CARSON CITY - Unable to unravel a web of confusion over tax breaks on buildings that are environmentally friendly, Gov. Jim Gibbons is asking the state's attorney general to help.
Gibbons said Tuesday that he has asked Attorney General Catherine Cortez Masto for an opinion about whether the Legislature's decision to put the tax breaks on hold puts the state on weak legal footing. Gibbons said he was concerned that some Nevada businesses already have committed to the building standards in exchange for the tax breaks.
The law was "cobbled together," he said. "It was so inaccurately regulated, it's difficult because some agencies have part, other agencies had another part , and they weren't working together. It's weird, I'm telling you.
"I'm very concerned about the liability of the state in this," he said.
The Legislature voted last week to freeze the program. Created in 2005, the law offered property and sales tax breaks of up to 50 percent to business that followed green building standards in their construction and operation.
Clark County school officials and others estimate the law could cost the state as much as $900 million over the next decade. Those estimates surprised lawmakers, who acknowledged they had approved the law without much study.
Green construction doesn't just mean energy efficiency. To obtain certification from the Leadership in Energy and Environmental Design Green Building Rating System, known as LEEDS, buildings are given points for saving water, preventing soil erosion and myriad other features.
Legislation freezing the program shed light on a law that few seem to understand. Some major resort projects have applied for the tax breaks, including the $7.4 billion CityCenter on the Las Vegas Strip. Dozens more businesses are interested or have applied, but the regulations are so unclear, few in state government are certain exactly what a business must do to apply for and adhere to the standards.
The governor shared in the confusion. Last week, some high-ranking lawmakers said Gibbons assured them he would sign their bill freezing the program. Then two days later, Gibbons said he was unlikely to sign it.
Other state officials have also been confused.
The original law called for anyone who wanted a sales tax break on construction materials to indicate so between Oct. 1, 2005, and Dec. 31, 2005.
By January 2006, Dino DiCianno, executive director of the Nevada Tax Department, was calling for some sort of finality to the process, saying there "has to be a contract or some intent" to build within that three-month time frame to obtain sales tax breaks. His careful use of words also revealed a concern that the law could cost the state dearly.
According to minutes of a state Tax Commission meeting reviewed by the Sun on Tuesday, DiCianno said: "The reason why we've tried to go down this road, Mr. Chairman, is that understanding that some of these projects are very large and that the fiscal impact if we were to go down the refund road would create a pretty significant impact to local governments.
"We're talking a lot of money here."
The biggest potential liability appears to be how some businesses have interpreted the law. Some might believe they have a tax break coming if they merely wrote a letter of intent to build a green structure by certain deadlines. There is also confusion about whom was supposed to receive applications, the state Tax Commission, the Commission on Economic Development or the Office of Energy? What if a company wrote a letter to just one agency? Should it expect a tax break, even if it hadn't started construction? Could it sue for that reason?
Tax Commission meeting minutes reviewed by the Sun also showed that some commissioners favored strict interpretation of the guidelines established in the law. Others were willing to allow a range of interpretations.
On June 26 for instance, DiCianno sought a clearer understanding of the eligibility requirements for the tax breaks. The discussion shows that commissioners struggled to balance the Legislature's desire to encourage green construction with the potential costs to the state and the possibility of abuses of the program.
DiCianno's concern stemmed from earlier debate in which some officials argued that a business should become eligible for the tax breaks if it had signed "substantial documented intention" to construct a green building. Doing so, those officials said, should be taken as more exacting than a signed construction contract.
At that June meeting, Commissioner Hank Vogler told DiCianno he wanted to be sure that the state did not discourage businesses from building to green standards.
DiCianno replied that all he wanted was a "bright line" to delineate between those that get the breaks and those that do not.
Commission Chairman Thomas Sheets wasn't sure that creating a specific rule was the right way to go. "I don't think our rule ought to be as bright as, respectfully, the executive director might want it to be ."
Joe Schoenmann can be reached at 501-2387 or at [email protected].
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