Updated June 10, 2023 - 2:46 pm
A bill that closes a tax loophole revealed by a Las Vegas Review-Journal investigation passed the Legislature on the last day of its regular session and awaits action by Gov. Joe Lombardo.
The state Senate unanimously passed Assembly Bill 448 on June 5, following the Assembly’s unanimous passage last month. The legislation requires payment of the real estate transfer tax if a property is shifted to a business entity that was “formed for the purpose of avoiding those taxes.”
Lawmakers introduced the bill after the Review-Journal reported last year that casinos and other big property owners frequently avoided transfer taxes in lucrative sales, as the deals were structured in complex ways that claimed exemptions to the tax. But critics told the newspaper last month that if the bill became law, companies could still find ways to avoid paying the tax.
Lombardo, a Republican, has until June 16 to sign or veto the bill. If he takes no action, the bill becomes law without his signature.
The governor’s press office did not respond to an email asking about his plan for the legislation.
Assembly Speaker Steve Yeager and Assembly Majority Leader Sandra Jauregui, Las Vegas Democrats who introduced the bill, did not respond to repeated requests for comment about whether they would try additional legislation in 2025 if the measure proves ineffective.
‘Unfair for everyday Nevadans’
Nevada Realtors President Tom Blanchard said in a statement to the Review-Journal that the real estate association supported AB448 and that Lombardo “hopefully” will sign it into law.
Blanchard said hard-working Nevadans pay the transfer tax, whether they are first-time home buyers or longtime property owners, but large corporate entities can escape paying it under state-allowed exemptions, leaving millions of dollars out of government coffers.
“Fundamentally, this situation has been unfair for everyday Nevadans,” he said.
Overall, the state generated more than $330 million in transfer tax revenue last fiscal year, with the money going to Nevada’s general fund, schools, low-income housing and other services.
“How much more housing could have been built if that loophole didn’t exist?” said Christine Hess, executive director of the Nevada Housing Coalition.
Vegas Chamber and the Nevada Resort Association did not take a position on the bill.
‘Unsophisticated’ approach to close loophole
The real estate transfer tax amounts to 0.51 percent of a property’s purchase price in Clark County, meaning a $300,000 house sale generates a $1,530 tax bill. But over the years, Southern Nevada has seen plenty of high-priced transactions that didn’t produce a dime of this revenue.
At least $27.5 billion worth of transactions in the Las Vegas area — comprising roughly two dozen sales involving hotel-casinos, malls and other properties mostly on or near the Strip — had closed since 2007 without any publicly reported real estate transfer taxes, the Review-Journal reported last spring.
In such deals, investors often acquire an entity that holds ownership of the real estate, instead of buying the property directly, and frequently cite a transfer-tax exemption allowed under state law when real estate is shifted to a subsidiary.
Yeager previously told the Review-Journal that he wasn’t aware of the issue until the newspaper reported on it.
Legal experts, however, told the Review-Journal that the bill will do little to force businesses to pay the tax.
“It struck me as being an unsophisticated way of approaching the issue,” said corporate attorney Bob Mahon, chair of the tax practice for legal giant Perkins Coie.
Mahon said there was a stronger way to close Nevada’s loophole: taxing the sale of an entity that holds ownership of a property.
A total of 17 states impose or allow these so-called controlling interest transfer taxes, according to a spring 2020 article by Holly Unck, a vice president of transaction tax services with commercial real estate brokerage CBRE Group.
Nevada is not one of them.
Contact Eli Segall at email@example.com or 702-383-0342. Follow @eli_segall on Twitter. Segall is a reporter on the Review-Journal’s investigative team, focusing on reporting that holds leaders, businesses and agencies accountable and exposes wrongdoing. Review-Journal Politics and Government Editor Steve Sebelius contributed to this report.