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October 24, 2014

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Damon Political Report

Mining industry working to scuttle bill targeting their deductions, find different way to pay $23 million to the state

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Unhappy with their part in the budget deal struck this week between legislative leaders and Gov. Brian Sandoval, mining lobbyists are scrambling today to find a different way to pay the $23 million lawmakers want from the industry.

Under the budget agreement, lawmakers would eliminate an array of deductions the mining industry uses to calculate its net proceeds on minerals tax.

While the measure would generate $23 million in new revenue for the state, it would also force the mining industry to pay another $23 million to county governments.

Mining lobbyists also argue that lawmakers are targeting legitimate deductions to which the industry is entitled. Under state law, mining companies are allowed to deduct the actual costs of extracting and processing the minerals. Over the years, however, they’ve convinced regulators to expand that definition to include a number of deductions that aren’t allowed in state law.

In a late afternoon meeting Wednesday, the industry tried to convince the Sandoval administration to increase the modified business tax rate paid by the industry. That offer was rejected.

Lobbyists then approached Democratic leaders with an offer to find a way to continue paying an increased mining claims fee that a district court judge recently found unconstitutional. The judge also issued a temporary restraining order barring the state from collecting further fees and the state may have to refund what has already been collected.

In the wake of that decision, lawmakers rejected a proposal to continue the increased claims fee, replacing it instead with the proposal to eliminate deductions.

Eliminating the deductions, however, will net the state about $15 million less than could have been generated by continuing the claims fee.

One mining lobbyist argued lawmakers could rewrite the law imposing the increased fee so that it would stand up in court.

Democrats, however, have rejected that suggestion.

“We’re not trying to get out of anything,” the lobbyist said. “We’ll pay the $23 million they want. We’re exploring a number of avenues to do that.”

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  1. Corporations once argued that they should have the same rights as an individual. Today, they have deductions and privileges far beyond what any individual is given. There are too many special tax codes for business entities and the lobby full time, something the individual cannot do. Equal protection does not exist.

  2. Mining has enjoyed UNCONTROLLED, UNAUDITED, BOUNDLESS SUCCESS for over 100 years taking minerals, both precious, rare earth, and semi-precious, OUT of Nevada with little to no resistance from the People of Nevada and Nevada LAWMAKERS AND GOVERNORS.

    But times have changed,& Tanker 1975 puts it well:

    "The Constitutional protection for the mining industry and the state laws that allow huge deductions need to undergo changes. I am not advocating the Alaska solution of a 25% royalty on oil companies, although based on recent earnings reports, that doesn't seem to have had a negative effect on their profits.Two mining companies are planning on opening mines in the Comstock Lode and the Carlin Trace.

    The issue was highlighted in a recent power point presentation at the Barrick Mining annual meeting. One of the mines highlighted in the power point was the Cortez Hills Mine in Northern Nevada. According to the power point, in 2010, the mine produced 1,140,000 ounces of gold (over 35 TONS) at a production cost of $312 per ounce. During the first quarter of 2011, the mine produced 366,000 ounces (over 11 TONS) of gold at a production cost of $220 per ounce. If you project a sale price of $1000 over cost of production,that results in a profit of over $1,500,000,000. Based on what the mining industry paid in taxes in 2009, the tax payment to the state of Nevada will probably be less than 50,000,000. The power point goes on to point out that the projected production from Cortez Hills for 2011 will be between 1.30 to 1.45 MILLION ounces (40-45 TONS)at a production cost of $235-245 per ounce. This is natural resource that should provide significant benefits to the citizens of Nevada. Unless the Legislature acts quickly, another two years will pass without any significant action to change the tax structure of the state.

    In 2009, the mining industry paid 48,600,000 on gross revenue of 5,800,000,000. In 2010, the gaming industry paid 416,000,000 on gross revenue of 5,800,000,000. Mining pays about 10% of what gaming pays in taxes."

    NEVADA LAWMAKERS must continue to RESTRUCTURE AND REFORM MINING LAW AND MINING TAX LAWS now and until the job is done! Nothing less. Please contact your Nevada Lawmaker and tell them what you expect them to do, as they will do zero unless people communicate to them. Thanks!

  3. I cannot believe that in a year when this business is virtually the ONLY one making billions in profits - they would have the nerve to complain about a few million.

    THEY TAKE THE GOLD ORE - there is no more after it is gone.

    But when your Governor made his money lobbying for mining, you end up with teachers and kids paying the bills and the miners laughing all the way to their Canadian banks.