Las Vegas Review-Journal Editorial Board, May 20, 2022
Should a company buying property on the Strip be able to avoid real estate taxes that a family buying its first home must pay? Thanks to a decision by Nevada lawmakers, that’s what’s been happening.
The Review Journal’s Eli Segall recently exposed a provision in state tax law that’s saved major Strip landowners 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 percent of the purchase price. That works out to $2,040 on a $400,000 house. Who pays the tax is open to negotiation between buyer and seller.
Nevada generated $248.6 million in transfer tax revenue in the most recent fiscal year, with $185 million coming from Clark County, according to the Department of Taxation. Yet on some high-profile Las Vegas real estate sales, the participants have avoided the levy.
In 2019, MGM Resorts International sold the Bellagio property to The Blackstone Group for $4.2 billion. It then rented it back from Blackstone. One might have expected the deal to generate a tax payment of more than $21 million. But neither side paid any transfer taxes. 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 carve-out. Instead of selling the property directly, the owner transferred it to a new corporation. That corporation, which now owns the property, is then acquired by the property purchaser. For the purposes of this tax loophole, there isn’t a sale to tax.
“Every transaction we conduct follows the letter of the law and is in accordance with all regulatory requirements,” MGM said in a statement.
That’s entirely true. No one has done anything nefarious. It is not uncommon for states – and the federal government – to legislate exceptions to taxes or to provide tax benefits for various behaviors. Think: homeownership and the mortgage deduction. The provision in question exists because Nevada lawmakers gave it their approval in 2007.
Since then, Mr. Segall found around two dozen sales worth more than $25 billion occurred without a public record of either side paying the transfer tax. At the 0.51 percent rate, that’s well more than $125 million in lost tax revenue.
We’re all for sensible tax policy that allows Nevadans to keep more of their own money to the greatest extent possible. If the real estate transfer tax has been deemed unnecessary for large transactions, perhaps it should also be abolished for smaller, residential sales.
The Review-Journal is owned by the Adelson family, including Dr. Miriam Adelson, majority shareholder of Las Vegas Sands Corp., and Las Vegas Sands President and Chief Operating Officer Patrick Dumont.