Senate committee hears overview of Nevada consolidated tax distribution, formulas and history

CARSON CITY — Michael Nakamoto, chief principal deputy fiscal analyst with the Legislative Counsel Bureau—s Fiscal Analysis Division, gave the Senate Committee on Revenue and Economic Development a detailed, two-part briefing on Nevada—s consolidated tax distribution (CTAC) and the statutory formulas that determine how money flows from state-collected taxes to local entities.

Nakamoto told the committee the CTAC consolidates six revenue sources and that the Local Government Tax Distribution Account distributed just over $2.2 billion in fiscal year 2024 to counties, cities, towns, enterprise districts and special districts. "These are the 6 revenue sources that make up the first tier of the C tax," he said, and then walked members through how the state—s Department of Taxation places those revenues into county-level first-tier buckets before distributing them at a second tier to eligible entities.

The presentation focused on three mechanics that determine monthly payments: a base allocation, how monthly shortfalls are handled, and formulas for dividing excess revenue. Nakamoto described the base allocation process: for local governments and special districts the base amount for a fiscal year equals what the entity received the prior fiscal year adjusted by the average percentage change in the Consumer Price Index over the five calendar years immediately preceding that fiscal year. For enterprise districts, he said, the base is a fixed annual amount set when CTAC began; it does not increase over time.

Monthly distributions are handled by dividing each entity—s annual base allocation by 12. Enterprise districts receive their fixed monthly share before local governments and special districts receive any funds. If a county—s first-tier bucket lacks enough money to meet the combined monthly base allocations, Nakamoto said the available funds are distributed proportionally and the shortfall is tracked; when future months produce enough revenue, the Department of Taxation first makes the current-month base payments and then repays prior-month shortfalls proportionally.

When money remains after making base payments and repaying prior shortfalls, that remainder is "excess revenue," and statutory formulas determine how it is split. Nakamoto described two different statutory approaches:

- The "0.02 plus" formula, used in counties with population of 100,000 or more (Clark and Washoe), multiplies each entity—s base allocation by 0.02 plus the sum of the entity—s five-year average percent change in population (for cities/counties/towns) and five-year average percent change in assessed value; special districts use only assessed-value change. The resulting factors determine each entity—s share of the excess.

- The "1 plus" formula, used in counties with population under 100,000, works similarly but starts from 1 plus those same growth factors.

Nakamoto provided a hypothetical example showing how the 0.02 plus formula rewards growth by giving faster-growing cities a larger share of excess revenue, and he contrasted that with the 1 plus calculation, which is less sensitive to growth differences.

He also reviewed CTAC—s legislative history, explaining that the consolidated system was created largely by Senate Bill 254 of the 1997 Legislature to standardize multiple, previously inconsistent county-level second-tier distributions. He summarized later technical and corrective changes, including statutory fixes for counties with declining assessed values and population, temporary interlocal agreement deadlines for Clark County (FY 2012), and the 2013 change (Assembly Bill 68) that replaced the "no 1 plus" approach in many larger counties with the 0.02 plus formula.

Nakamoto cited additional operational details committee members asked about: five of the six revenue sources are collected and remitted monthly into the CTAC account; the real property transfer tax (RPTT) is statutorily remitted quarterly in most counties, though Washoe and Eureka remit it monthly; the Department of Taxation publishes monthly first- and second-tier distributions on its website but does not separately label base and excess; and some entities may use interlocal agreements to alter statutory shares.

Senator Cruz Crawford asked about the frequency of excess distributions and whether staff could provide a table showing base versus excess. Nakamoto said the Department of Taxation—s monthly tables are public and offered to prepare a reverse-engineered breakdown to estimate base versus excess for committee members. "The Department of Taxation does publish the distributions at the first and second tier, every month," he said.

No committee votes or formal actions were taken; the meeting record shows this agenda item was a briefing and discussion only. Nakamoto concluded by offering to follow up with additional tables and to answer further questions.