The Las Vegas Raiders and Vegas Golden Knights on Tuesday pushed back against a proposed bill that would remove their existing exemption from the state’s live entertainment tax.
Senate Bill 367 would have Nevada treat its professional sports teams’ games the same as its Strip productions, musical concerts and theatre performances. Those latter types of events are subject to the state’s live entertainment tax, which is currently set at 9% of the admission charge.
State Sen. Dina Neal (D-North Las Vegas) presented the bill to the Senate Committee on Revenue and Economic Development, which she chairs. She characterized it as an issue of “fair play,” noting multiple times that gaming resorts aren’t exempted.
SB 367 raises questions about the types of incentives used by lawmakers to lure professional sports teams into the state.
Neal told the committee she expected opposition and has already received pushback. Specifically, she said an argument has been made that the state contractually agreed not to pass any targeted tax toward the Las Vegas Raiders. (She did not disclose in the hearing who specifically made that argument.)
“My thoughts toward that were: One, LET is not a targeted tax. It’s a removal of an exemption. Number two, there is no contract that can be written, far as I know, that can tell the Legislature what to do. Our power is plenary. So you can write it in (but) it’s an illegal term.”
She added, “I found it interesting that term even existed. But it is inaccurate to believe there is any legal place or standing for that contract term in the state of Nevada … The Legislature establishes the law of the state. If we change contract terms, that is our power. That is not the power of a business.”
A Las Vegas Raiders executive later told lawmakers the live entertainment tax exemption was a “specifically negotiated part” of the deal that relocated the NFL team from Oakland to Las Vegas.
“Before committing to Las Vegas, we discussed Nevada’s lack of ticket tax on professional sports teams as a specifically negotiated part of the financing structure that brought the team to Las Vegas,” said Raiders President Marc Badain during opposition testimony. “Changing the terms of such a negotiated deal before any fans have even attended a game at the stadium is not the spirit of the partnership that brought the team to Nevada.”
The existing carve out for sports teams was part of a 2015 bill that made major changes to the state’s live entertainment tax. Neal served in the Assembly and sat on its tax committee during that session. She said she cannot recall any discussion of future pro sports teams being exempted. She added that she recently revisited the legislative minutes and records but could not find anything documenting such a discussion.
“It seems this was an agreement made behind closed doors,” said Neal.
The generally accepted understanding is that the exemption was used as a “carrot on the stick” to lure professional sports teams to Nevada. At the time, none existed.
“I understand the carrot,” said Neal, “but they’re here.”
Democratic state Sen. Mo Denis commented that, unlike the well established gaming sector, major professional sports is still relatively new to Nevada.
The Vegas Golden Knights debuted in 2017 as the state’s first major professional sports team. The next year, the WNBA Aces relocated from San Antonio to Las Vegas. The Las Vegas Raiders debuted last year. The NFL team was incentivized to relocate with a $750 million public subsidy to help build Allegiant Stadium. (That stadium deal was approved in a special legislative session in 2016. Neal was one of 18 state lawmakers to vote against the deal.)
Many hope Las Vegas’ pro sports offerings further expand to include a MLB, NBA or MLS team.
“My concern is we’re kind of young in this type of expansion into our economy,” said Denis. “Would this be a disincentive?”
Neal pushed back against that, too, saying the teams will never want to give up that carve out. She suggested the state might need to evaluate exactly how it incentivizes such businesses to its borders.
“I can guarantee five years from now they’re not going to willingly walk themselves into a tax base when they’re making millions,” she said.
Neal said the timing is right to remove the sports team exemption. LET collections dropped almost to zero dollars after businesses were forced to shut down in March 2020, and live entertainment has been the slowest to return due to lingering restrictions on crowds.
“The best time to make revenue change is when you’re at ground zero,” said Neal, who argued that the pandemic reset would allow the sports teams to build into that new cost.
The Economic Forum’s December 2020 forecast projected live entertainment collections for the current fiscal year to be down 95% compared to pre-pandemic. Nevada collected $131.3 million in live entertainment tax during its last complete pre-covid fiscal year. The state is projected to collect $6.2 million in Fiscal Year 2021, $64.4 million in Fiscal Year 2022 and $118.5 million in Fiscal Year 2023.
The Senate Revenue and Economic Development committee took no action Tuesday on SB367.
Neal plans to amend the bill to retain the exemption for amateur and minor league sports, such as the Las Vegas Lights, Henderson Silver Knights and Reno Aces. Neal said those exemptions are warranted because their customer bases consist of more locals than tourists.
With that change, SB367 would apply to the Las Vegas Raiders, Vegas Golden Knights and Las Vegas Aces.
Like the Raiders, the Vegas Golden Knights are formally opposing the bill. Chief Legal Officer Chip Seigel told lawmakers the hockey team’s tickets are “overwhelmingly” purchased by local buyers, not tourists.
“This will ultimately hurt local fans,” he added.