Steve Wynn’s Windfall? Vegas’ Virtually Tax-Free Art

Calling himself the single highest payer of art sales taxes in Nevada, casino magnate Steve Wynn explained how easy it was to negotiate Nevada’s sales tax on art lower than other place in the country. A change that, so far, has been applicable exclusively to Mr. Wynn.

“All I did was suggest to the Nevada Fine Arts Commission that here is a way that we might get some more paintings from outside collectors into Nevada, and they took it and made a law out of it and went to the Legislature and lobbied it,” said Mr. Wynn frankly from his Las Vegas office. “I chimed in with about four phone calls myself.”

Mr. Wynn’s lobbying effort was really an afterthought. Over the last two years, he and his company, Mirage Resorts Inc., have very publicly amassed a $285 million collection of paintings. Last year, Mr. Wynn got his art dealer’s license. And on Oct. 15, the Bellagio resort and casino, a $1.6 billion reproduction of an Italian villa on Lake Como, will open, and his collection will go on sale inside. If the casino’s marquee isn’t enough to entice the art-inclined high roller–”Coming Soon Van Gogh, Monet, Renoir and Cézanne … With Special Guests Pablo Picasso and Henri Matisse”–surely the tax break will be.

“I’ve learned that collectors on these big pictures are always looking for ways to minimize the sales tax,” said Mr. Wynn in a gravelly voice. “They usually take delivery outside of the City of New York. Oregon and a few other places have spots where people can save a few bucks by sending them there.”

Under the Art Exemption Law of 1997, you don’t have to be a resident of Nevada to qualify for the 2 percent sales tax. You only have to agree to exhibit the artwork in Nevada for 20 hours per week for nine months of the year. The law applies to work selling for more than $25,000. It also grants a property tax exemption for the buildings where the works are exhibited. And Mr. Wynn is still working hard for his fellow collector. He and Mirage have asked the state for several additional tax breaks: to let exhibitors charge admission to their galleries (Mr. Wynn’s, of course, would be the first to do so); to make the law retroactive; and to give breaks on the user’s tax due when a buyer leases the art to another party who will in turn exhibit it. For example, in March, Mr. Wynn bought $124 million worth of art from Mirage which he leased back to the resort for $5 million per year. He doesn’t want to have to pay the taxes due for that transaction.

“Let’s say someone goes to an auction and buys a painting for $10 million,” Mr. Wynn said, laying out some arithmetic. “That’s $825,000 in taxes in New York City. This is a chance to say if you leave it in Nevada, you could save $625,000. Costs about 18 grand to ship the picture out here. You get a lot of publicity because it is on display in one of the great tourist centers of America, with a million-plus visitors per year. I did it so that you could save money.”

Mr. Wynn insists that his efforts are not self-motivated. “I had an interest in the matter,” Mr. Wynn said, “but not a burning one because it couldn’t affect me–in two ways. I didn’t need the exemption: me or the company. I’m a dealer. I don’t pay sales tax on pictures I buy for resale. No. 2: I had no room to display anybody else’s pictures. So I wasn’t a potential recipient of these lending arrangements.”

But it seems that’s only partly true. So far, only Mr. Wynn and Mirage Resorts have exercised the law’s benefits, though there have been reports of art acquisitions by other casinos since the law was passed. Mr. Wynn and his company have filed for an exemption of $1.4 million in property taxes for the Bellagio’s first year. They have also filed for a refund in sales tax on $180 million in paintings ($9 million), presumably for taxes paid on art purchased before Mr. Wynn got his dealer’s license. Dino Dicianno, deputy director of the Nevada State Department of Taxation, said that there were several different tax classifications for the art that Mr. Wynn and the Bellagio have purchased during the past two years; Mr. Dicianno could not explain the amount of the refund Mr. Wynn and his company are seeking.

Almost as complicated is the Bellagio gallery’s modus operandi. On the one hand, Mr. Wynn has sought the advice of top museum experts and recently hired Theodore Pillsbury, who resigned in January as director of the esteemed Kimbell Art Museum in Fort Worth, Tex., to act as a consultant to the new gallery. He intends to have an acoustic guide and a catalogue. He also wants to charge admission. All of these moves imply the permanence of a museum where the collection stays in place for a period of time. But, in fact, the Bellagio is a commercial endeavor. Everything on the walls will be for sale, according to Mr. Wynn. (“We did $30 million in art business in the last year,” Mr. Wynn said proudly of Mirage.) Still, to the extent that he takes advantage of the tax law, he will have to satisfy the exhibition requirements before turning over any art to a buyer. And so on.

‘A License to Print Money’

Of course, in a town where the concept of art has been limited to the faux Michelangelo David in the lobby of Caesar’s Palace, Mr. Wynn’s art exemption bill has raised a few hackles. Joe Neal, a state senator and Democratic candidate for governor, has turned Mr. Wynn’s art law into the centerpiece of his campaign, and vows to fight to have the bill repealed in the Legislature in 1999.

“This is like having a license to print money,” Mr. Neal said of the law. “The people are up in arms all across the state about [the law]. Whatever happens, I think the people are going to go after somebody on this.”

Mr. Neal’s campaign manager, Andrew Barbano, calls Mr. Neal’s bid for governor the campaign of the “populist versus the billionaire” and has dubbed the bill “Show Me the Monet.” When the bill was originally introduced in 1997, it was defeated. But a provision was added to the bill that the art be displayed for educational purposes, and it finally passed. Mr. Neal has made a significant point of the fact that Mr. Wynn intends to troop schoolchildren through the casino to see the art and that he has asked to be able to charge admission to the gallery.

“[Mr. Wynn] got this bill passed by promising to educate the children of Nevada,” said Mr. Barbano. “Now he is going to be doing for gambling what Joe Camel did for cigarettes.”

Added Mr. Neal, “If we gave him a tax exemption, then the public should not have to pay to see the art. He should show it for free.”

Alan Feldman, a spokesman for Mirage Resorts, pointed out that the gallery will be accessible to the public without going through the casino. He also pointed out that those under 21 are allowed to enter a casino as long as they don’t gamble or drink. The admission fee, he said, will be used to defray the cost of maintaining the artworks, as in other museums.

“I paid my nine dollars and 50 cents when I went to the Museum of Modern Art last week,” said Mr. Feldman.

Mr. Wynn came up with the idea for the sales tax bill about a year after he began his buying spree. He has been advised in his purchases by William Acquavella, a New York-based art dealer who has a showroom in Reno. In March, Mr. Wynn spent $50 million on seven paintings from Acquavella Gallery, including a Jasper Johns, a Willem de Kooning, a Roy Lichtenstein and a Jackson Pollock. The collection also includes Vincent Van Gogh’s Woman in a Blue Dress , purchased last December at Christie’s for $47.5 million.