. Randolph Townsend, R-Reno, said that would completely undo the work of the 2007 Legislature, opening a legal can of worms in the process.

"If you're going to have a new standard to meet, you're inviting more than litigation," he said. "We'll be tied up for the rest of our lives."

The issue was raised during legislative review of the proposed regulations to implement the new green building law.

After the meeting, Townsend said the Democrats were trying to change the rules to revoke the tax breaks for businessmen who have already committed huge amounts of money to major resort projects relying on the state law.

"They want everybody out," he said.

But Buckley said this is exactly what was intended by AB621. She said just saying you're going to build an efficient building isn't enough to qualify for the tax breaks, that there should be proof - such as a contract.

She said she raised the issue because she has been told the commission intended to simply certify all those projects without requiring the pre-construction contract.

She added that, if the Tax Commission feels it may be in trouble over the issue, that's too bad.

"They have to follow the law."

The original green building law allowed businesses that meet Leadership in Energy and Environmental Design (LEED) standards an exemption from all but the 2 percent base sales tax on construction materials, furnishings and fittings. It also allowed up to a 50 percent break on property taxes for as long as 10 years.

The amended law eliminated the sales tax break altogether for future projects. In addition, it cut the property tax break to a maximum 35 percent and allowed that break only on the improvements, not the land itself. Finally, to protect public schools, the tax break wouldn't apply to the portion of property tax which supports schools.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.