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New regulations cut some mining deductions
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LAS VEGAS REVIEW-JOURNAL CAPITAL BUREAU
CARSON CITY -- The state Tax Commission adopted regulations Monday that reduce some deductions mining companies have been taking and will produce $24 million a year in revenue for the state and local governments.
Commissioners had no choice but to pass the new regulations because they put into effect a law approved by the Legislature and signed by Gov. Brian Sandoval.
Under the law, companies cannot deduct items such as employee health insurance, worker housing, lobbying, federal taxes and state sales taxes before they calculate their 5 percent net proceeds of minerals taxes. Health insurance, however, will be a permitted deduction in 2014.
A source in the mining industry said the mining companies have not deducted lobbying expenses but did not mind that regulations now specify such a deduction is prohibited.
State Senate Majority Leader Steven Horsford, D-Las Vegas, had championed the end of the deductions during hearings on a mining bill in the spring.
He and others complained that before figuring taxes, some mining companies were deducting expenditures that had not been authorized by the Legislature.
Earlier, the state taxation director resigned after a legislative hearing in which he said state auditors were not properly trained and had not been auditing mining companies.
Legislators also created the Mining Oversight and Accountability Commission, a seven-member panel to oversee rules for mining safety and taxation.
Besides bringing extra revenue to the state, the elimination of certain deductions will benefit counties with mining companies. They also receive net proceeds of minerals taxes.
Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.
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It never ceases to amaze me how short sighted politicians and uninformed citizens can be. Mining is incredibly capital intensive and most mining companies never receive a reasonable return on their investment. If they did, more people would certainly be investing in mining companies. Mining has done reasonably well in the last few years but what about the 80's and 90's when mining companies were struggling to stay alive and routinely posting huge losses on their investments? Shouldn't mining companies be allowed to take advantage of the same tax policies as all businesses? Why doesn't gaming pay a net proceeds tax? Doesn't it consume state resources as well? As far as what Nevadans are seeing in tax revenues, what about counting the sales taxes paid by miners with high paying jobs that are actually buying things and keeping your economy afloat? Paint the whole picture, not just the part you want to show to justify your pathetic negative characterization of the mining industry.
In 2009, the mining industry had gross revenue of 5.8 BILLION. After deductions, including some that may have not complied with state law, the net profit was 1.8 BILLION. The tax paid to the state of Nevada was 48.6 MILLION. The state of Alaska collects a royalty of 25% on oil. Alaska currently has a 3 BILLION surplus in the state budget, and Exxon just reported record 1st quarter profits of over 10 BILLION, so the royalty payment doesn't seem to be causing the oil companies financial problems. The Barrack annual report has just been published, and shows record profits and dividends above the record levels of 2009. Shareholders return on investment jumped from 12% in 2009 to 19% in 2010.
In 2010, the Cortez Hill mine in Nevada produced 1.14 MILLION ounces (31.6 TONS) of gold at a cost of $312 per ounce. In the first quarter of 2011, the mine produced 366000 ounces (11.4 TONS) at a cost of $220 per ounce. Assuming a profit of 1000 per ounce, not unreasonable given gold has topped 1500 for a while, that would produce a profit of 366,000,000 for just the first quarter, or a profit of 1,264,000,000 for the year. Of that amount Nevada will be lucky to see 10,000,000. Tell me again that mining is paying it's fair share.
Wish I had *that* crystal ball.
This state has insurance taxes, entertainment taxes, room taxes, rental car taxes, gaming taxes, etc. Yep. Anyone can live tax-free in some tent in the middle of the Great Basin.
The price we pay for taxing tourists is that when we visit Anaheim they tax us RIGHT BACK.
I think your point is that since tax avoidance strategies are available, that means BIG Government is somebody else's problem. Nope. BIG Government is a problem to anyone who values personal liberty.
@ N7v.blogspot- The Only Taxes you pay are Sales Taxes, Gasoline Taxes, property taxes, and the Tax on Registering your Vehicles. All of which is voluntary unless YOU choose to buy those items. Other then clothes, you don't need to ever pay any taxes in the State of nevada. And by the way, the average person pays a total of around $800 Dollars a year on taxes (more if they own a house). 75% of tax revenue comes from tourists, with another 15% from businesses.
24 million on 6 Billion in revenue...not bad...wish I had that tax rate
If we had small government in this state, *existing* mining taxes plus a few weeks of retail sales taxes would be enough to cover the cost. That is, $100M/y for the three branches, prisons, 18 public schools, a militia, etc.
More tax revenue just means MORE government.
Disallowing a deduction for employee health insurance will make it more likely that the industry will eliminate the benefit (or increase plan deductibles) in this state.
I don't understand how the state can disallow a deduction for corp income and sales taxes. The DEMs would tax the industry at 100% if they could get away with it.
I do not own shares in mining firms. I do not work for the industry. Ioppose BIG Government and the HIGH taxes necessary to fund it. Of course, I could be persuaded to support special taxes on lawyers and lobbyists, so long as the money could only be *rebated* directly to residents.
That is a start but in reality the mining tax should be like the gaming tax the casino's pay, no deductions. Gross win is taxed before any other expenses. Due to old laws the mining has been legally getting away with very little taxes. Time to set things right in that industry.
Joke; 24 million dollars; these guys spend more pumping toxic chemicals into our water supply ever day than that.