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Home > Featured > Three mining tax cap resolutions exempted from first legislative deadline

Three mining tax cap resolutions exempted from first legislative deadline

By Jeri Chadwell
Published: Last Updated on

Three measures that would change the mining industry’s constitutional tax caps received exemptions to keep them from dying when the Nevada Legislature had its first legislative deadline on April 9. That’s the date when pieces of legislation needed to pass out of the initial committees to which they were referred to remain under consideration.

The three resolutions were introduced and passed in summer 2020 during the 32nd special session. If any of them pass again during this legislative session, they will appear on the 2022 ballot for voters to decide. However, since being introduced in the early days of the current session, none of them have been taken up by the committees to which they were referred.

The provisions of the resolutions differ in some ways, but all three were contentious during the special session. Now termed-out Republican Senator Joseph Hardy broke party lines to vote in favor of one of them, and four Clark County Democrats voted alongside their Republican colleagues in opposition to another.

The three measures

Assembly Speaker Jason Frierson called Assembly Joint Resolution 2 “an olive branch” extended to the mining industry. AJR 2 would increase the existing cap on net proceeds of minerals extracted in the state from 5% to 12%. It would allow the Legislature to change tax percentages mining operations pay and would also set a minimum tax rate within the Nevada Constitution. 

As is currently the case with tax revenue raised from mining, revenue raised by AJR 2 would be split between the counties where the minerals are extracted and Nevada’s general fund. However, rather than continuing the roughly 50-50 split between counties and the state, AJR 2 would keep county revenues near their current rates while increasing more than three-fold the amount of money funneled into the general fund.

Frierson said during the special session that while it was not written into the language of AJR 2, lawmakers had agreed to introduce companion legislation during the 2021 session to ensure that only mining operations with gross proceeds in excess of $20 million would pay the 12% rate.

That would amount to fewer than 10% of mines in the state. Thus far, such companion legislation has not been introduced.

“People have to understand that with just a little overreach you will kill some of these rural communities.”

The other two measures—Assembly Joint Resolution 1 and Senate Joint Resolution 1—would change mining tax rates from net to gross and increase them to 7.75% of proceeds. There are differences in how the funds raised by them would be allocated, but—unlike AJR 2—both would eliminate the tax share received by counties.

Under SJR 1, the proceeds from the tax would be divied up, 50% to be used “exclusively to fund a program to make payments to eligible persons domiciled in this State.” The use of the remaining 50% of the tax proceeds would not be restricted by the provisions of the Nevada Constitution.

AJR 1 would see 25% of the proceeds of the tax spent on education. The use of the other 75% would not be written into the state constitution.

Using 2019 net-proceed figures from Nevada mines, Legislative Counsel Bureau staff said during the special session that the tax structure outlined in AJR 2 would have resulted in more than double the tax revenues, $260 million versus the $113 million that was collected. On the other hand, the tax structure laid out in both AJR 1 and SJR 1 would raise much more money. Either of these resolutions would have resulted in around $600 million in taxes.

Negotiations continue

Exempting the three resolutions from the deadline to pass out of committee suggests lawmakers may intend to use their support or opposition of them as a bargaining chip to advance their respective agendas on other legislation later in the session. However, it seems more likely that negotiations are underway that could scrap all three resolutions in favor of a different compromise.

Flip flops at the Nevada Legislature. Image:Lucia Starbuck
Mining tax bills were contentious during the 31st Legislative Special Session in July 2020. Democrats placed flip flops outside Sen. Keith Pickard’s office door after he said he’d support a mining tax bill, then flipped his vote. Image: Lucia Starbuck / This Is Reno

Assembly member John Ellison and Senator Pete Goicoechea each represent several of Nevada’s more rural counties—including Elko County, which is home to some of the state’s largest and most profitable mining operations for gold. Both said they’re hoping that negotiations between mining industry representatives and the state’s Democratic leadership will result in the death of the resolutions.

“The majority party is controlling [the legislature], and what they’re going to do with those three resolutions. … I know mining is negotiating with leadership—on both sides, I assume—and probably mostly with the governor to see if they can find some middle ground to avoid any of those resolutions going to the ballot, and … I think that probably will happen. I don’t know what the price tag will be,” Goicoechea said.

“We’re hoping that they did come up with a plan that’s going to work for the mining companies, but it seems like every day there’s another issue that’s popping up,” Ellison said. “We’ve just got to be careful because, you know, mining is in every county in the state of Nevada. One way or another, there’s mining in every county.”

Goicoechea said if any of the three resolutions were to move forward, AJR 2 would be the most favorable. He said he’s concerned, nonetheless, especially for new mining companies still in the exploration phase and base metal mining operations, like copper mines, whose profit margins are not as high as gold mines.

He added that taxing even gold mines’ profits can be tricky given the volatility of pricing for the mineral. While the price of gold is currently near $1,800 per ounce, as recently as 2000 it bottomed out at less than $400.

He said he’s hoping that when the legislature begins to open up to the public and lobbyists, more conversations about a potential compromise will be possible.

“People have to understand that with just a little overreach you will kill some of these rural communities,” Goicoechea said.

This Is Reno also reached out to Senate Majority Leader Nicole Cannizzaro and Assembly Speaker Jason Frierson but did not hear back from either prior to publication.

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