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5 auditors reviewing Nevada mines

SANDRA CHEREB
Associated Press

Five auditors are conducting tax reviews of Nevada mining companies – starting with the biggest ones – under a new law that calls for greater state oversight of the industry, a state panel was told Tuesday.

At the inaugural meeting of the Nevada Mining Oversight and Accountability Commission, taxation officials said the first wave of audits is focusing on the state’s largest operator, Toronto-based Barrick Gold Corp.

The company has seven mining operations in Nevada, and each mine is being audited. Results of those field audits are expected by mid-2012.

Chris Nielsen, deputy director of the Nevada Department of Taxation, said the agency has notified every mine operator in the state to expect a field audit in the coming months. Newmont Mining Corp., based in Denver, is the state’s second-largest operator and will be next for the audit.

SB493 was passed by the Legislature after the state’s former tax chief said the agency hadn’t conducted field audits of mining operators for at least two years and lacked trained staff to do so.

Besides creating the oversight commission to coordinate mining regulation, including environmental and work safety aspects, the law repealed fees and deductions that mining companies can deduct from taxes paid on minerals. Nevada’s constitution limits taxes that mines pay on minerals to 5 percent of net proceeds – an amount calculated after extraction and other business costs are factored.

That protection has been in place since Nevada gained statehood in 1864. But the industry came under renewed scrutiny during this year’s legislative session as gold prices soared and state coffers collapsed under the crush of the Great Recession.

Nielsen said the tax department, after a paper review of operators this year, disallowed about $74 million in deductions, amounting to about $4 million in added revenue collections.

State Sen. Steven Horsford, D-Las Vegas, a candidate for Nevada’s 4th Congressional District, said he was concerned whether all the audits can be completed on time, given that state law provides a statute of limitations of three years to claim back taxes. Horsford also serves on the oversight commission.

But Nielsen said once the initial audits are completed, the process should be shorter and will be conducted on a regular basis every three years.

Bob Fulkerson, executive director of the Progressive Leadership Alliance of Nevada, urged the appointed commission to inventory the cumulative effects of the industry on the state, including toxic releases and cleanup efforts.

PLAN has been a critic of the industry for years and has backed efforts, so far unsuccessfully, to repeal the net proceeds tax cap. Fulkerson said the commission should “make a determination about whether mining deserves to be singled out in the Nevada Constitution for special tax protections.”

Legislators this year approved a proposed constitutional amendment to repeal the cap. If SJR15 is passed again by lawmakers in 2013, it will be placed on the 2014 ballot for final voter approval.

Nevada is the largest gold producer in the United States, accounting for 72 percent of the nation’s gold production in 2010.