Nev. Will Require Mining Tax Prepayment, Create Tax Amnesty

By Daniel Tay
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Law360 (July 21, 2020, 1:39 PM EDT) -- Nevada will require prepayment of the state mining tax and establish a tax amnesty program under a bill signed by the governor that aims to help address a $1.2 billion general fund shortfall caused by the novel coronavirus pandemic.

Democratic Gov. Steve Sisolak signed S.B. 3 on Monday. Under the bill, an entity extracting minerals in the state must temporarily pay the state's tax on net proceeds of minerals in advance based on estimated net proceeds and royalties for the current calendar year. Normally, the state's taxation of net proceeds is based on actual net proceeds from the preceding calendar year, with one year's taxes being collected in the following year.

The state will also establish a tax amnesty program to allow a waiver of penalties and interest for businesses and individuals who had unpaid taxes before the program's start.

Sisolak had convened a special session to address the pandemic's impacts. The session concluded on Sunday, and Sisolak praised the Legislature's work in addressing the $1.2 billion general fund shortfall. 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.

"While all states are facing devastating impacts to their budgets as a result of the COVID-19 recession, Nevada once again finds itself hit the hardest due to an overreliance on an unbalanced revenue structure and the continued need to successfully diversify our economy beyond hospitality and tourism," Sisolak said in a statement Sunday.

The mining tax provisions are estimated to bring in $54.5 million in fiscal year 2021, and the tax amnesty program is estimated to bring in $21 million, according to Russell Guindon, a fiscal analyst with the Legislative Counsel Bureau.

Under S.B. 3, entities paying the tax on net proceeds of minerals must make estimated payments in 2023 that would otherwise be payable in 2024 under the original method. The state Department of Taxation would then be required to reduce the amount of tax due in 2024 by any estimated payments made in 2023 under the bill's provisions.

Taxpayers looking to take advantage of the amnesty program must pay their debts in full to be eligible for the waiver, according to the bill. The amnesty program will last for not more than 90 days and must end by June 30, 2021.

Besides S.B. 3, another bill, A.B. 4, was put forward during the special session to address the tax on net proceeds of minerals, which critics have asserted does not require mining companies to pay their fair share. Under A.B. 4, 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.

A.B. 4 failed to garner the two-thirds supermajority needed to pass a bill that increases state revenue, despite lawmakers attempting to pass the bill twice. According to an analysis of the bill by the Fiscal Analysis Division of the state Legislative Counsel Bureau, its provisions would have resulted in an additional estimated $54.6 million in revenue to the state general fund in fiscal year 2021.

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

--Editing by Vincent Sherry. 

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