Mining trade group sues Nevada tax initiative

Nevada's mining industry, being eyed as a source of more revenue to help the state fix a budget deficit of nearly $1 billion, has filed a lawsuit to block a petition asking voters to raise taxes on mining.

The Nevada Mining Association, in its suit filed Tuesday in state District Court in Carson City, argues the initiative proposed by a coalition of conservationists and social activists is unconstitutional and violates a state law limiting initiatives to a single subject.

No court hearings have been scheduled.

The Progressive Leadership Alliance of Nevada's initiative would amend the state constitution to require that mining companies pay tax of at least 5 percent of their gross proceeds. The current tax is capped at 5 percent of net proceeds after most expenses are deducted.

Gov. Jim Gibbons has been eyeing the mining industry, too, to help Nevada out of its fiscal crisis. Agency heads have been forced to consider rationing incontinence supplies for Medicaid recipients, closing prisons, shutting down college campuses and laying off thousands of teachers.

Gibbons, a staunch supporter of no new taxes, isn't seeking new taxes from the industry, but last week praised it for "stepping up to the plate" as it considers prepaying at least some taxes to help fill Nevada's budget hole.

Gibbons' deputy chief of staff, Lynn Hettrick, said Wednesday that there were no developments in those discussions. "From our standpoint, the ball is in their court," he said.

Backers of the initiative say if it had been in place in 2008, the mining industry would have paid about $284 million in taxes to state and county governments on $5.7 billion worth of mineral production. That's more than triple what they paid.

In an affidavit filed with the suit, Mining Association President Tim Crowley noted that the industry also pays other taxes, including sales, property and businesses taxes, that amounted to $132 million in 2008.

The existing tax structure, on the books since 1865, "is not, and never has been, an income tax on the market price of gold or silver," the suit said. "It reflects the simple truth that mineral property must be located, extracted, refined and processed; it is not just lying around the valleys of Nevada waiting to be picked up by passers-by."

Nevada is the fourth largest gold producer in the world, behind South Africa, Australia and China, and gold prices have been trading above $1,000 an ounce. The industry argues to tax them based on the trading price would be unfair because it doesn't take into account their expenses to find it, mine it and process it.

Bob Fulkerson, PLAN's executive director, said the suit "demonstrates that foreign gold corporations will hide behind their well-heeled lawyers, use bullying tactics, and do whatever else it takes to avoid paying their fair share of revenues."

The mining association also argues that the petition would not only apply to gold mining, but geothermal energy producers as well.

"The petition's effect would be to ignore investment in and costs of the processes necessary to utilize geothermal energy, and would tax producers on gross proceeds of income from energy sales," the suit says.