Nevada mining industry avoids audits

CARSON CITY -- Legislators expected shock and awe Thursday after the Department of Taxation director testified he does not have any auditors trained to determine whether the mining industry properly pays its state taxes.

"I am going to have to start taking blood pressure medicine," responded Senate Majority Leader Steven Horsford, D-Las Vegas. "We have a huge increase in net proceeds (taxes), and you don't have anyone with the skills set to look at these companies at a time we have an enormous challenge with our shortfall."

Horsford made his comments during a Senate Revenue Committee hearing after state Taxation Director Dino DiCianno said he has not had auditors for two years who are familiar with Nevada's complicated tax law on net proceeds of minerals. DiCianno added he never told Gov. Brian Sandoval of his staffing problem.

The revelation comes at a time when Democratic legislators are looking for additional revenue to cover a budget they think is $2 billion to $2.5 billion short of the state's needs. Sandoval and Republicans oppose any tax increases and want to approve the governor's
$5.8 billion budget without changes.

Sandoval reported Thursday that mining tax collections for the coming year will be $10 million more than previous projections and that the extra money would be set aside for education.

Senate Revenue Committee Chairwoman Sheila Leslie, D-Reno, called it "ridiculous" for the governor to think he alone can decide where funds are spent. She said that money will go into the general fund. Legislators, working with the governor, would decide where it is spent.

Both Terry Rubald, chief of the Taxation Department's assessment division, and mining lobbyist Jim Wadhams told the committee they do not think the mining industry is shorting the state of tax revenue.

But Rubald said mining largely "operates under a self-reporting tax system."

Mining companies last year made an advance payment to the state of about $85 million in net proceeds of minerals taxes.

The tax is calculated after taking the sale price of gold or other minerals and then deducting legally allowed costs of extraction, transportation, depreciation, marketing and other costs.

The advance payment is supposed to cover next year's payment on mineral taxes to the state, but Sandoval has proposed delaying that for two years.

Progressive Leadership Alliance of Nevada lobbyists questioned whether mining is cheating the state on tax payments.

PLAN President Bob Fulkerson said mining companies reported to shareholders in their annual reports that
30 percent to 40 percent of expenses go toward extracting and producing the finished minerals, while they claim to the Taxation Department that 70 percent to 80 percent goes to these costs.

"Why is there such a huge discrepancy?" he asked.

As it stands now, PLAN lobbyist Jan Gilbert added, mining pays less in net proceed taxes than the amount of taxes paid to the state by rental car companies.

PLAN, a liberal-leaning group , has been trying unsuccessfully for several years to induce the Legislature to increase mining taxes. Its efforts have been met with lawsuits from the mining industry.

Tim Crowley, president of the Nevada Mining Association, told legislators his industry pays all of the taxes that every other business pays in addition to the net proceeds tax.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.