ELKO — Assembly Minority Floor Leader Pete Goicoechea, R-Eureka, said Tuesday “it looks like it’s been seven or eight years” since the Nevada Department of Taxation did field audits of Nevada mines that pay net proceeds taxes.
“They were just doing desk audits,” he said, but Goicoechea also said the field audits probably won’t find that the mining companies did anything illegal because the companies have “the best audit teams in the world.”
The Nevada Tax Commission met Monday to talk about the discovery that there hadn’t been any field audits in recent years, and Sen. Steven Horsford, D-Las Vegas, said at that meeting there are apparent discrepancies regarding deductions allowed by state law and those allowed under regulations.
Gov. Brian Sandoval called for the meeting after the audit issues came to light, and Nevada Mining Association President Tim Crowley said last week the industry welcomes the review.
“We have to see how the numbers come out,” Goicoechea said.
Mines pay a 5 percent net proceeds tax that is set by the state constitution, and any proposed bills to raise mining taxes will come up against the constitution, he said.
Goicoechea said there is no question mining is a target in the current legislative session, but he doesn’t expect any new tax hikes on the industry.
“I don’t think that will happen in this session, and the governor is adamant about new taxes,” he said in a telephone interview.
“Mining is clearly one of the most profitable industries out there today,” he said, but he added that while gold is in the $1,400-an-ounce range, costs for extraction are up.
Goicoechea, who was an Eureka County commissioner before election to the Assembly, lives in one of the counties that benefits the most from the gold mines in northeastern Nevada. He said when gold prices were down as low as $250 an ounce, “the state wasn’t there to help us.”
The London afternoon fix gold price hit a low of $255.95 per ounce in April 2001. The spot price closed on Tuesday on the New York Mercantile Exchange at $1,427.67 per ounce, up $1.47.
The higher gold prices are increasing the net proceeds taxes. The industry paid nearly $91.9 million in net proceeds of mines taxes in 2008, according to the Nevada Mining Association’s Economic Overview, and the industry is continuing to prepay taxes at the state’s request.
Barrick Gold of North America reported earlier this month that Barrick alone made a prepayment of $101 million in net proceeds taxes to the state based in estimated 2011 operating results at its Nevada mines.
The $101 million is up from $88 million paid in 2010 net proceeds taxes.
Bob Fulkerson of the Progressive Leadership Alliance of Nevada stated in an article published in the Las Vegas Review-Journal earlier this week that Assemblywoman Peggy Pierce, D-Las Vegas, would be proposing a bill to cap the percentage of deductions the mining industry can take for the net proceeds tax.
He also called for the Legislature to put a question on the 2012 ballot to remove mining’s tax protections from the state constitution.
State law allows mines to take deductions for extraction costs, transportation, refining, marketing, maintenance, insurance, depreciation and royalties, but The Associated Press reported Monday that regulatory changes allow for deductions for reclamation costs, employee transportation to mines, housing, pensions and retirement costs and World Gold Council dues.
Assemblyman John Ellison, R-Elko, said Monday he is keeping an eye out for bills that would impact the mining industry, including ones Pierce may have introduced.
Goicoechea said lawmakers introduced more than 250 bills on Monday, the final day for introduction, and it will take time to look at them.