6-10-11 Elko Daily Free Press

Changes in mining deductions will give state extra $24 million

ELKO — The Nevada Mining Association went along with the Legislature when lawmakers approved changes in deductions for the net proceeds of minerals tax but didn't agree on all of them, association President Tim Crowley said Wednesday.

"In the end, we realized the state needed to raise more money, and we ultimately didn't try to stand in the way of that bill's passage," he said.

With the high price of gold, the mining industry was a target of lawmakers hoping to find more revenue for the state, and the industry was willing to "do our part but in a way that made good policy sense," Crowley said as he headed to Elko for the Mining Expo to be held today and Friday at the Elko Convention Center.

"We understand that the economy is in the worst shape it's been in certainly in my lifetime, and that creates a lot of tension," he said.

Crowley said the mining association will continue to try to get the message across that the industry is willing to do its part but also to show what the industry already does for the state.

"Yes, we're concerned about some issues going into the future. The economy is getting better but we're not likely to see the record growth we saw over the past 20 years," Crowley said.

The industry didn't want the deductions on health care and sales taxes but didn't have the opportunity to argue against them as the Legislature moved on the bill in the last day of the session that ended at 1:20 a.m. Tuesday, Crowley said.

The elimination of health-care benefits as a deduction is for two years, but all the other changes are permanent, he said.

As approved, SB493 will have a $24 million impact per year on the mining industry and result in $24 million in revenue to the state per biennium and $24 million to counties where mines are located during the same two-year period. The state and county share the net proceeds 50-50.

The bill doesn't allow deductions for lobbying, employee housing, severance pay, mineral exploration, trade association dues, sales taxes and federal taxes but does allow deductions for costs associated with direct mining activities in the state. This includes employee travel within the state, reclamation costs and Nevada-based corporate services.

Oversight commission

Along with the list of what mines can deduct and what they can't deduct, the bill establishes an oversight commission that will receive updates from several agencies on mining-related issues.

"We're fine with that part," Crowley said.

"The Legislature wanted a one-stop shop for all things mining," said Nevada Division of Minerals Administrator Alan Coyner. He said his agency will be among those reporting to the new commission that Gov. Brian Sandoval will appoint.

"We're happy to provide what information we can," he said Wednesday.

The bill also includes provisions for how exploration and mining companies are to be paid back if they paid the one-time fee for mining claims that the Carson City District Court recently ruled unconstitutional.

The bill states that those who paid can apply to the Nevada Department of Taxation for a refund or a credit toward liabilities with the department.

The court ruled against the one-time fee that the Legislature passed in a special session last year and is now expired. This fee was due on June 1.

Claremont Mining filed a lawsuit in Elko District Court that also maintained the fee was unconstitutional, and it was joined to the Carson City action.

Coyner said the one-time fee was separate from the $8.50 per-claim fee individuals and companies pay to the minerals division and the University of Nevada, Reno Mackay School of Mines. The $8.50 fee continues.

"Our fee is due Nov. 1," Coyner said.

Claim holders also have to pay a $140 maintenance fee for each claim to the U.S. Bureau of Land Management by Sept. 1 of each year.

Changing law

Another measure aimed at the mining industry, SJ15, also made it through the Legislature to remove the net proceeds tax that currently is limited to 5 percent, and Crowley said this is still confusing. The Legislature still has to pass the measure again, and then it goes to a vote of the people.

The people of Nevada are the ones who approved the 5 percent cap in the first place, in 1989, and Crowley said even if the net proceeds is removed, there is still a constitutional cap of 5 percent on property taxes.

The Legislature could come back with a new tax on the mining industry should voters approve the change, however, Crowley said.

Division stays same

Another mining-related effort in the Legislature failed to get out of committee. This was the proposal to consolidate the Nevada Commission on Mineral Resources and Division of Minerals into the Nevada Department of Conservation and Natural Resources.

"Of course, we're pleased the division will remain an independent agency under the governor," Coyner said.

The commission opposed the consolidation because the change wouldn't save money, could cause conflicts because the division is a pro-industry advocate, and there weren't any synergies.

Coyner said the proposal died in action on his division budget.

A bill that takes away the mining industry's right to use eminent domain also passed, but Crowley had said earlier the industry wasn't too concerned since it rarely used eminent domain. The issue came up when Fronteer Gold threatened to use the right to buy the Big Springs Ranch in Elko County.

The ranch is adjacent to the Long Canyon Project Fronteer was developing. Newmont Mining Corp. bought Fronteer earlier this year.