Rules on tax break in limbo

CARSON CITY -- Rules to clarify which companies are entitled to a sales tax break for building environmentally friendly construction projects failed to win approval Tuesday from state lawmakers.

The failure of the Legislative Commission to approve the rules drafted by the Department of Taxation and the Energy Office, developed after several hearings, leaves the question of which projects can get the breaks unresolved.

"We are in limbo right now," said Dino DiCianno, the Taxation Department's executive director.

The two agencies were seeking pre-approval of the regulations to get them into effect as soon as possible.

But the no vote means the two agencies either will have to satisfy lawmaker questions about the intent of the language in the existing rules or devise new wording and resubmit the regulations.

The breaks could be worth millions of dollars. The 2007 Legislature ended the sales tax breaks for all but a handful of companies that sought them under a 2005 law.

Drafting new regulations that satisfy a majority of lawmakers on the process to be used to define which companies should get the breaks has been a challenge.

Democratic members of the Legislative Commission, with one Republican, voted against the proposed regulations Tuesday.

At issue is how narrowly to craft the rules, which could have an effect on which projects are eligible. The commission has the authority to approve regulations proposed by state agencies to ensure that they follow the Legislature's intent.

Clark County and Clark County School District officials have expressed concern during past hearings about the potential effect of the sales tax breaks on their budgets.

The purpose of the green legislation is to encourage energy efficiency. The projects must follow LEED -- Leadership in Energy and Environmental Design -- standards to obtain the sales tax exemption and a separate property tax break.

The sales tax break was eliminated for all but a few projects by the 2007 Legislature, but the new legislation provides for a property tax break for all projects that qualify under LEED. The property tax breaks are not as contentious.

During a June 1 floor vote on the new green legislation, Sen. Randolph Townsend, R-Reno, said the legislation eliminated sales tax breaks for all buildings except for the CityCenter project being built by MGM Mirage; Fontainebleau; The Venetian's Lido/Palazzo projects; the Molasky Corporate Center; the Echelon Place project by Boyd Gaming; and the Panorama Towers project. All are in Clark County.

But Assembly leaders never specified which companies would get the breaks and said that the regulations would be applied to each project individually to make such a determination.

The legislation does not spell out by name which projects are eligible for the breaks.

Carson City attorney Bob Crowell, representing the Echelon project, said the failure to approve the regulations is a concern because the company is ready to move forward with its $4 billion project on the site of the former Stardust.

"We need to have some certainty," Crowell said. "We need to move past this. People are waiting to commit substantial funds based on what is happening here, and we need to know what the rules of the game are."

Crowell said the company will continue to work with state regulators and lawmakers to find language acceptable to everyone.

Contact Review-Journal Capital Bureau reporter Sean Whaley at swhaley@reviewjournal.com or (775) 687-3900.