Nevada: Department Issues Guidance on Forthcoming MBT Refunds

The Nevada Supreme Court recently held that a Nevada law repealing 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 supposed to decrease to 1.378 percent and 1.853 percent on July 1, 2019. However, before the July 1, 2019 effective date, legislation was enacted to maintain the current rates. Recently, the Nevada Supreme Court held that the legislation that maintained the current rates was unconstitutionally passed because it did not receive a 2/3 vote in each legislative chamber.  

The Nevada Department of Taxation recently issued guidance on obtaining MBT refunds. Per the guidance, the Department is working on a process for issuing refunds of the invalidly collected tax and will soon provide a timeline for releasing the refunds. Nevada law requires the Department to verify that a credit is valid before the amount can be refunded, including that the taxpayer’s account is in full compliance before any refund can be issued. In developing the refund plan, the Department has identified taxpayers who have delinquent returns, invalid addresses and/or existing debt on their account. To refund the MBT more quickly, the Department recommends that taxpayers that have any delinquent tax returns for any type of tax file those returns as soon as possible. Refunds cannot be mailed to an invalid mailing address, so the Department further recommends that taxpayers update their address. Please contact Sarah McGahan with questions.