LAS VEGAS - Banks and thrifts operating in Nevada will pay an additional $17 million in taxes next fiscal year as part of an $836 million tax hike signed into law this week by Gov. Kenny Guinn.
Though the final package is more palatable to banks than others that had been proposed during a contentious session of the Legislature, some bankers said it might cause them to think twice about adding personnel or branches in the state.
The law assesses a 2% payroll tax on all banks and thrifts doing business in Nevada and a $7,000-a-year excise tax on each branch in the state. Other businesses will pay only a 0.7% payroll tax.
Like many other states, Nevada is looking for ways to close a large budget gap.
The bank payroll tax, which takes effect when the new fiscal year starts Oct. 1, is expected to yield $15.5 million in fiscal 2003-04 and to rise to $21.4 million the following year. The state projects $1.3 million in revenues from the branch tax, which becomes effective Jan. 1, in fiscal 2003-04, and forecasts that revenues will double the next year.
Large, out-of-state banks such as Wells Fargo & Co. and Bank of America Corp. will be hit the hardest by the branch tax. Wells, of San Francisco, has 106 offices statewide and Bank of America, which is headquartered in Charlotte, has 75.
The Nevada bank with the most branches is the $2.8 billion-asset Nevada State Bank in Las Vegas, with 64.
In all there are about 450 bank and thrift offices in the state, including minibranches in supermarkets and in outlets of such retailers as Wal-Mart.
Also affected by the 2% payroll tax is Citigroup Inc.'s Citibank Nevada, which has a credit card processing facility in Las Vegas with between 2,000 and 3,000 employees.
The per-branch tax, though not unprecedented, is by far the largest in the country.
Mathew Street, the general counsel on state legislative issues at the American Bankers Association, noted that North Dakota has a $50 annual per-branch tax and that South Dakota assesses a $500 fee on each location.
Nevada bankers said the measures are less onerous than others that lawmakers had debated over a 169-day period that had included two special sessions. The prior week's discussions had centered on a 4% net-profits tax and a 0.1% gross-receipts tax on all businesses, versus the 0.25% favored by Gov. Guinn, a Republican, and the Governor's Task Force on Tax Policy. Both components were scrapped in the final package.
Ted Wehking, the executive vice president of the Nevada Bankers Association, said the bank excise-tax suggestion came from his office "because it was a better solution than a gross-receipts tax or a franchise tax," which he said is especially hard to apply to banks.
"We've known for the past two years that the state was headed toward a situation where it would need more taxes to pay bills," Mr. Wehking said. "We agreed that we would be willing to pay more taxes."
Whether the new tax will inhibit branch expansion is "too early to call," he said, but that is "something to be factored into operating costs of a branch system."
Ed Jamison, the president of Community Bank of Nevada in Las Vegas, said that the measures will have "some impact on us, of course" but that it is too early to tell if the branch tax will slow expansion plans at his bank, which has five branches and assets of $423 million.
Philip D. LaChapelle, the president of the $47 million-asset Security State Savings Bank in Las Vegas, said that for now the excise tax has caused it shelve any plans to open a second office. Instead, next month the thrift will expand from its 1,100-square-foot space into a 2,400-square-foot site in the same shopping center.
The dozen or so other tax hikes in the new law include a 75% increase on liquor taxes and a 10% live-entertainment tax.
Even the gaming industry, which has been largely successful in fighting attempted tax increases, did not escape unscathed. The new package includes a 0.5% rise in the gaming tax, to 6.75% - still much lower than other states with gambling - and a 33% jump in slot license fees.
