Tesla Motors Inc. has sold approximately $20 million in Nevada tax credits to the MGM Grand Las Vegas Hotel and Casino, a major transfer of the tax breaks Tesla has earned under its $1.3 billion incentive deal with Nevada for building its "gigafactory" in the state.
According to a statement provided by Tesla, the credits are the first the company has received through the incentive agreement. The MGM Grand didn't return a request for comment, but according to a report published by local online news outlet This Is Reno, the casino purchased the tax credits to at least partly cover the cost of the gaming license fees it pays to the state.
It's not clear what the MGM Grand paid for the tax credits. A representative with the Nevada Governor's Office of Economic Development, which was involved in the transfer, didn't return a request for comment by press time, but This Is Reno reported that the office's executive director Steve Hill said the sales price was close to the credits' face value. The office reportedly reviewed at least part of the transfer in March.
Steven Miller with the free-market think tank Nevada Policy Research Institute, which has been critical of Tesla's tax deal with Nevada, said a risk of discounted tax credit sales is that businesses can pass along tax savings to other industries that weren't the intended targets of subsidies.
"To the extent that there's a significant discount when they're sold, that means that essentially taxpayers are making up the difference," Miller said. "There's always a risk."
Tesla argued that the shift of tax credits to the gambling industry didn't mean Nevada taxpayers lost out on its promised investment. "Tesla only receives these incentives if it performs," according to the company's statement. "They are tied to Tesla generating an estimated $100 billion of positive economic impact for Nevada and spending a minimum of $3.5 billion."
In 2014, with the support of Gov. Brian Sandoval (R), Nevada approved a $1.3 billion incentive package for Tesla in return for the company's decision to locate in the state its massive rechargeable battery factory, an important part of its future electric car supply chain. The incentives allow Tesla to obtain 100 percent sales tax abatements for 20 years and 100 percent property and employer excise tax abatements for 10 years, along with $200 million in credits for hiring and capital investment.
Ray Bacon of the Nevada Manufacturers Association, which supports the broader effort to diversify Nevada's economy, said Tesla's success in marketing its Model 3 car -- a $35,000 consumer-priced model -- has pushed the company to try to ramp up production. He suggested that the sale of tax credits could be an effort to generate additional capital in the short term, at least in part because of that pressure.
Bacon added that a contact at Panasonic Corp., which partners with Tesla in the gigafactory to supply and manufacture batteries, told him that the electronics company has "moved up their hiring schedule."
Tesla's tax deal -- the largest in Nevada's history -- has drawn controversy from critics such as the Nevada Policy Research Institute, which argues that the deal constitutes corporate favoritism. Reports late last year suggested the company was behind in its hiring goals, but CEO Elon Musk claimed those reports were based on outdated numbers.
"Tesla's overwhelming use of Nevada residents for its gigafactory workforce is clear from the numbers," according to the company, which noted that the share of Nevada employees involved in factory construction and current factory operations is a combined 80 percent.
Bacon said that despite some delays, the factory has progressed largely as envisioned in the incentive agreement.
"The home battery storage units [for Tesla electric cars] -- they're making those already," he said. Also, Bacon said Nevada's efforts to land Tesla and electric car manufacturer Faraday Future coincide with increased education efforts by the state to prepare workers for future factory jobs.
"The community colleges have summer classes going . . . and they're all full. That never has happened," he said.