Study Projects Substantial Damage from Proposed Nevada Business License Fee Increase

Researchers anticipate revenue shortfalls, declines in entity filings if Nevada Gov. Brian Sandoval’s proposed fee increase is implemented

(Mass Media) – Las Vegas. The Nevada Registered Agent Association, an organization of commercial registered agents representing thousands of businesses across the state, released detailed information today from a study conducted by public policy experts to determine the impact of Nevada Gov. Brian Sandoval’s proposed business license fee increase and gross receipts margin tax. The study states the proposed fee increase would “irreparably damage” Nevada’s reputation in the business community, projecting significantly reduced entity filings and substantial revenue shortfalls.

Led by University of California, Riverside professor Dr. David Swanson and Dr. Robert Schmidt of DSII, a public policy consulting firm, the in-depth study projects that the proposed fee increase would result in an estimated total of only 216,000 active commercial entity recordings across Nevada in fiscal year 2016, which is 124,000 less than the governor’s projection of 340,000 recordings for the same fiscal year. According to the study, the proposal, which was recently introduced in the Nevada Senate as SB 252, is expected to reduce new entity filings in Nevada by approximately 44 percent in fiscal year 2016 and 63 percent in fiscal year 2017, when compared against 2014 levels. The Nevada Registered Agent Association commissioned this study to identify the proposal’s effect on Nevada’s incorporation industry.

While the proposed business license fee increase seeks to generate additional revenue for Nevada’s public education system, the study estimates that the proposal overstates its revenue projections by approximately $42 million in fiscal year 2016 and by about $65 million for fiscal year 2017. This disparity is expected as a result of existing entities leaving the state and a reduction in new filings.

“If this proposal is put into effect, the Nevada Registered Agent Association expects a significant number of highly mobile business entities to leave Nevada and incorporate in other states,” said Matthew Taylor, president of the Nevada Registered Agent Association. “Most of the entities incorporated in Nevada have no physical presence or employees in the state. These businesses file in Nevada as a result of our state’s pro-business climate, but they will have little to no incentive to renew their filings if this fee increase is implemented.”

Increasing the business license fee would essentially price Nevada out of the market for business entity filings, with competing states such as Delaware and Wyoming providing attractive alternatives for entities across the nation, Taylor says. If the proposal is introduced, annual fees to renew a corporation or LLC in Nevada would increase from $325 to a minimum of $525, which is approximately 10 times the cost of Wyoming’s annual renewal fees. These figures include Nevada’s $125 state filing fee, in addition to the business license fee.

The study included a comprehensive review of the U.S. Census Bureau’s Business Dynamics Statistics, in addition to a survey of Nevada Registered Agent Association members and a random sample survey of 804 Nevada organizations listed in the state’s SilverFlume business database. The research also included an estimation of price elasticity for business license fees. The analysis was limited to active, for-profit commercial entities with either no employees or no physical presence in Nevada.

About the Nevada Registered Agent Association

Members of the Nevada Registered Agent Association represent thousands of Nevada business entities while working to strengthen the state’s status as a valuable resource to businesses across the nation. Nevada Registered Agent Association members spend millions of dollars each year to promote the advantages of doing business in Nevada, and they play a vital role in attracting entity filings to the state. Nevada law requires out-of-state owners of Nevada companies to maintain registered agents in the state. Registered agents accept service of legal documents and notifications from the state and other entities.

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