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Bill would limit value of mining tax breaks
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Jessica Ebelhar/Las Vegas Review-Journal
State Assemblywoman Peggy Pierce, D-Las Vegas, listens in committee at the State Legislative Building during the legislative session in Carson City on Feb. 08, 2011. » Buy this photo
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LAS VEGAS REVIEW-JOURNAL
CARSON CITY -- Mining companies in Nevada could lose tax deductions worth more than $2 billion under a bill making its way to the state Legislature.
Assemblywoman Peggy Pierce, D-Las Vegas, is poised to introduce a bill that would limit the value of tax deductions mining companies used to shave hundreds of millions of dollars from their latest tax bill.
Pierce wants to cap the value of legally deductible expenses at 40 percent of the total amount spent. "They would have to pay taxes on the other 60 percent," she said.
Although the amount mine operators pay in taxes fluctuates with mineral prices, if Pierce's proposal were to become law it could generate tens of millions of dollars in revenue at today's prices. That's money lawmakers could use to offset proposed cuts to education or social services.
"The 30-year experiment in radically small government in Nevada has run into the worst economy in 70 years, and we have a crisis," Pierce said.
Jim Wadhams, a mining industry lobbyist, said he was expecting the bill and is looking forward to a legislative hearing. He said it's an opportunity to explain to legislators the mining tax is a property tax and the deductions are part of assessing the value of mining land. That means the tax should reflect the expense of mining, processing and taking the materials to market.
"That is the issue that will come out of this, what is the fair market value of that dirt, not the mineral at the end of the process," Wadhams said.
Pierce's plan comes as the mining industry is under scrutiny by lawmakers from both parties.
On Monday, the state tax commission is scheduled to hold an emergency meeting to discuss whether mine operators' correctly paid taxes on proceeds from the last two years.
The meeting is the fallout from former taxation director Dino DiCianno telling a legislative committee that the state hasn't employed auditors with specialized training to evaluate mining taxes for at least two years.
That resulted in outcry from legislators, forced DiCianno to abruptly retire and prompted Gov. Brian Sandoval to call for the emergency meeting.
But neither supporters nor opponents of mining expect auditors to find evidence the industry underpaid.
What mining critics really want is what Pierce is recommending, a change in state laws that puts strict limits on mining companies' deductions.
"I don't think the audit is the problem, the problem is the deductions," said Jan Gilbert, a lobbyist for the Progressive Leadership Alliance of Nevada and longtime advocate of higher mining taxes.
For example, the industry reported about $5.8 billion in gross proceeds in 2009. After deductions the companies' net proceeds, the amount on which they pay taxes, was $1.8 billion. The amount of state taxes paid on the net was $47.8 million, plus another $46.4 million in county taxes.
In contrast, Strip casinos made about $5.8 billion in gross gambling revenue in 2010 and paid about $416 million in state taxes on the proceeds.
The disparity between mining and gaming, as well as the high value of deductions built into the net proceeds of minerals tax, has lawmakers questioning whether they should squeeze more from mine operators as a means to help balance a state general fund that's facing a 6.4 percent cut.
"Clearly it is not fair, I think that is the point," said Sen. Michael Roberson, R-Las Vegas.
Roberson, a conservative who is opposed to raising taxes, said new revenue from mining taxes should be offset by cutting the government service taxes Nevadans pay when they register their cars.
Gilbert and other liberals have said they don't think there would be a need to offset a mining tax increase with a decrease elsewhere, but would consider signing off on a tax swap if it accomplished their goal of forcing mining to carry a bigger share of the state's tax burden.
But a plan to increase mining taxes, even one with bipartisan support, faces difficult political and legal obstacles.
For starters, any tax increase would require two-thirds support from the Legislature. And it is unlikely proponents could muster such strong support without a signal from Sandoval that he would agree to sign it into law.
Sandoval, a Republican, was elected on a promise to oppose tax increases. Dale Erquiaga, his senior policy adviser, said the governor would veto deduction restrictions if they were motivated by a desire to raise state revenue, as opposed to merely correcting flaws in the statutes.
Also, the Nevada Mining Association could challenge a tax increase in court. Mining taxes are limited by the state constitution, statutes and regulations.
Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or 702-477-3861.
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It's insane that Canadian miners should continue reaping amazing profits while our education continues to take a hit in Nevada. We will never be able to diversify our economy if companies don't move to Nevada. Companies won't move to Nevada until there is an EDUCATED workforce to draw from. Education is our future. It's time the mostly get disallowed their near tax-free billion dollar benefits.
Hey
its about time that they look at taxing it at about 20% like they should do with the greedy casinos
Get real folks all thing will be on the table
Sandoval proposes to spend ~$5.8B in the coming biennium. Through a combination of existing taxes and borrowings from out-years (*delayed* tax increases). The DEMs want to spend ~$2.5B more than he. Higher mining taxes factor in.
The amount necessary to fund the government functions actually *required* by the NSC is ~$200M. How the Legislature chooses to spend the the rest of the money is *discretionary*. For example, Sandoval proposes to waste $3B on K-16. The Legislature could just as easily vote to *rebate* that money (along with the other $2.8B++) to taxpayers.
It works out to at least ~$1,000 per Nevadan per year.
george I got to say man, your understanding of things is really messed up. I mean, never cared that the federal government "illegally" controlled "our" state? You do realize don't you dunce that the federal government OWNED that land when this little piece of nothing was a territory right? I mean, you didn't "think" that somehow by granting Nevada statehood that the citizens of the country that actually owned that land would somehow be obliged to turn it over to JUST the citizens of this state did you? Geez man, get a grip, learn some history, learn some property law, or just keep your ignorance to yourself; God knows who might unintentionally absorb some of your nonsense and regurgitate it.
So who gets harmed by having mining pay a similar rate to what casinos pay? Does anyone REALLY think mines will close with gold at $1,400 an ounce. That would be like oil companies closing at $140 a barrel. Get real people, the tax would not affect a single Nevadian in a negative way, only in the positive. Conservatives can still try to stop government wasteful spending, nobody will stop you, just let the others work on paying for schools, prisons, a judicial system, decent health services, etc....
Could it be because the taxpayers now have YOU in the crosshairs?
Hey, it's your beloved government that wrote out those contracts and stooges like you believe our government can do no wrong. How come now all of a sudden you're worried about "our" gold, but up until now you never cared that the Feds illegally control 91% of our state?
Good luck with those property taxes.
Socialist Pierce said The 30-year experiment in radically small government in Nevada ..
If we just had *small* government in this state (not even *radically* small) our biennial budget would be ~$200M. That's right. *Existing* mining taxes plus a few weeks of retail sales taxes would cover it. So WTH is this Socialist talking about? Naturally the GOP opposition to this political gang rape has been pathetic.
Gold *above* ground is worth ~$1,420/oz. Gold *below* ground in a proven mine is worth $1,420/oz minus cost of production. The Mother Lode yet to be discovered in Eureka County is worth ZERO.
Those early(est?) stages of production are where Gold Mining companies come in, so get off this Communist notion that the miners are "robbing us", or that we're being "plundered" by foreigners, and so forth. It's not like these companies are excavating entire mountains intact and hauling them down to Argentina.
I do not work for the mining industry. I do not own shares in natural resource firms. I oppose BIG Government, and the high taxes necessary to fund it.
Buy this photo.
finally a politician looking at the obvious. mining taxes need to be revised to reflect the needs of the 21st century Nevada resident... not the 19th! we were unable to make changes in the 20th. don't stop with mining. casinos pay double digit taxes on reservations and in jersey they can take a small raise here. last but not least corporations.. walmart, target, exxon, huge profits going out of our state. stop raising the state sales tax that hits the residents our economy won't get any better that way. every state is recovering but ours. wake up people.
"Not our gold"? Maybe you missed it george, but whether the gold is being stolen from "federal land" or "state land" by virtue of the fact that "we the people" are BOTH the "federal" government, AND the "state" government, the land, and the minerals beneath that land, do indeed belong to "we the people". And those primarily FOREIGN companies hauling OUR GOLD back to THEIR countries, to further benefit THEIR country, are STEALING what BELONGS to US. And stooges like you george, seem to think this is a good idea. Tell you what george, I'll make the same deal with you that Nevada has, for over a century made with those companies; you send me YOUR gold, and I will, after taking all of the expenses out, return to you THE SAME PERCENTAGE of return that you are insisting that WE THE PEOPLE "get" from THEM. How now brown cow?