CARSON CITY -- State Taxation Director Dino DiCianno "retired" abruptly Friday, less than 24 hours after he told legislators that his staff for the past two years has not audited mining companies to determine if they are properly paying state taxes.
And Gov. Brian Sandoval ordered an audit of mining operators' books to ensure they are paying their required state net proceeds of minerals taxes.
The governor and legislators did not say Friday they suspect mining companies have not paid all due taxes, but Senate Majority Leader Steven Horsford, D-Las Vegas, said: "The numbers justify investigation."
"There was an increase in mining profits and a decrease in revenue. It is ridiculous that we have no experts available to explain whether or not that is legitimate, especially now," he said.
News that mining companies have gone unaudited comes at a time when Democrats are complaining that Sandoval's proposed $5.8 billion two-year budget is $2 billion to $2.5 billion short of the state's real needs.
Sandoval did not say DiCianno had been fired, but that the taxation director had "informed" him Friday that he was retiring.
"I appreciate Dino's many years of service to the state of Nevada and I wish him well in his retirement. He has been a loyal and dedicated public servant for three decades," Sandoval stated.
He appointed Deputy Taxation Director Chris Nielsen to succeed DiCianno until a permanent successor is named. Nielsen will develop a strategy to resume audits quickly and Taxation Department auditors will be assisted by State Internal Audit Division staff members, according to a statement issued by the governor.
DiCianno shocked members of the Senate Revenue Committee on Thursday when he admitted that for the past two years his office had no auditors skilled in handling the state's mining tax laws and capable of auditing mining companies.
He also said he never told Sandoval about his staffing problems.
MINING PROFITS GROWING
Mining companies have been reaping bigger profits because of the skyrocketing price of gold, now selling for $1,417 an ounce. About 80 percent of the nation's gold is extracted in Nevada.
The mining industry now pays about $85 million a year in net proceeds of mineral taxes to the state and a similar amount to rural counties.
The Taxation Department released a report Thursday that showed those revenues have been increasing in recent years. Sandoval even announced Thursday that due to high gold prices the state would receive $10 million more in net proceeds taxes than expected.
DiCianno's statement that he lacked trained auditors so rattled Horsford on Thursday that he said he might "start taking blood pressure medicine."
"While I appreciate Mr. DiCianno's recognition of his error, a changing of the guard is not good enough," said Horsford on Friday. "We are being asked to cut millions from education and essential social services. If our state is losing money because tax reports are being rubber-stamped, we need to fix that. We need to audit our auditors."
During the Thursday hearing, Terry Rubald, chief of the Taxation Department's assessment division, said mining largely "operates under a self-reporting tax system."
For years legislators have talked about but failed to pass any legislation to require higher taxes from mining companies. Horsford said Thursday that mining should not be singled out any more than other industries for special taxes.
Senate Revenue Chairwoman Sheila Leslie, D-Reno, would not conjecture Friday whether mining companies are properly paying their net proceeds tax.
"Who knows?" she said. "I am not accusing them of doing anything illegal. I do know that multibillion-dollar corporations have a whole lot more attorneys than we have auditors."
MINING DEFENDS ITSELF
Tim Crowley, president of the Nevada Mining Association, said companies have "excellent procedures" for computing and paying their taxes, and he doubts auditors will find anything unusual.
Newmont Mining Corp. lobbyist Jim Wadhams said he was surprised at DiCianno's announcement that mining companies have not been audited.
"I have dealt with five or six (Taxation Department) people over the years. They are supposed to examine company records and verify the calculations are correct. Do I think they now will find any major discrepancies? I don't think so."
Barrick Gold of North America, the state's largest producer, issued a statement in which Greg Lang, its North America region president, said "we certainly pay our taxes." He said Barrick has invested more than $2 billion in Nevada in the last five years and paid $101 million in net proceeds taxes March 1 to the state and counties.
The Progressive Leadership Alliance of Nevada has been the sole organization in recent years trying to induce legislators to increase mining taxes. The liberal-leaning group that represents unions failed last year to secure enough signatures on petitions to put a mining tax before voters.
PLAN legislative lobbyist Jan Gilbert also did not accuse mining companies of cheating on their taxes, but she did criticize mining tax rules.
"I think the way regulations are written, we basically are allowing them to deduct anything except toilet paper, and they may even deduct that," she said Friday. "We have set it up so mining gets off the hook."
Mining companies pay a 5 percent net proceeds of mineral tax that is calculated after they deduct legally allowed expenses, such as the costs of extraction, transportation , marketing, depreciation and employee benefits.
In the Thursday hearing, PLAN President Bob Fulkerson said some companies are deducting far more than others and reporting different deduction costs to shareholders than they do to the state.
However, Crowley said because the price of gold is so high some companies are taking gold from older mines and their extraction costs are much higher than gold produced at new mines.
Leslie said DiCianno, who did not return a call seeking comment, does not deserve all the blame for the improper oversight of mining companies.
"I am sympathetic to the state agencies for the pressure we are placing on them to meet all their requirements with fewer resources," she said. "I don't think Dino bears all the blame. A lot of things aren't getting done in state government now."
"I think it is really uncalled for," she said. "He is firing a long-term public servant who probably didn't request the audits because the governor's budget is so tight. All the budgets have been drastically cut."
Contact Capital Bureau Chief Ed Vogel at email@example.com or 775-687-3901.