Nevada: Legislation to Repeal Reduction of Modified Business Tax Rates Required Supermajority Vote

Listen to a brief overview of state tax developments this week, including Nevada, or read full Nevada development below.

Detailed Nevada Development

The Nevada Supreme Court recently held that a Nevada law that repealed a previously legislated reduction of the Modified Business Tax (MBT) rate was unconstitutionally enacted. In general, every employer that is subject to payment of Nevada unemployment tax is also subject to the MBT, which is imposed on total gross wages less employee health care benefits. There is one general rate (1.475 percent) and a higher rate for financial institutions (2.0 percent). In 2015, legislation was enacted to reduce both MBT rates if general tax revenues exceeded a certain threshold. In late 2018, the required threshold was exceeded, and the MBT rates were scheduled to drop effective July 1, 2019. However, before the July 1, 2019 rate reduction, legislation (Senate Bill 551) was enacted that repealed the law reducing the rate. This law was challenged by a number of Republican lawmakers because it was not passed with a supermajority vote in each chamber.

Under Nevada law, a 2/3 vote of each chamber is required to pass any bill that increases taxes. Before the court, the defendants argued that Senate Bill 551 did not increase taxes. Instead, they argued, the bill simply maintained the current rates and current amount of tax revenue, and the 2/3 provision applied only to legislation that adopted new sources of revenue. The Nevada Supreme Court rejected this argument, holding that if Senate Bill 551 had not been enacted, the state would have not generated almost $100 million of public revenue. The Nevada Supreme Court affirmed the lower court’s injunction to stop the Department of Taxation from enforcing Senate Bill 551. For more information on Leg. Of the State of Nev. please contact Sarah McGahan.

This Week's Developments

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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US