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Published Wednesday, July 4, 2012 | 2 a.m.
Updated Friday, July 6, 2012 | 9:47 a.m.
Sun coverage
- Mining, gaming tax initiatives might have some life left in them (04-22-2012)
- Other Voices: Mining industry pays its share of taxes (03-31-2012)
- As gold bubble deflates, tired excuses will soon follow (03-24-2012)
- Barrick mining company joining Keystone Corporation and its anti-tax stance (01-22-2012)
- One man’s campaign to upend Nevada’s tax structure (01-12-2012)
Three Nevada mining companies have shorted their taxes by $8.7 million since 2008, according to recently completed audits of their tax returns.
The audits of 17 mining operations owned by Eagle Picher, Ormat Nevada and Barrick are the first of an industrywide examination by the Department of Taxation that is expected to extend to 2015.
The scrutiny was sparked last year when lawmakers discovered the state’s tax department had not audited major mining companies for two years.
Critics of Nevada’s mining industry, who have said the industry does not pay enough in taxes, said the audits revealed “outrageous” behavior by the companies.
“In the face of billions of dollars mining companies are taking out of Nevada, it might be minor,” said Bob Fulkerson, executive director of the Progressive Leadership Alliance of Nevada. “It’s the principle. They’re getting such a great deal to begin with, but even that’s not enough to satisfy their greed. That’s what’s outrageous. That’s what’s incomprehensible.”
John Restrepo, chairman of the Nevada Mining Oversight and Accountability Commission, described the audit findings as “relatively small.”
“There’s going to be a difference of opinion over what’s allowed during the normal course of business,” he said. “There are no major red flags on anything we saw so far.”
As a whole, the mining industry paid more than $300 million last year in state and local taxes. The audit findings, some of which are still being disputed, represented just a small portion of that, a mining industry representative said.
“We’re committed to paying what the law requires,” said Tim Crowley, president of the Nevada Mining Association. “There’s no harm in the audits. We always participate in the audit process.”
Crowley noted that some past state audits found that mining companies overpaid their taxes and were due refunds from the state.
The three companies plan to dispute some of the findings, extending a continuing disagreement over what can legally be deducted from the net proceeds tax.
According to the audits, Eagle Picher underpaid $4 million, Barrick underpaid $2.5 million and Ormat underpaid $2.2 million.
Nevada assesses a 5 percent property tax on minerals — called the net proceeds tax. Mining companies are allowed to deduct the cost of extracting and processing the mineral. Lawmakers, regulators and mining officials regularly argue over what constitutes an extraction or processing expense.
Lawmakers last year eliminated some of the deductions that mining companies could take, though those changes did not apply to the most recent audits.
Barrick and Newmont are the two largest companies operating in Nevada, mining 90 percent of the gold in the state. A Department of Taxation schedule shows that audits on Newmont mines began in March.
Lawmakers and activists alike have eyed mining’s booming profits as state coffers have struggled under the recession. In the last legislative session, Senate Majority Leader Steven Horsford, D-North Las Vegas, led the charge to increase the scrutiny on the mining industry after discovering companies had been routinely taking tax deductions not allowed under state law.
He pushed for the creation of the Nevada Mining Oversight and Accountability Commission, which reviewed the audit findings last week.
Horsford did not attend Thursday’s meeting and declined to comment on the audits.
Progressives also believe Nevada’s net proceeds on minerals tax is too low for an extractive industry. They are pushing legislation that would lead to the net proceeds on minerals tax being stripped from the Nevada Constitution, freeing lawmakers to impose a higher tax rate if they wish.
This story has been edited from its original version.
Considering no one was checking...
and they were basically 'on their honor',
this is SHOCKING, I tell you...
SHOCKING NEWS!!!
I have long said that the mining industry, reaping windfall profits (the cost to extract was the same at $200/ounce as it is at $1,700/ounce). But the mining companies just invented additional costs in a WEAK attempt to cheat the state. Time to do away with this net proceeds tax, and make it a flat rate based on production and reserves. The 9.3% that the Casinos pay in taxes to the state would be a good starting rate.
What the state needs are about twenty ex IRS agents who are skilled in doing fraud audits. The State of Nevada could extract 20 million dollars in additional taxes from these mining companies. They are fooling no one and they know it.
So the Mining firms are barely paying 3% in taxes to rip Nevada s resources?
3rd world dictators get better deals than that for their soil, what fools we are to let the miners do us like this...
This is actually the corporate culture throughout America. Cry poor when the tax man visits, but then paints a rosy picture for Wall Street. The truth is somewhere in between.
I don't expect anything to change in Nevada as Gov. Sandoval's largest campaign contributions came from mining.
5% after deductions???? They should be paying at least what we have to pay in sales tax.
Well if we'd stop dumping every last dollar into K-12 and FUND THE AGENCIES so the Dept. of Tax COULD administer the tax laws.... You have no laws if you refuse to enforce them--would require regulators (auditors, collectors, appeals officers) willing to apply the law across the field WITHOUT favoritism for political contributors.
There is a simple way to cure this. Tax them like they do the casino's. Percentage of Gross gaming income, not on the net. Much harder to play with the books that way and does not require extensive audits.
Saves a ton of money and levels the playing field.
The State of Nevada has missed and is missing huge amounts of sales and use tax revenue due to its lack of audit policy. Numerous companies from out of state ship building materials into our state and pay no tax. These companies drive the local suppliers out of business while providing nothing to Nevada. The state of California has a fierce audit program that enforces laws and penalizes scofflaws.
Nevada should do the same. These programs pay for themselves.
You know it's bad when Nevada could learn something useful from Sarah Palin.
Palin is no brainiac and those of us on the left are her biggest critics but at least she had the basic common sense to make sure Exxon, BP and the other oil giants paid their fair share in taxes to Alaska.
Nevadans should be ashamed of themselves for allowing this state sanctioned robbery to continue.
I love to watch die hard liberals twitch. If somebody threw a dollar on the ground they would pounce on it faster than LastThroes would defend Obamarama.
Change the law about mining taxes. Period. End of the twitching and frothing....or is it.... where were the greedy liberals when mining was barely hanging on...oh, that cat don't dance. BTW, the process for raising taxes is lengthy and not very probable.
Once again I will give you an easy solution to all the money problems facing our lovely State.... Yucca Mtn.
You can tax the incoming shipments and as an added bonus you can tax the storage, which is, forever.
Yucca Mountain will provide jobs and $$$$$ something Nevada desperately needs. Get over the imbecilic knee-jerk reactions and really look at the science.
I can't figure out for the life of me how the Liberals can totally believe in Global Warming and how SCIENCE can reverse it but when it comes to hauling radioactive waste SCIENCE stops at the borders. Pathologically bizarre.
$8 million missed out $300 million in taxes? Budget dust. This isn't a real story. Move along.
what a surprise--more corporations that pay almost nothing, and still cheat on their taxes---im shocked! the gaming and mining industry rape this state and the population year after year with the cheapest operating expenses in the world--we are the third world now....and the citizens and employees get less and less pay and benefits from these traitorous corporations with their elitist executives.
that trickle down theory is really working well for the lower and middle class!!!! (NOT)
Heretic: "I can't figure out for the life of me how the Liberals can totally believe in Global Warming ..."
Colorado Springs CO has more far-right conservatives than almost anywhere in America.
I'm guessing, after many of those diehard global warming deniers in Colo Springs watch their beautiful homes burn to a crisp, will start to reconsider the extensive scientific evidence showing the earth is undergoing extreme climate change.
I don't wish that kind of hell on earth for anyone but Nature has a way of forcing humans, even the most idiotic among us, to wake up and smell the hot coffee.
LastThroes, copy the entire sentence next time...
The rebuff was for liberals who believe in science for global warming but not Yucca....I can write in crayon next time if it helps.
Side note, I was in UT last week at their Wildfires and I'm in CO now....Hell on Earth.
Enjoy your 4th of July before some idiot with fireworks burns your place down.
Can't wait for the public employee's unions to start screaming MINE! MINE! MINE!
Led by clark county FF's since they are "struggling" on $175k average annual compensation.
Considering that mining PRE-PAYS taxes at the request of the State so Nevada can balance the budget, this minuscule amount is very heartening. Chairman Restrepo's comments--strangely at the end of the story--that these kind of things are within the normal scope of business and there are no red flags, could easily have been the lead in this story.
The Cortez Hills Mine, owned by Barrick, produced 336,000 ounces of gold in the 1st quarter of 2011. That's over 11 TONS of gold at a cost of less than $250 per ounce. Assuming that rate stays the same in a year the mine will produce over 1,338,000 ounces of gold or over 44 TONS of gold. Assuming a modest profit of $1000 per ounce, that means a profit on the gold of $1,338,000,000. Based on current rates, Nevada will likely see about 50,000,000 in tax revenue. Of course mining pays it's fair share. NOT !!!!!
@tanker....and who's "fair share" chart are you using....yours?
I'm all for the fair share concept, how about let's get the 47% that pay NO federal income tax to chip in their "fair share" while we are at it.
It would be a mistake to focus on this relatively small tax underpayment. The more glaring problem is is low rate of taxation, compared to other businesses, which the mining industry enjoys. I would expect other businesses and taxpayers to be outraged at the disparity, which places the burden of supporting state services on everyone else.
If they failed to pay it's time to
Gibbons now works for a mining company
http://finance.yahoo.com/news/Former-Nev...
Sandoval should resign, he is a poor leader who does not hold his mining masters accountable. SHAME!
I am Ok with upping the mining and casino tax and other taxes only if there are major adjustments on how government unions work in Nevada.
Arbitration should be replaced.
They should only be able to negotiate raises within a certain range and not negotiate work rules.
Government union employees should be required to put more into PERS.
If more money is dumped into k-12 then it should go into a school voucher program so that if a family picks the government school then the government local school will get the money and the principal of the school will get to choose how to spend it. If the family opts of government school then the family gets the money to spend on their child's education anyway they see fit.
As for this, "more glaring problem is the low rate of taxation, compared to other businesses, which the mining industry enjoys"
Mining companies like casinos pay exactly the same rates of taxation and taxes as other Nevada businesses plus they pay ADDITIONAL special taxes like the mining tax or gaming tax on top of the regular business taxes.
Nevada is for sale, and not necessarily the highest bidder wins.
What a state! Or is it a State?
This state would be able to properly educate its children if the mining and casino businesses paid anywhere near the tax rate that they pay in other states. In fact, it would be rolling in dough!
Federal income taxes and state taxes are two different animals. This article is ONLY about Nevada taxes.
The other point to be remembered is that NO business in Nevada pays a tax on profits made in Nevada. Wal-Mart, Costco, the banks, supermarkets pay no tax on profits generated in Nevada. They use the services of the state but only pay a 1.66% payroll tax.
vegasbike: Sales tax auditors do audit and assess tax and interest (why no penalties?) on those consumers who import from out of state BUT the Department is so UNDERFUNDED that many do get away with it. Legislators / Governors have listened to the endless hammer for K-12 funding (over funding with no results) and cut the budgets biennium after biennium on all other Departments so the State is not enforcing the most basic laws and regulations. Unfortunately, we're going to have to wait for the feds to allow uniform taxing including internet businesses that ship products into Nevada without having the nexus or brick-and-mortar storefront on our soil. Sure the law says you owe Use tax if you didn't pay Nevada Sales tax but the administrative impossibilities of enforcing that mean we go without the revenue. And then there are the complexities of service labor being exempt--tell me the difference between service labor and installation and/or direct labor? See, that's why another administrative ruling limits the amount of revenue and increases audits, appeals, disagreements about what is taxable. So let's try to get the Sales Tax FLATTER--applying to more things perhaps at a lower rate or keep the rate the increase revenue--apply tax to ALL charges involved when there is a sale of an item--no exempting portions of labor, fees.... And enact statutes, regulations and decisions that support the general concept that the whole thing is taxable unless there is a specific and clear exemption in the law. Ditto that for service labor such as personal care such as grooming--those who can afford a $500 haircut can afford the tax. Those who spend $20 for a haircut won't pay much. And TOURISTS do a lot of that grooming, spa care....