Nev. Bill To Cut Mining Tax Deductions Fails To Pass Senate

By Daniel Tay
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Law360 (July 17, 2020, 1:47 PM EDT) -- A Nevada bill to limit deductions mining companies can use to reduce their taxable net proceeds from extracting minerals failed to garner enough support in the Senate to pass during a session called to address the coronavirus pandemic's economic impacts.

A.B. 4 received a 13-8 vote in the state Senate on Thursday, one vote short of the two-thirds supermajority needed to pass a bill that increases state revenue. The vote was along party lines, with all Democrats voting for the bill and all Republicans voting against it.

The bill would have restricted the amount of deductions that mining companies can take against the gross proceeds from mining minerals in the state, which would have increased the amount of tax that the state would have collected on net proceeds.

Under the bill, mining companies would only have been allowed to take 60% of the deductions currently allowed under state statute for taxes due for the calendar year 2020 and each following calendar year. According to an analysis of the bill by the Fiscal Analysis Division of the state Legislative Counsel Bureau, the change would have resulted in an additional estimated $54.6 million in revenue to the state general fund in fiscal year 2021.

Under Nevada law, the state's taxation of net proceeds is based on actual net proceeds from the preceding calendar year. This means that under A.B. 4, companies paying tax in fiscal year 2021, based on the net proceeds of minerals for calendar year 2020, would only have been able to take 60% of the deductions.

The bill was introduced by the Assembly Committee of the Whole on Thursday. The bill passed the Assembly by a 29-13 vote along party lines the same day before falling short in the Senate.

The pandemic's effect on the state economy is expected to contribute to a $1.2 billion general fund shortfall in fiscal year 2021, according to projections by the Legislative Counsel Bureau and the Governor's Finance Office. Democratic Gov. Steve Sisolak called a special session, which began July 8, to address the shortfall and the pandemic's economic impacts.

Activist groups have asserted that the structure of Nevada's net proceeds of minerals tax is unfair and does not require the mining industry to pay its fair share. Another bill, S.B. 3, which would require taxpayers to temporarily pay the state's tax on net proceeds of minerals in advance, was opposed by Acting in Community Together in Organizing Northern Nevada, or ACTIONN, for that reason.

The executive director of ACTIONN, J.D. Klippenstein, speaking about S.B. 3, told Law360 removing statutory deductions was an important step in meaningfully addressing the state's fiscal situation. Klippenstein did not immediately respond to requests for comment about A.B. 4.

Party leadership in both chambers did not respond to requests for comment.

--Editing by Vincent Sherry. 

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