Sandoval administration has no auditors trained to scrutinize mining industry’s tax deductions

By Anjeanette Damon

Thursday, March 10, 2011 | 5:47 p.m.

In an uncomfortable exchange during a legislative hearing today, Gov. Brian Sandoval’s taxation director admitted to lawmakers that his agency has no staff trained to audit the substantial tax deductions being claimed by the booming mining industry.

Dino Dicianno, director of the taxation department, admitted it's been at least two years since he's had auditors trained to comb through the voluminous deductions the industry is allowed to claim from its net proceeds tax.

Under further questioning from Senate Majority Leader Steven Horsford, D-North Las Vegas, Dicianno said he did not bring that fact to Sandoval’s attention when the budget was being built.

“And there are no trained auditors on net proceeds?” an incredulous Horsford asked after the committee sat a bit stunned for a moment after Dicianno delivered the news. “Have you brought this up to the governor?”

“Ahhh… that’s my fault,” Dicianno answered, his voice wavering a bit. “Maybe I should have.”

The mining industry is taxed at the full constitutional property tax rate of 5 percent, but is allowed a number of deductions for the cost of extracting and processing the minerals dug from the earth.

Staff at the taxation department does a cursory review of the industry’s tax returns to ensure the numbers add up and that companies are claiming deductions under authorized categories.

But there are no auditors to do an in-depth review of those deductions.

Lawmakers questioned how the state could trust the mining industry is appropriately reporting its deductions, noting some discrepancies between what’s reported to shareholders and what is reported to the state on production costs.

Mining lobbyist Jim Wadhams told the committee he was surprised the department had not had trained auditors for the past two years, noting that prior to that he’s participated in stringent audits.

“Well it’s been the last two years you’ve had record prices and why we need oversight,” Horsford responded. “This is not a condemnation on the industry. It’s our own state department’s inadequacy in this area.”