The 2015 Session of the Nevada Legislature _____________________________ Legislative Report Prepared For Members Of The Associated Builders & Contractors Nevada Chapter

June 2015

2015 Nevada Legislature Summary As the 2015 Session of the Nevada Legislature began its work on February 2nd the Associated Builders and Contractors of Nevada was on hand to represent your interest. That representation continued on a fulltime basis each and every day until the legislature adjourned Sine Die at midnight on June 2nd. ABC was again represented fulltime by Warren Hardy of the Hardy Consulting Group. Warren has over 25 years of experience in the business both as a legislative advocate and a State Senator and Assemblyman. In addition, Chapter President Mac Bybee spent significant time in Carson City as in integral part of the lobbying team. We appreciate those members who participated in our legislative meetings and conference calls and provided input into developing our positions on the many issues we were faced with. This was a difficult session but ABC was successful in advancing several reforms on behalf of the open shop construction industry and protecting the interests of our members. The following is a summary of a few of the issues ABC worked on this session:

Budget and Taxes: The 2015 Session of the Nevada Legislature was very much about achieving the reforms and spending enhancements that the governor outlined in his State of the State address in Mid-January, particularly the reforms and increased funding for education. Very early in the process a consensus began to emerge among legislators and interest groups that the governors budget should be funded as he requested. Many pundits observed that there seemed to be less contention over the Executive Budget than at anytime in recent memory. We would agree with that analysis. In the end the legislative “money committees” put their own spin on the budget and advanced their own priorities but the debate did not cause a great deal of contention in the halls of the legislature and the final budget emerged largely as the governor had intended. More controversial however was how that budget would be funded once it was finalized. The Governor consistently “doubled down” on his suggested method to fund his budget through a business license scheme based on a company’s gross receipts. Specifically, he offered SB252, which proposed increased business license fees using a tiered method that was similar to what many local governments utilize to calculate their business license fees. Under the bill the minimum rate for state business licenses would double from the current flat $200.00 to $400.00 with the top rate capped at $4 million. While the Senate was able to get sufficient votes to pass the measure out of that house (Four Republicans voted against the measure), it did not gain traction in the State Assembly where the Republican leadership had offered an alternative to the governor’s plan. Specifically Assemblyman Derek Armstrong, who chairs

the Assembly Committee on Taxation and Assembly Majority Leader Paul Anderson introduced AB 464. The Assembly proposal proposed a modest increase in the business license fee but the primary source of revenue was an increase in the current Modified Business Tax (MBT) or payroll tax. The bill also lowered the threshold under which businesses are exempt from the payment of the tax. As a preferred alternative to the governor’s plan many business groups began to voice support this proposal. Several other proposals came forward including a proposal by Democratic Senator Pat Spearman, to eliminate the payroll tax for all businesses except banking and mining and instead impose a tax of gross receipts of all businesses. Throughout the session, the so-called Gross Receipts Tax was a “non-starter” for most Republicans so Senator Spearman’s proposal never got much consideration. In the end the Legislature adopted a hybrid plan that included a gross receipts tax, referred to as a “Commerce Tax”, designed to meet the governor’s objective of broadening the tax base in Nevada. Under the final plan, named the Nevada Revenue Plan, the business license fee for corporation’s increases from the existing $200 a year to $500, while the fee for all other business entities will remain at $200. The existing modified business tax increases from 1.17 percent to 1.475 percent of wages and it reduces the current exemption to the first $200,000 in payroll a company pays out each year. The tax remains at 2 percent for the mining industry and financial institutions. Companies will also still get to deduct health care premiums for employees. The new commerce tax will apply to businesses with more than $4 million in state revenue each year. Businesses can count 50 percent of their commerce tax bill as a credit against their modified business tax bill. The intent of the commerce tax is to capture revenue from businesses that do business in Nevada but aren’t based in the state. The new Commerce Tax divides Nevada’s economy into 26 business categories, each consisting of one or more industry classifications as delineated under the North American Industry Classification System (NAICS). Each business category is assigned its own gross receipts tax rate. Constructions rate is 0.083%. This rate will be levied on gross revenue in excess of $4 million per year. Pass through revenue can be deducted from the gross receipts. The plan also includes a complex provision that will lower the modified business tax rate if revenues from the new commerce tax and MBT rate bring in more revenue than projected. Finally, more than $500 million of overall tax increase comes from the removal of the sunset on expiring payroll and sales taxes. The bill also raises the tax on cigarette by $1 per pack.

In addition to the Nevada Revenue Plan the legislature made adjustments to the Live Entertainment Tax “LET” including clarifying that the tax is only applicable at events where patrons are charged for admission and that it does not apply to food and beverage. ABC expressed opposition throughout the session for any form of gross receipts tax.

Legislation Impacting the Construction Industry In addition to the tax debate, ABC was actively engaged in seeking some significant reforms to how governments in Nevada interact with the construction industry. The most significant reform to occur was passed as part of AB159; a bill ABC requested to eliminate the use of discriminatory union only project labor agreements (PLA) on publically funded construction. The bill essentially prohibits the use of union only project labor agreements on public construction unless the governing body, after a public hearing, makes a finding that using a PLA is necessary to protect the health and safety of the public. However, the bill specifically prohibits utilizing the threat of labor unrest as a reason for such a determination. In the end, political circumstances compelled ABC to agree to an amendment that allowed a public process for a government agency to utilize a PLA on a water project or an airport project if a public finding determined that the project constitutes “critical infrastructure”. On airport projects, “critical infrastructure” is defined as projects such as runways, taxiways and airport security. AB133 would have provided significant penalties for contractors who “knowingly” hired illegal workers. ABC strenuously opposed this bill because it did not provide safe harbor for contractors who acted in good faith and relied on information that might have turned out to be inaccurate through no fault of their own. This bill failed to gain passage AB172 made reforms to how prevailing wage is utilized in Nevada. The bill mandates an immediate 10% reduction in the prevailing wage for any project being completed by the K-12 or higher education systems. It also completely exempts charter schools from the requirement to pay prevailing wage. Finally, the bill increases the threshold before prevailing wage must be paid from the current $100,000 to $250,000. This bill passed and signed into law. AB125 represents the most sweeping construction defect reform in the United States. The new provisions of the bill amended the definition of construction defects to include only a defect which presents an unreasonable risk of injury to a person or property; or which is not completed in a good and workmanlike manner and proximately causes physical damage to the residence or appurtenance. The bill also addressed indemnification issues in a way favorable to contractors not involved in the actual defect. The bill further removes the provision of

existing law that provides that a claimant may recover reasonable attorney’s fees as part of the claimant’s damages in a cause of action for constructional defects. Also of significant importance is the fact that the bill reduces the statute of limitations to six years from the 10 years in current law and disallows homeowner association boards from filing a defect suit on behalf of homes within their communities. AB215 would have changed the definition of what constitutes a public work on higher education projects. In order to be able to construct education projects that are funded primarily though private funding sources without a prevailing wage requirement, current law defines a public work to include any construction project financed in whole or in part by public money, or any building of the Nevada System of Higher Education of which 25 percent or more of the costs are financed with state or federal money. AB215 would have removed that definition to require prevailing wage on all construction projects regardless of whether they were funded by private sources. This bill failed to gain passage. AB332 prohibits any public body which sponsors or finances a public work from entering into a contract for a public work which provides that any construction materials or goods to be used on the public work be purchased or otherwise supplied by the public body. This is designed to stop agencies from using their tax-exempt status on construction projects since that status was authorized by the legislature for the purchase of supplies and equipment only. AB345 would have changed the statute regarding acceptable types of bonds for construction contracts. Current law requires corporate surety bonds. AB345 would have changed the law to allow less traditional and less secure bonds. ABC felt that this had the potential to open the industry to contractors that are not financially secure. This bill did not pass. SB223 limits the circumstances under which a primary contractor is liable for labor and other costs accrued by a subcontractor. SB233 – This bill requires that a new employee for a construction company obtain an OSHA 10 card within 15 days of hiring, and requires supervisory employee to obtain an OSHA 30 card within 15 days of the hiring date. It removed OSHA 10 and OSHA 30 renewal requirements. This legislation took effect June 10, 2015. SB254 Changes the law regarding retainage in both public and private construction in a way that creates equity for contractors while protecting the interests of project owners. This bill passed and was signed into law. SB340 required that any contractor that has been debarred from doing projects for the federal government is also barred from doing public works projects in Nevada. ABC proposed an amendment to narrow the scope of this legislation.

While not all of ABC’s changes were accepted, the bill was narrowed significantly from its original version. SB371 proposed to require that 10% of the workers on every public works project in the state be part of a registered apprenticeship program in the state. ABC requested and was given an amendment to exempt any contractor that did not have access to a program. In spite of the amendment, ABC continued to express concerns with the bill and ultimately it failed to pass.

Legislation Impacting Public Works Spending AB191 Allows for the continued collect of the fuel tax that was approved by the voters to fund road and infrastructure projects in Southern Nevada. AB 423 would have created the Legislative Committee on Transportation Infrastructure and Funding. This committee would have place a statewide emphasis on transportation infrastructure, and more importantly, funding. This bill did not pass. SB 207 allows existing bonds for school construction projects to rollover without an additional vote. This rollover will provide financing for the construction of new schools in local school districts by extending the life of existing bonds for an additional ten years.

Legislation Impacting All Nevada Businesses AB304 would have provided significant new rights to employees in the filing of discrimination claims against employees and would have provided penalties for employers who discussed the salaries of their employees. While ABC believes all employees should be treated fairly and equitably, this bill tipped the scale too far in the direction of employees. This bill failed to gain passage. AB306 would have imposed requirements on businesses to provide a separate location for breast-feeding by employees. The bill created requirements in excess of what is currently required by federal law. While we support the concept and worked on a compromise, in the end we felt the federal guidelines were sufficient. AB306 failed to pass the deadline for first house passage. AB356 would have clarified penalties for trespassing and harassment by labor unions and others while demonstrating or protesting. Unfortunately, this bill did not pass this session. SB160 removes the burden of liability from a business for an injury to a person who is on their premises without invitation, permission or license. The bill brings Nevada into conformity with 42 other states in this regard. SB180 would have mandated that courts award plaintiffs the cost and fees associated with hiring an attorney in addition to any other damages or relief

already awarded in the lawsuit. This bill would have encouraged frivolous lawsuits. The bill was not passed. It was heard by the Senate Committee on Commerce and Labor but was not voted on. SB190 would have added a significant number of offenses to those considered discriminatory against employees. This bill failed to gain passage. SB193, In its original form this bill would have removed the 8-hour workday for Nevada and returned the state to the federal 40-hour overtime standard. ABC Nevada supported this measure and worked to get it passed. Unfortunately, during the hearing on the bill in the Senate, an amendment was adopted to increase the state minimum wage for those not providing insurance to $9.00 per hour. Concerns with this amendment based on our belief that the state legislature cannot constitutionally increase the minimum wage without a constitutional amendment. This concern was expressed to the legislators and their legal staff. However, the Legislative Counsel Bureau took a very strong position that the legislature is authorized to raise the wage. We were successful in getting the Assembly to propose an amendment returning the bill to its original state. However, the Senate refused to accept that amendment sending the bill to conference committee for final consideration. In the end the conference committee adopted an amendment that reinstated the $9 minimum wage while changing the daily overtime requirement from 8 to 10 hours per day. Ultimately the Assembly, by a single vote, refused to adopt the conference committee report, which caused the bill to fail on the final night of the session. SB224 – This bill provides a clear definition of the term "independent contractor” and, more importantly, limits the period in which an employee can recover unpaid wages without written notice. This bill passed with a unanimous vote in both houses SB231 – This bill limits the amount of a controlled substance that healthcare providers may dispense to an injured employee and revises the time that an insurer has to pay a bill submitted by a healthcare provider. It further changes the rights of injured employees who were injured while intoxicated or under the influence of a controlled substance. SB259 would have mandated sick leave for employees under certain circumstances. ABC is obviously concerned about these kinds of mandates into the management of private businesses. SB259 failed to pass the deadline for committee passage. SJR 6 was sponsored by Senator Joe Hardy and proposed a constitutional amendment to eliminate the tiered minimum wage system. It was felt that, since the Affordable Care Act requires all employees to have insurance, it no longer makes sense to have a separate higher minimum wage for those companies that

do not offer insurance to their employees. Unfortunately this bill failed to gain passage this session. SJR8 – This resolution proposed to take a ballot question to the voters to raise the minimum wage to $15 per hour. This bill failed to gain passage. * This document is intended to be informational only. ABC recommends you contact your attorney to determine how this new legislation will impact or alter your specific business practices.