The Nevada A.G.
v. the Nevada A.G.
Are decades of
Nevada Tax Commission decisions legally at risk?
By Steven
Miller
BusinessNevada
Recent actions
of the Nevada Attorney General’s Office in a double-taxation
case are bringing the integrity of the office into question, a
growing number of tax experts are suggesting.
The controversy arose after the Nevada Tax Commission at a May
9 meeting approved a $40-million-plus tax refund for Southern
California Edison. SCE operates the Mojave Station power plant
near Laughlin and fuels it with coal mined in Arizona.
Because the State of Nevada was levying not only a minerals
tax but also a use tax on the coal, the company in 2002
appealed to the commission, challenging the double taxation
under Article 10, Section 5 of the Nevada Constitution. That
section not only directs lawmakers to “provide by law for a
tax upon the net proceeds of all minerals, including oil, gas
and other hydrocarbons, extracted in this state,” but it also
explicitly bars any other tax upon a mineral so taxed.
However, on July 7 the Office of Attorney General Brian
Sandoval filed suit against the tax commission, asking a court
to nullify the May 9 tax-refund decision on the grounds that
the commission had violated the state open-meeting law by
deliberating and voting in a closed meeting.
Tax commission members expressed consternation, saying that
for at least the last 10 years, the Attorney General’s office
had counseled them to hold closed meetings under state law NRS
360.247, which says a taxpayer’s appeal proceedings may be
“closed to the public if the taxpayer requests that it be
closed.”
“I am, frankly, shocked that these issues have arisen as they
have,” said Tax Commissioner John E. Marvel, according to the
Las Vegas Review-Journal. “I question whether there is
good faith or not on the part of the attorney general’s
office.”
Nevada Taxpayer Association President Carole Vilardo,
interviewed by news personality Jon Ralston on KLAS-TV
(Channel 8), said that during many years attending tax
commission meetings, she had “never heard an attorney
general—when the appellant asks if the hearing is closed—say
that they have to come back and deliberate in public.”
Senior Deputy Attorney General Neil Rombardo, point man for
the AG’s office on its lawsuit, told the R-J he could
not explain how the commission could have voted in closed
session for years but only now faces a complaint about it.
However, he said, the law remains clear that votes by a public
body must be taken in public.
Rombardo cited a 1979 legal opinion from the AG’s office
telling the commission to hold its meetings in public. But it
was 1983 when the Nevada Legislature added NRS 360.247 to the
statute books, according to the Legislative Counsel Bureau’s
online index of Nevada statutes.
Commissioner Thomas Sheets told Las Vegas Sun reporter
Cy Ryan that he and his fellow commissioners are frustrated
that, after following the advice of the attorney general’s
office, they now are being sued by the same office.
“It calls into question all the advice we have been getting in
the past couple of years,” Sheets said. Another commissioner,
George Telesis, said the AG’s office “clearly has a conflict
of interest. You can’t peddle it any other way.
“The same person who is suing me is defending me,” he told
Ryan. “It makes no sense.”
Norman Azevedo, a former senior deputy attorney general for
Nevada who advised the tax commission when he worked for the
state and now represents SCE, said the commission followed the
proper procedures in arriving at its decision.
He noted that the AG’s office itself argued before the Nevada
Supreme Court that taxpayer information is confidential. In
that lawsuit, International Game Technology is being sued by
an employee who claims the company underpaid its taxes by
millions of dollars.
KLAS-TV investigative reporter George Knapp, writing in the
July 14 Las Vegas City Life, said tax commissioners
insisted they had followed the advice of their own assigned
counsel, Deputy Attorney General Dena James.
But facing “the prospect of fighting her own bosses in court,”
wrote Knapp, “James stated last week that she had not advised
the commission to deliberate and vote in closed session.”
“Sources close to the story,” continued Knapp, “say the
commissioners felt like they had been sucker-punched by their
lawyer.” He noted that James “coincidentally, just received a
promotion and pay raise.”
Knapp also reported that the AG’s office—notwithstanding its
high public posture in support of “open government”—has been
actively e-mailing people at the Tax Commission that “whoever
is leaking information to George Knapp should stop.”
Both Vilardo, in behalf of the taxpayer association, and Las
Vegas Chamber of Commerce Government Affairs Director
Christina Dugan have sent letters to Attorney General Brian
Sandoval, counseling some restraint.
“The confidentiality provisions within the tax statutes,”
wrote Vilardo, “are there to protect sensitive financial and
proprietary information that an appellant does not want made
public. To require deliberations to be public, removes the
very protection that the request for a closed hearing affords
the appellant.”
Dugan agreed: “Allowing the general public access to sensitive
information places a business at risk of losing a competitive
advantage. The Chamber maintains private sessions must be used
sparingly, but are vital in certain instances for the
protection of proprietary business information.”
Knapp, Vilardo and Ralston have all conjectured publicly that
Sandoval and the Guinn Administration are most likely
concerned that stopping the double-taxation of imported
minerals could cost the state even more than the Southern
California Edison $40 million rebate. Other businesses—notably
Sierra Pacific Resources, parent company of Nevada
Power—import significantly more coal into the state than does
SCE.
“Why did this rear its head at this point?” asked Vilardo. “I
think it is purely a monetary answer, where policy be damned,
interpretation of a statute be damned, we don’t want to lose
the money.”
She argued, however, that escalating gaming and sales tax
revenues mean that revenue losses from ending double taxation
of imported minerals would not be critical.
Given the evident conflict of interest within the office of
Nevada Attorney General Brian Sandoval—who campaigned publicly
on his commitment to Nevada’s often-controversial open meeting
law and has sued other agencies to impose his interpretation
of it—tax commissioners sought and received permission from
the AG’s office to hire an independent counsel to represent
them in the lawsuit. Additionally, the commission is exploring
the possibility of permanently establishing its own legal
counsel, independent of the Attorney General.
Should Sandoval’s office succeed in getting the SCE decision
overturned on open-meeting violation grounds, some observers
say, many years of rulings by the Nevada Tax Commission could
be legally vulnerable on the same grounds.
Last November, U.S. Senator Harry Reid nominated Sandoval for
appointment to the federal bench.
If confirmed by the Senate, Sandoval told the Las Vegas Sun,
he will be “able to make decisions impacting Nevada for the
next generation. Incredible issues come through the court.”
