FILE - Nevada Gov. Steve Sisolak

Nevada Gov. Steve Sisolak delivers his first State of the State address from the Assembly Chambers of the Nevada Legislature in Carson City, Nev.

Four Nevada business groups have joined a lawsuit challenging the state over two tax hikes slated to go into effect on Sept. 30 and July 1, 2020, respectively.

The Retail Association of Nevada, Nevada Trucking Association, National Federation of Independent Business (NFIB), and Nevada Franchised Auto Dealers Association joined Senate Republican Caucus in its lawsuit against Gov. Steve Sisolak, Senate Majority Leader Nicole Cannizzaro, Lt. Gov. Kate Marshall, the Nevada Department of Taxation and the Department of Motor Vehicles.

The lawsuit challenges two bills, SB 551 and SB 542, which were signed into law after being passed by a simple majority rather than the supermajority that's usually required to impose taxes and fees.

“The Nevada Legislature’s attempt to do an end-run around the state constitutional requirement for a two-thirds supermajority vote supporting any new tax or tax increase cannot stand,” NFIB said in a statement.

In 1994 and 1996, Nevadans overwhelmingly approved ballot initiatives that amended the state constitution to require a two-thirds majority vote in both legislative chambers to pass any bill “which creates, generates, or increases any public revenue in any form.”

The constitutional amendments were enacted “in response to a growing concern among voters about increasing tax burdens.”

"We have checks and balances for a reason, and eroding the two-thirds requirement is an unprecedented disregard for the constitution and creates a dangerous precedent," said Senate Minority Leader James Settelmeyer, who leads the caucus lawsuit. "While there was ample money to fund education and other vital programs, Sisolak and Cannizzaro acted recklessly and their behavior created an unnecessary constitutional crisis at the expense of over 23,000 small businesses in Nevada."

SB 551 eliminated a planned decrease in the state's Modified Business Tax (MBT), making the tax permanent.

State Sen. Ben Kieckhefer said the scheduled reduction in the MBT “was a mechanism that was inserted specifically to function as it is functioning now and to unravel that, unravels the entire concept of what we approved in 2015.” In other words, part of the reason why Republicans voted for the 2015 Commerce Tax was because of the provision mandating a scheduled reduction of the MBT.

The NFIB point out that MBT impacts Nevada’s small businesses, the majority of which have less than 20 employees, that are required to pay the tax.

“Nevada’s small-business owners already list taxes as a top concern, and with this lawsuit, NFIB is continuing its fight to stop these unconstitutional tax increases from taking effect,” Karen Harned, executive director of the NFIB’s Small Business Legal Center, said in a prepared statement.

The Legislative Counsel Bureau’s analysis of SB 551 concluded that the constitutional text, “creates, generates, or increases,” only applies to bills that “directly increase revenue” either by overtly raising an existing tax or creating a new one.

But “such an interpretation is strictly prohibited by the rules of statutory construction articulated by the Nevada Supreme Court, which requires courts to avoid rendering any constitutional text ‘meaningless or superfluous,’” Robert Fellner, director of policy at the Nevada Public Research Institute, argues in an analysis of the lawsuit.

SB 542 kept in place a $1 technology fee on all DMV transactions that was supposed to expire after five years and was only created to pay for a new computer system for the Department of Motor Vehicles (DMV), which was never implemented.

Tech Mahindra, the company hired to complete the $75 million computer project, was fired by the state in 2018.

“Because failure in government is routinely rewarded, the Legislature responded by passing a bill that extended the tax, rather than letting it expire as the original statute required,” Fellner said.

Nevada officials estimated this summer that only $4.5 million of the equipment, hardware and software was salvageable.

“Even for the public sector, turning $31 million into $4.5 million is an impressive level of failure,” the Las Vegas Review Journal Editorial Board wrote when expounding on the DMV’s alleged malfeasance.

The lawsuit, filed in the First Judicial District of Nevada in Carson City, is expected to go to the State Supreme Court.

Taxpayers foot the bill for the state's defense of the lawsuit and private funds are being raised to support the plaintiffs’ legal costs, which are expected to be costly.