Nevada lawmakers on the final day of the 81st Legislative Session set in motion a significant shift in tax policy toward an industry that has long been scrutinized for having a unique constitutional carveout protecting it from tax hikes.
Assembly Bill 495 was a bipartisan compromise forced by multiple proposed ballot questions aimed at some of the most politically powerful industries within the state. It was the culmination of several months of behind-the-scenes negotiations between lawmakers, mining corporations, the gaming industry and the state’s most powerful teachers union.
Assembly members Jill Tolles (R-Washoe) and Tom Roberts (R-Clark) voted with the Democrats in order to pass the bill with the two-thirds majority constitutionally required to raise taxes. The final vote was 28-14, the bare minimum needed to pass a new revenue bill.
In the Senate, the final tally was higher than it needed to be: 16-5. All Democrats supported the bill. Joining them were Republican state Sens. Ben Kieckhefer, Heidi Seevers Gansert, Keith Pickard and Scott Hammond.
AB495 would create a new excise tax on gold and silver mining companies with more than $20 million in gross revenue annually. Gross revenue between $20 million and $150 million would be taxed at 0.75% and gross revenue above $150 million would be taxed at a rate of 1.1%.
The new mining excise tax was modeled after the commerce tax, which was spearheaded by then-Gov. Brian Sandoval in 2015.
The revenue from the new excise tax would be deposited into the state general fund for the upcoming biennium, but for subsequent bienniums would be deposited into the state education fund.
AB495 would also reroute the state general fund portion of the mining industry’s existing net proceeds of minerals tax to the state education fund.
Gold and silver mining contributed $55 million to the state general fund in 2019.
Between the new excise tax and the rerouted net proceeds of minerals tax, an estimated $150 million per year, or $300 million over a biennium, could be deposited into the state education fund beginning in 2023.
Constitutional amendments, concessions and CCEA
Assembly Speaker Jason Frierson immediately after sine die just after midnight on Monday said he sees the mining tax as the highlight of the legislative session, not just because of the amount of new revenue raised but also because the funding would go directly toward education.
During a special session last summer, Democratic lawmakers passed three proposed constitutional amendments to change how mines are taxed, the plan being that they would pass one of the resolutions again, which would put the proposal before voters during the general election.
On a separate track, the Clark County Education Association, which represents approximately 18,000 licensed teachers within the Clark County School District, was coming off a win during the 2019 session — the passage of a long-awaited bill to replace the decades-old funding formula with something more modern and transparent. The union wanted to begin finding money for K12.
The union spearheaded two initiative petitions, one to raise the gaming tax, the other to raise the local schools support tax, which is a part of the overall sales tax.
John Vellardita, executive director of CCEA, openly said the petitions would be used as leverage for finding more immediate solutions.
Frierson said the state never viewed its ballot questions as leverage.
As both of those efforts met in preparation for the 2021 session, it brought many parties to the metaphorical table.
“What we did this session is a reflection of our reality today,” said Frierson.
That reality included securing bipartisan support.
As part of the mining tax compromise deal, Republicans were able to restore money to the state Opportunity Scholarships program, which was in the process of being phased out. That program gives tax credits to businesses who donate money to scholarship programs for low-income students who attend private K-12 schools.
Other concessions included the gutting of a straight-ticket voting bill, changes to the direct Medicaid reimbursements for personal care services, $1.2 million of funding for the Silver State Opportunity Grant Program, and the commissioning of a legislative report on school board governance. That report, which would be submitted before the 2023 Legislative Session, is being seen as the first step toward transitioning to a hybrid appointed-elected school board.
One of the last of the concessions from Democrats came in the form of an amendment introduced Monday to earmark $15 million for Title-1 charter schools for programming that addresses learning loss experienced as a result of the pandemic. That money is part of a $200 million pot of federal relief that Democrats had originally set aside only for school districts.
A separate bill, Senate Bill 463, introduced as an emergency measure in the final days of the session, included an appropriation of $3.8 million to hold harmless a handful of charter schools that were set to lose money because of the transition to the new pupil-centered funding formula.
The deal was contingent on CCEA withdrawing its two initiative petitions. When questions arose about the legal ability to withdraw an initiative petition, lawmakers responded by passing an amendment to Assembly Bill 321, which makes mail ballots permanent. The amendment attempts to clarify that petition filers have the ability to pull petitions, though it still is a possibility that the act might be challenged in court.
Paying its fair share
Disagreements on mining tax policy are older than the state itself.
The industry was written into the Nevada Constitution, where it has remained ever since. Nevada’s first governor, H.G. Blasdel discussed differences in opinion on mining taxes within his state of the state addresses.
“The mines are now, and must ever continue to be, the chief support and paramount interest of the State,” reads the record of the 1869 address. “Whilst it is both our interest and duty to foster (the mines) by all legitimate measures of legislation, this should not be done to the injury of other less important interests. That the mines, in common with other property, should contribute their fair portion of the public burthen, cannot be doubted.”
These days, mining is nowhere close to being a chief source of revenue for the state. It contributes just 1.4% of the state budget, and some have long argued they should pay more.
The mining industry reported $7.8 billion in actual gross proceeds in 2019, according to the state’s Net Proceeds of Minerals Bulletin. They paid $122.7 million — $57 million to the state general fund and $61.1 million to the county where the mine is located.
Gold and silver mining made up 90% of mining proceeds.
The new mining excise tax will effectively double what gold and silver companies pay to the state. One particular operation will feel the impact the most.
Nevada Gold Mines, a partnership between mining giants Barrick Gold and Newmont corporations, owns 12 of the 21 mines that reported more than $20 million in gross proceeds of minerals in 2019. It also owns seven of the 11 mines that reported more than $150 million in gross proceeds.
More than half of gross proceeds of minerals in Nevada came from just three mines owned by Nevada Gold Mines.
Gold and silver make up 90% of mining proceeds, but other types of extraction also take place throughout the state. They include copper, geothermal, gypsum and lithium.
Nevada’s one copper mine, Robinson Mine in White Pine County, reported $353 million in gross proceeds in 2019. Robinson Mine is owned by Polish multinational company KGHM Polska Miedź. The company paid $355,000 to the state general fund and $1.3 million in combined state and county taxes.
Robinson Nevada Mining Company General Manager Amanda Hilton told lawmakers on a joint finance committee on Sunday that the proposed mining tax constitutional amendments would be an “exponential tax increase” for the company.
According to Hilton, Robinson paid $2.3 million in net proceeds in 2020 but would have paid $27 million under the proposed tax structure detailed in the proposed constitutional amendments. She did not say which resolution she was referring to.
Hilton said that copper pricing is significantly different from precious metals prices and that the company could not absorb such an increase.
Tyre Gray of the Nevada Mining Association said that because the price of gold is more countercyclical to the economy than copper, gold is better suited to be a stopgap for the education budget.