Legislature must close transfer tax loophole | EDITORIAL

Should a business buying property on the Strip be able to avoid the property taxes that a family buying their first home must pay? Thanks to a decision by Nevada lawmakers, that is what is happening.

Eli Segall of the Review Journal recently exposed a state tax law provision that has saved major landowners in the strip millions. One of Nevada’s lesser-known taxes is a levy on the sale of property. In Clark County, the real estate transfer tax rate is 0.51% of the purchase price. That works out to $2,040 for a $400,000 house. Who pays the tax is open to negotiation between buyer and seller.

Nevada generated $248.6 million in transfer duty revenue last fiscal year, including $185 million from Clark County, according to the Department of Taxation. Yet at some high-profile estate sales in Las Vegas, attendees avoided the tax.

In 2019, MGM Resorts International sold the Bellagio property to Blackstone Group for $4.2 billion. He then leased it to Blackstone. The deal could have been expected to generate a tax payment of over $21 million. But neither party has paid transfer duties. The sale by Las Vegas Sands Corp. of The Venetian, Palazzo and The Venetian Expo for $6.25 billion also avoided the tax.

That’s because Nevada law contains a previously little-known exclusion. Instead of selling the property directly, the owner transferred it to a new company. This company, which now owns the property, is then acquired by the purchaser of the property. For the purposes of this tax loophole, there is no taxable sale.

“Every transaction we complete follows the letter of the law and complies with all regulatory requirements,” MGM said in a statement.

It is totally true. Nobody did anything wrong. It is not uncommon for states and the federal government legislating exceptions to taxes or granting tax benefits for various behaviors. Think: home ownership and the mortgage deduction. The provision in question exists because Nevada lawmakers approved it in 2007.

Since then, Mr. Segall has discovered that around two dozen sales worth more than $25 billion have taken place without either party paying the transfer tax. At the rate of 0.51%, that’s well over $125 million in lost tax revenue.

We’re all for sensible tax policy that allows Nevadans to keep more of their own money whenever possible. If the real estate transfer tax has been deemed unnecessary for large transactions, perhaps it should also be abolished for small residential sales.

The Review-Journal is owned by the Adelson family, including Dr. Miriam Adelson, majority shareholder of Las Vegas Sands Corp., and Patrick Dumont, president and chief operating officer of Las Vegas Sands.