State to seek rehearing of costly, tax refund court ruling

Nevada's attorney general will ask the state Supreme Court to reconsider its ruling in a major tax refund case that could bring a $900 million-plus revenue shortfall closer to $1 billion.

The request by Attorney General Catherine Cortez Masto, to be filed on deadline Monday, will include an analysis outlining the legal basis for a review by the high court of its March 27 decision favoring John Ascuaga's Nugget in Sparks.

Nicole Moon, spokeswoman for Cortez Masto, confirmed Tuesday that a "threshold decision" had been made to seek a rehearing of the decision - a ruling that could bolster similar refund claims filed by many major hotel-casinos.

The Nugget case alone could cost the state more than $1 million in use taxes based on the value of food given to patrons or employees as "comps." Since the food was given away, the Supreme Court said the taxes weren't due.

The state Taxation Department is toting up the dollar amount of the claims from the other clubs - some of them Las Vegas megaresorts with "comped" food budgets far bigger than the Nugget's.

Once that amount is calculated, it will be added to the latest $900 to $910 million revenue shortfall estimate. DiCianno has said it's possible that existing claims and any new ones could approach $100 million, but he won't venture a guess until his list of claimants is complete.

Gov. Jim Gibbons, working with legislators on ways to cut state spending beyond the 4.5 percent cutbacks he ordered in January, said Monday that leaving the tax refund estimate out of the latest shortfall estimate is a necessary risk. At this point, he said the estimate would be "speculation at best."

There's more to determining the dollar amount than adding up existing refund claims and accounting for any new ones submitted to the Taxation Department following the Supreme Court decision. The state could get a break if some of the claimants decide not to press immediately for their refunds.

John Bartlett, the attorney who represented the Nugget in the tax case, has said that as far as the Nugget is concerned, "we're willing to sit down and talk about how best to handle this" so that the state isn't harmed even more during the current economic downturn.

Bartlett said options for refunds could include deferrals or tax credits for any of the businesses with refund claims. That would enable the state to could avoid immediate payments.

With the "comped" meals ruling left out of the shortfall equation, Gibbons and lawmakers think they can get by with moneysaving options such as delays in state building and other one-shot projects, use of reserved and "rainy day" funds and other steps.

That would avoid layoffs of state workers and actual reductions in agency operating budgets. Scheduled pay raises for state workers and teachers wouldn't be canceled.

Gibbons has credited state Treasurer Kate Marshall with helping to ease the shortfall crisis. He noted that in February she identified $40 million and last week came up with another $20 million in savings that can help cover the shortfall.

The projected $900 million shortfall through mid-2009 amounts to 13 percent of the nearly $7 billion state budget approved last year for the current two-year budget cycle.