By ELI SEGALL, Las Vegas Review-Journal
LAS VEGAS (AP) — In 2007, shortly before the frantic implosion of the Las Vegas real estate market, Nevada lawmakers approved a seemingly minor tax law change.
According to a Las Vegas Review-Journal investigation, the change allowed landowners to use a range of entities when transferring real estate to an affiliate to exempt those transactions from property transfer taxes.
Since then, the exemption has been cited in several money-making transactions on or near the resort corridor of the Las Vegas Strip – and a lawyer who has pushed for the change recently indicated that this trend was not the intention. of legislation.
Overall, at least two dozen Las Vegas-area transactions, totaling $27.5 billion, have closed since 2007 without any publicly declared real estate transfer taxes, according to a Review-Journal report titled “How Las Vegas’ biggest real estate deals result”. in no right of mutation.
Each of these transactions involved separate buyers and sellers and involved casino hotels, shopping malls and other properties, primarily on or near the famous Las Vegas casino corridor.
However, in about half of the transactions tracked for this report, deeds filed with Clark County cite a transfer tax exemption permitted by state law when owners transfer real estate from an entity to its corporation. parent, subsidiary or affiliate.
These deals include the $4.2 billion cash sale of Bellagio’s real estate; the $3.89 billion sale of Aria and Vdara real estate; and the sale of $1.1 billion of luxury retail in Crystals malls.
Together, these three sales could have generated nearly $47 million in transfer tax revenue.
Instead, property records show their combined transfer tax bill came to naught.
“PROBABLY A GOOD IDEA”
In southern Nevada, transfer taxes represent a fraction of the sale price of a property and help fund public housing and the Clark County School District. The tax has been around for decades in Nevada, as have the exemptions.
Nevada’s transfer tax law was approved in 1967, according to state records, and did not apply in several scenarios, including when property was transferred to a government agency or when it changed of hands in the context of a bankruptcy.
In 1985, owners could claim an exemption when transferring real estate between a corporation and an affiliate. Then, in 2007, state lawmakers changed the wording of this exemption from “corporation” to “business entity.”
At the time, a lobbyist for a Las Vegas developer pitched it not as a way to help people avoid transfer taxes on lucrative purchases, but as a way for real estate investors to avoid being taxed more than once in certain land transactions.
Russell Rowe, representing Focus Property Group, told state lawmakers at a hearing in March 2007 that he believed the exemption in question “applies to all entities,” according to court filings. the meeting.
“We want to make this clarification,” he said at the time.
During the housing bubble of the mid-2000s, Focus and other developers purchased massive land at auction from the federal government for hundreds of millions of dollars to launch new planned communities around the Las Valley. Vegas.
In such transactions, investors pool their money and buy the land through a limited liability company, then divide the land among themselves, Rowe told lawmakers.
The lead entity pays transfer tax on the purchase and is “potentially taxed again” when it transfers the land to its members, he said.
When the measure, Senate Bill 154, made its way through committees, then-Senate Minority Leader Dina Titus said a version of the proposal wouldn’t cost the state much. “in terms of lost revenue and that’s probably a good idea,” meeting minutes. Pin up.
“It would be strange if this committee gave tax relief to developers and not to seniors,” Titus said, pointing to another bill at the time.
Titus, a Democrat from Las Vegas, now represents Nevada’s 1st Congressional District in the United States House of Representatives. Her office recently told the Review-Journal that transfer tax legislation was one of many bills she voted on during her time in the state Legislature, which she was not not a leader on the matter and that she had no other recollection. add.
Rowe, of Rowe Law Group, recently told the Review-Journal that the general intent of the change was to prevent additional transfer taxes when the same people who bought land distributed the plots among themselves.
“It’s different from what you seem to be describing,” he said.
Rowe also noted that the law changed before real estate investment trusts became common in the casino industry.
Holly Unck, vice president of transaction tax services in the Phoenix office of real estate brokerage group CBRE, wrote in a Spring 2020 article on CBRE’s website that paying property transfer taxes is a “significant” cost. but “often overlooked” real estate transactions.
To avoid this, ownership is sometimes transferred to a corporation or partnership, and when the ownership of that entity is sold, transfer tax does not apply.
As states “became aware of this loophole to avoid the payment of transfer tax,” they taxed the sales of stakes in these entities, she wrote.
After the Review-Journal asked to speak to Unck for this story, CBRE spokesman Aaron Richardson said the company declined to comment.
He added that CBRE’s valuation and advisory team “is not involved in structuring transactions to minimize property transfer taxes; we help customers get refunds if the tax has been overpaid.
Nevada Congresswoman Heidi Kasama, a longtime Las Vegas real estate broker, said she was unaware of lucrative deals being structured without transfer taxes.
After the Review-Journal told him how investment giant Blackstone bought the Bellagio — he acquired a limited liability company that owned the real estate, and he didn’t buy the resort outright — Kasama likened it to buying shares in a company and thought it qualifies for a transfer tax exemption.
Kasama, a Republican and former president of the Nevada Realtors trade association, said if the law is changed there could be “unintended consequences” with the sale of property.
She highlighted all the LLCs, corporations and business entities in place and the years of existing contract law.
Chris Giunchigliani, a former Clark County commissioner who was a Nevada congresswoman from the 1991-2005 legislative sessions, was unaware the deals were structured this way until the Review-Journal contacted her to ask him questions.
“It’s just disgusting to me,” said Giunchigliani, a Democrat.
Giunchigliani noted that people pay transfer tax when buying or selling homes, and she thought companies might have “found a way around” the tax.
“Someone has to take a look at this,” she said.
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