Joint resolutions would more than quintuple state taxes on mining in Nevada

Some rural counties stand to lose significant revenue

Kinross Gold operates the Round Mountain mine in Nye County, Nevada. The mine grossed $502,191,697.42 in 2019 and deducted $374,040,732.00 from the gross proceeds to pay $6,407,548.27 in net proceeds tax. $4,472,468.69 went to Nye County. $1,935,079.58 went to the State’s General Fund. Some Nevada mines deduct enough in operating expenses to pay no tax – photo: Uncle Kick-Kick, licensed under CC BY-SA 2.0

The way mines are taxed in Nevada is enshrined in the State Constitution, and the Constitution is not easily revised, but any one of 3 joint resolutions passed during last summer’s second special session of the Nevada Legislature could ultimately change the way and rate at which mines are taxed in Nevada.

One of the three resolutions would need to pass the current session of the Legislature and then win a popular vote in the 2022 elections to change the Constitution.

Nevada Governor Steve Sisolak called the second special session of the Legislature last summer to address police reform, mail-in voting, COVID-19 liability protection for businesses, and other matters related to the novel coronavirus pandemic. During deliberations over the mining taxation reform resolutions, Republican lawmakers in the Senate and Assembly complained that raising mining taxes is not related to the pandemic.

The Dire Need to Raise Revenue

Governor Sisolak convened the first special session of the Legislature in July of 2020 to revise state spending to close a $1.2 billion hole in the 2021 state budget. Without new sources of revenue, lawmakers made deep funding cuts to schools and health and human services. Medicaid matching funds were cut. Before the pandemic, Nevada’s public schools were among the worst-funded and poorest-performing in the nation.

The price of gold has risen over the past year.

The price of gold is cyclical. During the pandemic, demand for physical gold has driven the trading market price of the precious metal to more than $1,800.00 an ounce or $58,000 a kilo. Gold mines continued to operate during the shutdown of nonessential businesses.

The effort to extract more tax revenue from Nevada’s fabled gold mines is not new. SJR15, first passed the 2011 legislative session and finally appeared on the statewide ballot in 2014 as Question 2. The initiative would have revised the Constitution to remove mining’s preferred status and the 5 percent cap on the net proceeds of minerals tax. The statewide measure failed by 3,209 votes, 50.3 percent to 49.7 percent.

We spoke with Ian Bigley, mining justice organizer for the Progressive Leadership Alliance of Nevada about the joint resolutions.

See music credits at the end of this report.

Net Proceeds on Minerals Tax

Net proceeds are determined by deducting, from the gross yield, the costs incurred mining and processing ore. The tax rate applied to the net proceeds is based on a sliding scale between 2 and 5 percent.

Typically the State and host counties roughly split net proceeds tax revenue. In Humboldt County, home to numerous gold mines, the net proceeds tax makes up nearly 20 percent of the county’s budget, the rural municipality’s largest single source of revenue. All three resolutions would eliminate mining tax payments to counties.

The Joint Resolutions

AJR1 –

If AJR1 were to revise the State Constitution as written, it would impose a tax on the gross proceeds of all minerals extracted in the state at a rate of 7.75 percent of the gross proceeds. Twenty-five percent of the monies collected must be used to fund education.

AJR2 – 

Assembly Joint Resolution 2 would retain the net proceeds tax structure and continue a limited disbursement to counties. The measure would also raise the tax rate on net proceeds to between 5 and 12 percent. The net proceeds tax is currently capped at 5 percent.

SJR1 –

Senate Joint Resolution 1 would impose an annual gross proceeds tax on all minerals, including oil and gas and other hydrocarbons extracted in the state of 7.75 percent. Fifty percent of the money collected would be distributed to state residents.

As example, some mines pay tax and others deduct enough in allowable operating expenses to pay no tax. If Nevada Gold Mines’ Turquoise Ridge operation had to pay 7.75 percent of $565,735,402.00 gross receipts in 2019, the company would have paid $43,844,493.65 in tax instead of $15,849,004.15.

The Jerrit Canyon Mine in Elko County paid zero tax in 2019, but if Kinross Gold did not have the deductions provided under the net proceeds tax and had to pay 7.75 percent of their gross, they would have owed $12,785,269.16 in tax on $164,971,215 in gross proceeds.

Barrick operates mines around the world. Shares of the company are traded on the New York and Toronto stock exchanges. The Canadian company mines a variety of minerals, and last September we spoke with Christina Erling, Director of Government Affairs North America, Barrick employs some 7,000 people in Nevada. Erling could not accurately gauge the impact of a 7.75 percent tax on gross proceeds on the company’s operations in the state, but they oppose the concept.

“Your net proceeds tax is a profit-based tax and allows for when the commodity price falls we can still fully operate,” Erling said in a phone interview with the Ally.  “That (net revenue taxation) factors in cost structure and cost increases that are out of the company’s control, whereas a gross proceeds tax is a percentage of the revenue and it applies irrespective of whether or not industry is profitable. The gross tax when the commodity prices fall – mines can be shorted because we’re forced to mine only the profitable tons until production falls. And that’s when you start looking at jobs being eliminated.”

Ken Tipton is the chair of the Humboldt County Board of Commissioners.

“I think it’s horrible,” Tipton said by phone in September of 2020. “I think it’s a rape of the rural counties by the metropolitan areas, specifically Las Vegas, Clark County. I don’t think that if they wanted to bring a bill like this, they should have been brought up in a special session. It should have been brought up in a general session. The mines are very, very important to the rural counties like Elko and Humboldt County, Lander County. I don’t know the numbers for those other counties, but I know that for Humboldt County the net proceeds is a little over 20 percent of our total revenues received. Just under 17 percent of our general fund revenues, so it’s the single largest form of revenue for the county.”

AJR1 and AJR2 have been assigned to the Assembly Committee on Revenue, and SJR1 has been referred to the Senate Committee on Revenue and Economic Development. No hearing dates have been set for any of the resolutions.

Music credits as reported to the Public Radio Exchange, in order of appearance:

Song: Riff Raff Rollin
Artist: Clutchy Hopkins
Album: Music is my Medicine
Label: Ubiquity Records
Date: 2009
Duration:1:44

Song: Turtle Rock
Artist: Clutchy Hopkins
Album: Music is my Medicine
Label: Ubiquity Records
Date: 2009
Duration: 2:06

Song: Heavy Hands
Artist: Clutchy Hopkins
Album: Music is my Medicine
Label: Ubiquity Records
Date: 2009
Duration: 2:10

Song: Giraffe Crack
Artist: Clutchy Hopkins
Album: The Storyteller
Label: Ubiquity Records
Date: 2010
Duration: 1:07

Song: 01-36-011
Artist: Clutchy Hopkins
Album: The Life of Clutchy Hopkins
Label: Crate Digler
Date: 2005
Duration: 1:12

Song: The Old Spot
Artist: Clutchy Hopkins
Album: Music is my Medicine
Label: Ubiquity Records
Date: 2009
Duration: :44


Brian Bahouth is the editor of the Sierra Nevada Ally and a career public media reporter. Support his work in the Ally.