Eight Nevada Senate Republicans on Friday followed up on a May promise to challenge the extension of the Modified Business Tax sunset.
The senators led by Senate Minority Leader James Settelmeyer, R-Gardnerville, filed suit in Carson City District Court alleging Gov. Steve Sisolak and Senate Majority Leader Nicole Cannizzaro violated the Nevada Constitution.
The challenge involves Senate Bill 551 and Senate Bill 542 passed by the 2019 Nevada Legislature. SB551 extends the existing Modified Business Tax rate and generates $98.2 million. SB542 extends the DMV technology fee set to sunset in 2021. That fee generates about $7 million.
The suit alleges the bills are unconstitutional because the Senate approved them 13-8 — one vote shy of the two-thirds majority.
During the session, lawmakers obtained a legal opinion from Legislative Counsel that the two-thirds rule didn’t have to be applied since it was extending an existing tax rate rather than raising a tax.
In May and again when Sisolak signed the bill Settlemeyer vowed to take the passing of the MBT and DMV fee to court.
He said Nevada’s constitution requires a two-thirds majority to pass “anything that increases revenue in any form.” He said that has been the ruling on sunsets in the past as well as new or increased taxes.
The complaint demands a restraining order preventing continuation of the higher modified business tax rate and the extension of the increased DMV fee. It seeks an order preventing the state from collecting the added revenues generated by the business tax and the DMV fee.
The suit names Cannizzaro and Sisolak who signed the bills, the department of taxation and DMV, Lt. Gov Kate Marshall who presided over the floor session and Senate Secretary Clair Clift.
“We have checks and balances for a reason and eroding the two-thirds requirement is an unprecedented disregard for the constitution and creates a dangerous precedent,” Settelmeyer said in a press release announcing the filing of the suit. “While there was ample money to fund education and other vital programs, Sisolak and Cannizzaro acted recklessly and their behavior created an unnecessary constitutional crisis at the expense of over 23,000 small business in Nevada.”