United States

Nevada: Commerce Tax Opponents Must Revise Repeal Initiative

May 23, 2016
From KPMG TaxWatch

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Almost as soon as the legislation adopting the new Nevada Commerce Tax was signed into law, anti-tax lawmakers and various business groups began calling for its repeal. A Political Action Committee named “RIP Commerce Tax” quickly formed to promote repeal of the tax by ballot initiative. Shortly thereafter, supporters of the tax from the Coalition for Nevada’s Future filed a lawsuit asserting that the repeal petition filed with the Secretary of State was invalid for several reasons. The Coalition also complained that repealing the Commerce Tax would unbalance the state budget and that the petition's description of effect did not clearly specify the budgetary consequences associated with repealing the tax.

After a trial court judge ruled in favor of RIP Commerce Tax, the Coalition for Nevada’s Future appealed the decision to the Nevada Supreme Court. On May 11, 2016, the Nevada Supreme Court ruled that the petition itself was valid. However, in the court’s view, the referendum's description was deceptive for failing to accurately identify the practical ramifications of the Commerce Tax being repealed. As such, any signatures obtained on petitions with this misleading description were declared invalid. The court recognized that the description of effect cannot exceed 200 words, but observed that it is imperative that signers understand the effects and ramifications of their signature and later vote. Thus, it appears opponents of the repeal must revise the effect statement and start the signature gathering process again. The first Commerce Tax return is due August 15, 2016. Please stay tuned to TWIST for future updates on the Commerce Tax.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.