Tax breaks can be taken away by Legislature

Lawmakers who gave tax breaks to businesses willing to build environmentally efficient buildings have the power to take them away.

That's the gist of an opinion by Kevin Powers of the Nevada Legislative Counsel Bureau's legal division.

"After doing exhaustive research, we've come to the conclusion that these general laws did not create any contractual or vested rights," he told the Assembly Commerce and Labor Committee on Wednesday.

That opinion is contrary to the belief held by Gov. Jim Gibbons and others that once businesses including MGM Mirage and the Venetian were granted property and sales-tax breaks, they become a contract right which can't be taken away.

Lawmakers are reviewing the law after discovering that just those projects that have already applied for the tax breaks would cost the state, school districts and local governments some $974 million over the next 15 years. One of them, MGM Mirage City Center, would itself account for more than $240 million of the total.

Lawmakers are considering an amendment that will change and reduce the tax breaks in the future. But as part of the process, Sen. Randolph Townsend, R-Reno, asked for a legal opinion on what they can or can't do about the applications already approved.

Powers cited U.S. Supreme Court rulings on the subject, which say the Legislature has the power to not only tax but to change or repeal those taxes. In addition, Powers said, they make it clear that "the Legislature makes policy; it doesn't make contracts."

"There's no contract to begin with," he said. "And the law presumes they understand that the law may change in the future."

He said it doesn't matter how much money the business, relying on the abatement law, invested in meeting the requirements to get a tax break.

"Such general laws may be amended or repealed by the state Legislature at any time, regardless of whether any person has incurred expense to comply with the requirements of the tax abatements and exemptions," he wrote in the opinion.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.