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An open pit gold mine, part of a complex near Carlin, is shown in this 2009 file photo. Tim Crowley, president of the Nevada Mining Association, says mining companies have been deducting expenses from their tax bills that may not be authorized by state law.
By Anjeanette Damon (contact) 
Sunday, April 17, 2011 | 2:05 a.m.
Tim Crowley
Chris Nielsen
Steven Horsford
Sun archives
- Nevada legislators scrutinize mining tax breaks (4-7-2011)
- Mining lobbyists avoid provoking hostile lawmakers in tax debate (4-5-2011)
- Democrats seek to repeal mining tax from the constitution (3-28-2011)
- Steven Horsford calls on Nevada regulators to close mining tax loopholes (3-21-2011)
- Sandoval calls emergency meeting of tax commission to review lax audits of mining companies (3-14-11)
- Sandoval removes tax department director after failure to audit mining companies (3-1-11)
- Sandoval administration has no auditors trained to scrutinize mining industry’s tax deductions (3-10-11)
- Obama proposal for new mining fees puts Harry Reid in tough spot (2-14-2011)
- Is low-taxes sales pitch enough to bring businesses to Nevada? (2-11-2011)
- Gaming, mining industries become early targets for taxes (2-8-2011)
Nevada mining companies have been deducting, with regulators’ approval, a slew of expenses from their tax bills that may not be authorized by state law, the president of the Nevada Mining Association acknowledged in a letter to the state tax director last week.
In the letter obtained by the Las Vegas Sun, Tim Crowley, president of the Nevada Mining Association, identified three categories of deductions taken by the industry and allowed by regulators that appear to conflict with state law governing the net proceeds on minerals tax.
That law allows mining companies to deduct expenses directly related to extracting minerals from the ground and processing them into a product ready for sale.
Crowley testified in a recent legislative hearing, “anything that doesn’t pass that litmus test, it’s not deductible.”
But in his letter to Tax Director Chris Nielsen, Crowley said a review by mining industry accountants found regulators are approving questionable deductions. Some of those deductions are not specifically mentioned in state law but are allowed through written regulations approved by state lawmakers.
Other deductions are not mentioned in either state law or written regulations, but have been allowed by tax officials just the same.
Regardless, many of those deductions are not related in any way to the extraction and processing of the ore — failing the ultimate legal test of an allowable a deduction, Crowley admitted in the letter.
State officials should reconsider those deductions, Crowley wrote: “Please understand that, to the best of their ability, association members comply with the statutes and regulations administered by the tax department. Our review has generated three categories for expenses worthy of reconsideration.”
According to the association’s review, the industry is allowed under regulations to deduct expenses for employee housing, exploration, corporate costs and fees paid to the World Gold Council, a marketing organization for the industry.
Those deductions are not mentioned in state law.
The industry has also been allowed to deduct miscellaneous travel expenses for training and to visit vendors, costs that Crowley wrote “may not be relevant to the value of the mineral.”
The association also questioned whether it’s appropriate to deduct employee severance costs, which Crowley stated bluntly have “little to do with the current minerals being extracted.”
Both the travel and severance costs do not appear in either written regulations or state law as allowable deductions.
Neither Crowley nor Nielsen could explain why those costs were allowed by regulators.
“In no way have we taken deductions that aren’t allowed by the (Tax) Commission,” Crowley said. “But we know there is going to be a discussion (about what deductions should be allowed) and we encourage it. We think it’s healthy.”
The commission signs off on state tax regulations and oversees the Department of Taxation.
The mining industry has come under increasing scrutiny and pressure from lawmakers and the public, who argue the state’s lone booming industry in the recession should contribute more in taxes to help the state with its crippling budget shortfall.
Lawmakers are considering legislation that would cut the industry’s deductions by nearly two-thirds and another bill that would eliminate the industry’s constitutional tax protections, in place since statehood.
How much in additional taxes the state could receive from the mining industry with revamped deductions is unclear. But under Assembly Bill 428, which would cut deductions by 60 percent, the state would net about $81 million in additional revenue.
Senate Majority Leader Steven Horsford, D-North Las Vegas, has also petitioned the Tax Commission to rewrite the regulations, which he says allow mining companies to make unauthorized deductions.
The commission is expected to make a decision on his petition during a special meeting Monday.
Nielsen was reluctant to comment on Crowley’s letter, saying it will be discussed publicly during the meeting. But he disagreed with the assertion that regulators are allowing deductions that are not specified in either regulations or state law.
“To my knowledge that is not occurring,” he said.
Nielsen also noted that tax auditors disallowed more than $74 million in deductions the industry attempted to claim in 2009, netting the state about $4 million more in tax revenue.
In response to Horsford’s petition, the association assembled a committee of accountants and other industry professionals to review regulations and deductions to determine whether they truly reflect the costs of extracting and processing minerals, Crowley said.
Industry lobbyists have strenuously fought the bill to cut their deductions, arguing it would artificially inflate the value of the property being taxed. But they’ve signaled a willingness to review individual deductions to evaluate whether they are appropriate, which could result in a higher tax bill for the industry.
“We wouldn’t have put it out there if we didn’t think it’s not clear, and it’s not clear,” Crowley said. “Let’s clarify it. Let’s go through it and decide, ‘is this in or is this out?’ If we were just going to go into defense mode, we wouldn’t have written a letter.”
Who knows how long the mining industry has been scamming taxpayers. Its time these foreign corporations paid up for past mistakes as well as for the misery they have profited off of for years.
Let's not kid ourselves by confusing dubious deductions with our budget problems.
Cracking down on questionable deductions is important. Everyone should pay the taxes they are required to under law. There are questions about whether the state was doing all it could to stop these practices.
The $4 million in revenue resulting from 2009 audits was helpful An extra $4 million will not solve our budget woes.
Have the mining industry pay a $2.2 Billion 'Save Nevada' donation so the current republican Gov won t gut the state with his cuts at least?
It s Nevada s gold, these scamming bastards can be replaced by firms willing to pay more than the 3rd world rate that the Nevada GOP lets em screw us with now..
you mean that individuals with obscene wealth have found ways to pay almost nothing in taxes?!?
And that, despite an insultingly contrived display of public contrition, they know in the back of their minds that they will continue to do so in the future?!?
I'm shocked!
Shocked and dismayed!
Thank you to the publishers and the reporter for elucidating a dynamic that I never could have imagined would actually happen.
My head is just spinning.
I suppose we peon Nevadans should be grateful that we don't have to pay a head tax to additionally support these all-mighty (often foreign) Corporations. Geeessshhh!
Isn't obvious that the State of Nevada has been looking the other way on a number of issues. Now that times are tough legislators have crack down on their large political backers, isn't that just a shame. Now there will be no way to go back and regain that lost revenue. Our legislators do not want to loose campaign donations.
"With Regulator's Approval?"
You mean without any tax audits - these aren't the regulators.
No operations audits either.
The Regulators of the mines in Nevada are the same ilk as the Regulators of Casinos - this is why small businesses like Dotty's are taking the heat and being driving out of business - the REGULATORS IN NEVADA ARE CROOKS THEMSELVES.
"ploy to pay a little tiny more in tax from their most egregious deductions in the hope it ends there."
That's it. This is an attempt to head off something bigger. Unfortunately Gov BS is in their hip pocket and will do whatever it takes to protect their claim to Nevada's gold.
Tax reform with the mining and gaming/resort industries must be REAL and palpatable. If need be, a citizens' fund for political leaders willing to tackle these industries should be instituted, as they may LOSE any potential political contributions from mining, gaming, resort, and big box store industries by being HONEST REPRESENTATIVES OF THE PEOPLE OF NEVADA, unlike many who have taken the bribes, er, political campaign contributions in the past, present, and future!
All the citizens of the State of Nevada ask, is that these industries pay their FAIR SHARE in TAXES; i.e., that at the very least, they pay an average of what they pay in such taxes in the other 49 states! But it would be MORE FAIR to tax them more now to make up for their PAST EXPLOITATION IN BARELY GETTING TAXED!
Let us NOT have a fox guarding the hen house, if anything, ask citizen volunteers to be regulators. The criminal corruption needs to be sifted out and put to an end in this state, or NEVADA will have no future, it will, and is heading, towards being a slave state with exploited citizens and residents here. Shame, Shame, Shame!
Time for the State to seize the productive mines under eminient domain and give them to George Soros and Michael Moore...that way maybe we can stop hearing of the "Buy Gold" Commercials on talk radio and FOX.
This is part of a very calculated ploy by the mining industrty to exploit Nevada's budget crisis. Watch what happens now: the industry will offer to come up with what amounts to a charity payment of something close to $100 million to the state as "mea culpa" for criminal tax deductions (but of course without admitting to anything wrong). It will offer its gold-heavy wrist to be slapped.
Also: industry lobbyists will push for some very minor revisions in the "illegal" deductions (as mentioned in this article). Big mining will offer and support all of this, but only in trade for the legislature backing off from fixing the tax laws, and our attorney general agreeing to hold big mining harmless from prosecution for past tax crimes.
Nevada is run by back room deals. Until now, our state has been treated by the mining industry like that old West saying from cowboy bordellos: "getting screwed without getting kissed." It's the oldest story in our state.
So: here comes the deal offered by big mining to keep screwing Nevada citizens while reaping obscene profits.
look what they do to the land...
to our land...
they destroy it...
then ship the gold over seas...
to foreign countries...
where foreigners enjoy the profits...
and we get a big hole in the ground...
frickin joke...
it is time to bring the big stick to mining...
and all of those losers out there...
that keep crying that it won't solve the budget problem...
lose the defeatist attitude...
nothing in and of itself will solve the budget problem...
but make no mistake...
this is a part of the solution...
so stop it...
you frickin losers...
stop the nonsense...
RAISE TAXES ON MINING!!!
AND GET THAT DAMN PROVISION OUT OF THE CONSTITUTION!!!
BRAIN SANDOVAL IS A COMPLETE AND TOTAL FRAUD!!!
never met a miner's @$$ he didn't want to kiss...
brian just loves kissing miners' @$$es...
sad...
pathetic really...
enjoys inflicting irreparable harm on the innocent children of nevada by gutting education...
and yet...
loves kissing miners' @$$es...
frickin joke...
BRIAN SANDOVAL IS A COMPLETE AND TOTAL FRAUD!!!
Great comments today and we all seem to be on the same page. The mining industry hasn't paid their "fair share" for 87 years, why would they want to start now? With gold, silver, and other minerals at all time highs and our state at all time lows, it's about time they paid up. High-paid lobbyists still wander the halls of Carson City, mining shareholders still donate obscene monies to political candidates who agree that mining keep their billions and billions of dollars in profits, so I have a suggestion for electing our states' officials: let's take a clue from our judicial system...instead of actually voting for a political candidate let's just treat it like jury duty. If you get a "summons" in the mail, then you're like, oh, I don't know, mayor for instance. You serve a while, then the next man/woman on the "jury/political office" gets the nod and it is their turn to serve. It would stop lobbyists from paying officials to vote their benefactors way, it would put the "everyday" man and their opinions/beliefs into the heart of our issues....I'm just saying.... Anything would beat the mob mentality that currently exists with regards to our mining and casino industries. Just a thought...sure there would be problems! BUT, perhaps things would be a wee bit fairer.....
I'd take a lot of these "make mining/gaming pay their fair share!" arguments more seriously if the people making said arguments were also paying their legal tax obligations to the state. Given that very few people pay their use taxes for goods purchased from out-of-state (via the Internet or otherwise), the demands for other people to pay their taxes ring hollow from people who can't be bothered to pay their own.
Thank you whoresford and the rest of your legislators for (and Sandoval) allowing this to happen for years. Not only have they been ruining the earth but they have been getting a free ride forever like the casinos. 81 million in revenue? They could pull that out of their suit pocket at a moments notice.
Let's face facts..
Our legislators are completely over matched by Mining and Gaming..
We have no control over these entities...they control the State of Nevada..
Time for a complete overhaul by the PEOPLE of Nevada.
But alas...we have no WILL.
The fix in my opinion.
5 to 7 % Gross tax on sales.
No deductions whatsoever.
Use their investor report for the sales data since they like to show investors, not the state, the true earnings.
$8 Billion in sales = $400 million to Nevada residents.
For this to happen- the people need to amend the constitution.
Clarifying that I'm not the commenter 'jpc'.
We need to FUND ESSENTIAL GOVERNMENT SERVICES LIKE DPT OF TAXATION. Auditors there make much less than any ordinary entry-level K-12 teacher. Time to upgrade the pay scale of these auditors.
LOOK AT WHAT THEY DO TO THE LAND!!!
hey sandoval...
you frickin fraud...
LOOK AT WHAT THEY DO TO THE LAND!!!
This is just a diversion to keep Legislators from truly Taxing these multinational corporations a fair tax rate for the profits they make from defiling the publics lands.
Let's look at the score.
Right wingers work very hard to nominate a Republican who is anti-taxes.
The Republican Party nominated such a person.
The general public voted solidly for such a person.
The left-wingers don't work AT ALL to nominate a Democrat who wants to raise taxes. However, they will whine and whine and whine about elected officals who don't raise taxes.
The Democratic Party nominates a person who also promises not to raise taxes.
Hmmmmmm......am I the only person who sees that the left-wingers are either stupid or lazy?
This can be remedied by hiring about a dozen experienced CPA's. Ex IRS agents would be ideal.
Legislators need to get the back taxes due to the state with interest and eliminate the consitutional tax protections. It is about time they pay their fair share.
The middle class deserve better then what they are getting from Nevada's government.
"Hmmmmmm......am I the only person who sees that the left-wingers are either stupid or lazy?"
--------------------------
Have you donated more money to Sharron Angle s new campaign yet Rockster?
"This can be remedied by hiring about a dozen experienced CPA's."
Nevada...hiring? What CPA would work for minimum wage and no benefits?
Markey = another left-winger that sat on his butt during the primary and did not work hard to get a pro-tax Democrat nominated for Gov.
hey sarge...
mining and gaming pay a fraction of the taxes they pay in other jurisdictions...
nuff said...
by the way...
did you know that mining is laughing its collective @$$ of...
AT YOU!!!
This is exactly what Sharon Angle, Brian Sandoval, and all the other tea party right wing nut jobs have wanted--as little regulation of private industry as possible.
The problem is that such lack of regulation inevitably leads to private industry breaking laws. After the S&L scandal, Enron, the Wall Street Meltdown, and countless other scandals that were facilitated by lax regulators, you would think we might finally learn that someone needs to be looking over the shoulder of private industry.
How much money have every day people lost in the last 25 years because of government's failure to properly regulate private industry? Billions? More like Trillions. Yet our governor and many other politicians in our state would just as soon step aside and let private industry do its thing.
So, let's get the regulations overhauled and properly defined! No hard task!
Why make such a bid deal out of something that could be easily fixed?
LVLAVDOG>>>>>>>>>>>>>>>>>>>> Who has been the Senator under this debacle with the mining industry? Hasn't it been Whorehouse Reid who doesn't want to cut funding for Planned parenthood. Stop blaming the tea party.