Governor: IRS confirms no tax on DMV rebate

Gov. Kenny Guinn said Monday he has a letter from the Internal Revenue Service confirming that his plan to issue $300 million worth of rebate checks to Nevada car owners would not require people to pay taxes on the money.

Guinn said that same letter rules the Assembly plan to send rebate checks to all Nevada licensed drivers would be taxable.

But Assembly Majority Leader Barbara Buckley, D-Las Vegas, said that's not at all clear in the IRS letter.

When told Chief of Staff Mike Hillerby had said IRS confirmed their understanding of the ruling "in plain English," she asked: "Then why couldn't they put that in the letter?"

Guinn and Hillerby said the IRS letter clears the way to rebate the amount Nevada car owners paid DMV when they registered their vehicles - up to $300 per vehicle.

Guinn said the rebates are non-taxable because they are actual refunds based on what people paid DMV last year, when the Assembly plan wasn't tied to actual fees or taxes paid by individuals to the government. The only ones who would have to pay taxes on the rebate are those people and businesses which claimed registration fees as a deduction last year. To them, the rebate would be taxable income.

Hillerby said since most Nevadans don't itemize tax deductions, their rebate checks would not be taxable. And because the state doesn't know which people deducted the registration fees and who didn't, he said the state doesn't have to issue 1099 tax forms to each person to whom it writes a check.

Sen. Bob Beers, R-Las Vegas, said he read the letter as indicating both the registration and driver's license rebate plans are taxable.

"Furthermore, it clearly says we have to send out 1099s, which is expensive and for us impossible because we don't know anybody's Social Security number," he said.

Beers is a certified public accountant who has handled tax matters for businesses and individuals.

Hillerby said the letter is supposed to clarify the issue, not raise more arguments.

But Buckley described the letter as "clear as mud."

"This clears up nothing," she said.

Still, she said she doesn't want to get into an argument over the issue.

"We'd like the money to all land in the pockets of Nevadans, not the pockets of IRS," she said.

She said she doesn't believe the Assembly plan was fully explained to IRS officials. That plan called for rebate checks to all Nevada licensed drivers based on fuel taxes they pay, which are not itemized - which should qualify the checks as non-taxable rebates.

Guinn has threatened to veto any budget plan that doesn't contain a fair rebate to Nevadans.

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