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Lawmakers reach deal with mining industry over tax deductions

Updated Sunday, June 5, 2011 | 10:57 p.m.

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CARSON CITY - In an example of how even final deals can be subject to change, lawmakers late Sunday night reversed themselves on an agreement that would have let Nevada mining companies keep their tax deductions for health care expenses in exchange for making a one-time payment of $6.4 million to the state.

The initial deal had addressed the immediate budget problem, but would have saved the mining industry more than $12 million a year going forward.

But the deal also would have eliminated funding for local school districts that had already been built into the budget. To fix that, lawmakers reversed their decision to eliminate the health care deduction. Under the new deal, however, mining companies would be able to resume taking the health care deduction in two years.

Under the original compromise, six of the state’s largest mining companies had agreed not to seek a refund on an increased mining claims fee that a district court recently found unconstitutional. With the new deal, mining companies are no longer held to that promise, said Senate Majority Leader Steven Horsford, D-North Las Vegas.

"That is separate from this," Horsford said. "They can make that decision now."

The original deal had clearly left Horsford and Sen. Sheila Leslie, D-Reno, frustrated.

“You say you want to be treated like every other business, but, oh, you deduct your sales tax,” Leslie said to mining lobbyist Tim Crowley. “And, oh, you also get to deduct your health insurance twice. You can understand our frustration.”

Horsford has spent the session seeking to close what he described as tax loopholes exploited by the industry, which has been taking questionable deductions that aren’t explicitly allowed by state law.

Click to enlarge photo

Steven Horsford

The industry is allowed to deduct from its net proceeds on minerals tax only the costs specifically related to extracting and processing the minerals. But over the past three decades, the industry has succeeded in convincing regulators to expand those deductions. Horsford said it was a policy priority to close those loopholes by clarifying exactly what can be deducted and what can’t. Lawmakers are moving forward on eliminating deductions for sales tax, travel, marketing and fire insurance.

But the policy debate became mired in the budget fight, as Democrats sought to eke more taxes out of the booming mining industry to help with the revenue shortfall.

The issue was further complicated when a district court ruling found unconstitutional an increase in mining claims fees, proposed by the large mining companies, that lawmakers used to close a budget shortfall in 2010.

“This was some idea that they suggested, we didn’t have a hearing, we adopted it, it got challenged and we lost,” Horsford said. “Now we’re in a predicament.”

Democrats then found themselves in the position of finding a way to replace the $38 million that court decision cost them, as well as raising taxes on the industry.

“It is not enough,” Horsford said of the additional money the industry will pay in the next biennium. “They are not contributing their fair share. Yeah, I feel strongly about that.”

Horsford and Leslie also are pushing a bill, Senate Joint Resolution 15, that would put a ballot question before voters that would remove the minerals tax from the constitution.

Lawmakers can’t change the rate or change the share of the tax collected by the counties because of the constitutional provision.

“They have a special deal,” Horsford said of the constitutional protection. “It prevents us from asking them to do more to help us to fund our budget. I think that is wrong.”

Assemblyman Tom Grady, R-Yerington, said the mining industry provides “some of the highest paying jobs in the state” to rural counties that lack any other economic base. Taking the protection out of the constitution could result in a lower tax rate, he argued.

“We may be sorry we even looked at it,” he said. “It’s a real, real gamble.”

Taking the tax out of the constitution would take at least five years. If successful, lawmakers could then decide how and at what rate to tax in the industry.

“To suggest somehow that putting SJR 15 through would somehow be a tax decrease is false,” Horsford said. “It’s false. It’s spin and it’s a misrepresentation of the facts. It empowers us to set the rate and determine what the split (between the counties and the state) is. That’s it.”

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  1. Vote every one of the bastards out who agreed to this!

    Excuse me, I have to go puke.

  2. How many politicians had their pockets lined with Silver and gold? This is outrageous!

  3. Where are my commuting deductions for driving to work? No shared gains, no shared sacrifice. $6.4 million, one time for what? $5.6 billion gross/year? I'll bet there will be a lot of small cloth bags filled with little shiny stones on the back steps of the "Peoples Representatives". I'm in the wrong business - I work for a living.

  4. Lets have a mining moratorium for the next five years and let's see if the mining industry can "discover" fair renumeration for NEVADAS Minerals and GOLD!

  5. Brower, Rhoads, Gustavson, Halseth and Roberson need to be taken to task for their votes to protect the mining industry's lavish deductions and preferential treatment.

  6. Let's see if I have this right: For untold under the table dollars and the right to keep their jobs and power, these crooks we call representatives of the people sold us out (AGAIN) to the mining companies (many of them foreign owners) that continue to drain Nevada resources while making billions of dollars yearly and paying very little taxes in return for that privilege. Is that what happened here?

    Well, that has to be OK with me since I am guilty of being one of the idiots that voted, again, for some of these same, self-centered idiots that now occupy Carson City State House. We get what we vote for. Perhaps in the next few elections we can make that a priority and a stipulation, candidates either run on a promise to change the constitution regarding the mining companies status and make them pay or we don't vote for you. I personally would like a list of names of those who voted for this silliness.

  7. Like I said earlier, vote the bastards out!

  8. For once boftx I agree with you. It is time for the voters to take things into their own hands and vote the crooks in Carson City out of office. And it is time that the voters put the issue taxes to the Mining Companies and Casinos on the Ballot. I just wonder how they can sleep at night let alone look at themselves in the mirror.

    Hand me the petition so I can start the process of getting these clowns out of office.

  9. Let's see what we ought to be talking about here:

    Just to keep the math simple, Nevada produces more than 5,000,000 Troy ounces of gold a year. At $1500 per troy ounce, that would translate to $75,000,000,000 per year for just one mineral. About 60% of that $75 Billion per year should be gross profit (revenues less costs of extraction and processing) (Understand that this estimate of gross profit percentage might be low because gold prices have increased greatly while costs of production have not). 5% tax on that $45 BN in gross profit should be yielding the State about $225,000,000 per year. We are actually collecting about $30 Million.

    So, once again, the folks we send off to Carson City have agreed that we will collect $6 million for 2 years, but not do anything about reconciling the $30 million we collect now against the $225 million we should probably be collecting each year (just from Gold mining).

    Let's move the capital to a major population center where someone can actually watch things.


    It would be nice to have a list of names of the VOTES! LAWMAKERS, you were given fair warning and solutions, and you trusted this den of vipers, ""This was some idea that they suggested, we didn't have a hearing, we adopted it, it got challenged and we lost," Horsford said. "Now we're in a predicament."" I cannot say it enough times, "DO NOT TRUST MINING, not even when they so kindly offer their budget numbers (remember, they haven't been audited by the STATE of Nevada for 2 years!); do not TRUST their legal advise--they are going to slant it and lead you astray, as they have proven. Some of you LAWMAKERS are either stuck on stupid or part of the problem, guarding the hen house. GEZ!

    The Nevada Constitution needs to be thoughtfully and carefully amending in regards to MINING, GAMING/CASINOS/RESORTS, AND BIG BOX STORES; not this tail-end, hurried piece meal bull crap legislation that requires returning to every 2 years because of inferior quality crafting! Seriously! The People of Nevada deserve much better.

    LAWMAKERS can count on being accountable this 76th Nevada Legislative Session. Nevada VOTERS and CITIZENS are judging the quality of work YOU have crafted and enacted in the name of good and for the benefiting of Nevada's PEOPLE!

    The 76th Session might be ending, but believe me, the accountability and YOUR ANSWERING FOR YOUR WORK in Carson City, has only just begun....

  11. Minning companies should be treated like any other company. The problem is they keep getting singled out for special fee's. These fee's are later found illegal then there has to be a deal to hold back the lawsuits.

    Its a cycle that won't go away. their lawyers are smarter than our legislaters.

  12. Assemblyman Tom Grady, R-Yerington, said the mining industry provides "some of the highest paying jobs in the state" Funny words from an assemblyman that represents a district with a major water pollution problem caused by the very same Industry with those high paying jobs.

  13. @Stivers:

    "their lawyers are smarter than our legislaters. (sic)

    I do believe our blind squirrel has found an acorn!!!

    That's a HUGE NUT, Justin, and right on the MONEY!!!

  14. Yeah, Harley, it's all free.
    No taxes are needed to support a civil society.

  15. The jugglers and the clowns under the big Nevada legislative circus tent performed their usual bag of comical tricks again, leaving the big crowd holding a stinky bag again. . .