Trust in us: Reno firms tap into Bay Area’s tech gusher
As investors place ever-larger valuations on technology companies in Silicon Valley, some of the money is beginning to slosh over the state line to benefit lawyers, trust-company officials and accountants in northern Nevada.
The pitch: The California taxman will take a big bite out of the proceeds of a tech company’s buyout or initial public offering. But careful planning and the use of Nevada trusts — especially before the big payday — can keep more dollars in the pockets of high-tech high flyers.
And use of Nevada trusts in estate planning will protect IPO riches for generations to come.
“Three or four years ago, almost nobody had any idea about the advantages that Nevada offers,” says Gregory Crawford, chief investment officer for Reno-based Alliance Trust Co. “Nevada can offer a lot of unique strategies for people in California who are wealthy.”
Crawford and other professionals from northern Nevada have been quietly working Silicon Valley networks to spread the word among the tightly knit community of technology financiers and developers.
Their work, in combination with the sharp rise in valuation for technology companies, appears to be paying off.
Confidentiality rules keep the Reno-area professionals from talking about their clients or the amounts of money involved, but they say the once-small rivulet flowing over the Sierra is becoming a sizable stream.
Crawford, for instance, says more than 30 percent of the recent growth of Alliance Trust Co. is a direct result of its inroads into the Bay Area.
Scott Gunderson, a Reno attorney who devotes much of his practice to development of asset-protection strategies, was called in 2012 to advise a couple of folks whose company appeared to be headed toward a lucrative initial public offering.
The IPO was planned for 2013. During 2012, Gunderson’s clients moved to Nevada, establishing a home that, among other the other pleasures of living in the Silver State, allowed them to avoid California’s top personal income tax rate of 13.3 percent.
“Thirteen percent in tax on millions of dollars is a lot of money,” Gunderson notes.
The effort to draw California tech millionaires’ money into Nevada trust companies is supported, Crawford says, by the decisions of tech companies to establish physical facilities in the region.
Apple’s data center under construction east of Sparks, for instance, or Tesla’s consideration of Nevada for a giant battery-making plant help make technology entrepreneurs comfortable with Nevada as a place to do business.
“It gets the right people thinking about Nevada, and Nevada begins to feel like a legitimate option,” says Crawford. “It’s a club down in Silicon Valley.”
But Nevada faces competition from other states — South Dakota and Delaware among them — that also provide attractive asset-protection laws.
“First, you have to get people to choose Nevada,” Crawford says.
The state also is competing with other states to land some of the trust dollars that are returning to the United States from offshore havens after the Internal Revenue Service stepped up its scrutiny and reporting requirements.
No matter whether the trust dollars are coming from California, some other state or an offshore location, they help underpin the northern Nevada economy.
Alliance Trust, for instance, has grown from a single employee to a staff of 10 in the last decade.
Law firms, accountants and other professionals in northern Nevada land much of the work generated by the trust business.
“The economic impact is real,” Crawford says.
The cuts would come as a direct result of reduced tax collections caused by business closures across the Silver State due to the COVID-19 pandemic.