KEY FACTS ABOUT THE MARGIN TAX INITIATIVE (QUESTION 3) StopTheMarginTax.com 1 NAIOP Presentation June 6, 2014

2  Question 3 is a ballot initiative that will be on the NV general election ballot in November  New 2% business tax on GROSS revenue Businesses with more than $1 million in annual gross revenue would have to pay Would have to pay EVEN in years with no profit Equivalent of an almost 15% corporate income tax – higher than CA

 Businesses with more than $1 million in annual gross revenue would have to pay Creates a “fiscal cliff” for businesses Businesses that gross one penny more than $1 million would pay the 2% Margin Tax based on the entire million  Businesses could ONLY deduct Modified Business Tax (MBT) liability plus one of three deductions: Cost of goods sold Costs of employee compensation (up to $300K/employee) Standard 30% deduction 3

 NO guarantee of more money for education Legislature would have complete authority to divert funds Legislature has history of diverting funds designated for education (ex room tax diversion)  NO plan for how any funds going to education would be spent Initiative provides no plans or requirements to ensure that revenues go to classroom instead of the hands of bureaucrats 4

Gigantic tax increase by anyone’s standards 5  Proponents original estimate: $800 million/year  Guinn Center estimate: $460 million/year  Applied Analysis estimate: $650-$750 million/year

For businesses, would make NV one of the five highest taxed states in which to operate Although 87% of NV businesses would be exempt from directly paying the tax, 80% of NV businesses are considered micro-businesses, meaning they do not employ anyone The vast majority of job-generating businesses in NV would be subject to the tax. Thousands of small businesses would NOT be exempt 6

8,860 jobs when indirect impacts included $413 million in reduced labor income when indirect impacts are included A total of $1.1 billion in reduced economic activity when “ripple” effects are considered 7 According to Applied Analysis, the effects of the Margin Tax Initiative translates to:

8  Initiative would increase consumer costs Would impose the new tax on almost all types of goods and services sold including: Food, clothing, gas, electricity, telephone services, prescription medicines, childcare and medical care Ultimately, some or all of the increased costs would be passed on to Nevada consumers.

 Rents, reimbursements and commissions would be subject to the Margin Tax Initiative o Reimbursement expenses, such as common area maintenance fees would likely be included in total revenue  Would both a broker and an agent, if both exceed the $1 M threshold, be subject to the proposed Margin Tax? o The initiative does specifically exempt “pass-through” revenue, revenue received by a business entity solely on behalf of another o This provision would likely limit double taxation 9

 Real estate industry is expected to bear a significant share of the incremental tax burden if the Margin Tax Initiative passes  Current figures: o Estimated modified business (payroll) tax payments: $7.4 million  If the Margin Tax Initiative passes: o Net taxable business receipts: $6.9 billion o Gross business tax liability: $69.7 million o After deducting MBT: $62.2 million 10

11 This is a preliminary draft document. It is subject to material review and revision.

Associated Builders and Contractors, Nevada Chapter Associated General Contractors, Las Vegas Chapter Associated General Contractors, Nevada Chapter Builders Association of Western Nevada (BAWN) Carson Valley Chamber of Commerce Economic Development Authority of Western Nevada (EDAWN) Elko Area Chamber of Commerce The Fallon Chamber of Commerce Las Vegas Metro Chamber of Commerce The Chamber of Reno, Sparks, and Northern Nevada Churchill Economic Development Authority Carson City Chamber of Commerce 12 National Federation of Independent Business – Nevada Nevada Association of Employers Nevada Farm Bureau Federation Nevada Manufacturers Association Nevada Mining Association Nevada Resort Association Nevada Restaurant Association Nevada Taxpayers Association Retail Association of Nevada Southern Nevada Homebuilders Association Nevada Association of REALTORS Dayton Chamber of Commerce

13  Coalition formed representing thousands of small and large businesses, groups and individuals citizens Actively soliciting coalition members and presenting to groups  Here’s how you join: StopTheMarginTax.com News items, analysis, fact sheets, Facebook & Twitter links, sign up and donation forms, etc.  Launched social media and e-newsletter March 20 th

 Join our coalition  Make a contribution  “Like” us on Facebook and follow us on – use our hashtags: #StopMarginTax, #NO on 3 and #NOon3NV  Forward our e-newsletter to friends, family and colleagues  Retweet our Twitter posts and “share” our Facebook posts 14

 Utilize our online “tool kit” for employers  Break room flyer  Campaign Brochure  Contribution Form  Frequently Asked Questions  Coalition Sign Up Form  Letter to Editor Guidelines  Link to Us  Talking Points  What Your Business Can Do  What Your Organization Can Do 15

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