Sides agree on revamp of mining deductions

Senate Majority Leader Steven Horsford, D-Las Vegas, and the Tax Commission Monday agreed to begin a complete review and rewrite of regulations governing mining tax deductions.

Commission Chairman Bob Barengo said Horsford's original request for an emergency regulation clamping off some of those deductions has too many complications. He said the biggest is changing the rules in the middle of the tax year when miners have already paid their net proceeds of mines taxes in advance this year.

"The problem is waiting until the next tax year for something that needs to be done now," Horsford said.

He said the state has lost "millions, if not hundreds of millions" in taxes mines should have paid.

"We need to close this loophole now so we can get every dollar to which the state is entitled," he said.

In addition, emergency regulations must be approved by the governor and only last 120 days.

Horsford petitioned the commission for immediate change after he said research showed him that miners have convinced previous tax commissions to allow many more deductions than state law permits. Those include such things as employee housing provided by the mines, costs of employee pensions, salaries for corporate executives not even located in Nevada and general corporate business expenses. Even mining association director Tim Crowley agreed in a letter to the commission such things as employee housing, exploration and corporate regional costs aren't mentioned in statute, only in regulation.

The law, Horsford said, is clear that miners can deduct only the costs of actual extraction, transportation and refining ores. He said the law limits deductions "to those defined in statute and no others."

He charged that past tax commissions had overstepped their authority in granting so many added deductions.

But commissioner John Marvel questioned why, if that's true, hasn't the Legislature brought the matter up in the more than 20 years since those deductions were put in the rules.

"We need legislative guidance in interpreting the statute," he told Horsford.

He said, however, because of the problems with changing the rules midstream this year, he would agree to begin the formal regulation process, "as long as it's done expeditiously."

Barengo said that is his intent and, at the conclusion of the two hour special meeting, said the regulatory process would start at the commission's next meeting May 16.

Since miners have already paid 2011 taxes up front - a decision by lawmakers and the governor's office designed to fill a budget shortfall - commissioners and experts in the audience said it was highly doubtful regulation changes now would generate any extra money this coming biennium.

But Horsford said after the meeting that, as requested by Marvel and other members, he would move to provide clear guidance on what deductions are permissible and which ones aren't - in clear language that can't be misinterpreted or manipulated.