Nevada Mining Tax - Proposed Changes

Nevada, as in the case of many other states, faces a serious budget deficit. Historically, Nevada's tax revenue has been generated primarily from the gambling-based tourist industry. This monetary flow has suffered as a result of the weakened economy. To provide state residents with adequate services additional revenue is being sought from other sources. The main target for these efforts appears to be the State's mining industry.

In comparison to other states and provinces of Canada, the mining industry in Nevada has had it pretty good for the past few years. it has been estimated that between 2000 and 2007 Nevada mines extracted and sold $25.5 billion in product value, paying only $125.3 million (just less than 0.5%) in state taxes.This situation can be attributed to generous write-off provisions, whereby taxes were paid on only 21% of the value of the production. Almost one-half of the producing mines reported no taxable proceeds.

In accordance with the Nevada Constitution, the tax rate cannot exceed 5% of net proceeds. However, if many of the present allowable deductions were disallowed, it would raise millions. In this regar, a lower Court has allowed the Progressive Leadership of Nevada (PLAN)to propose a ballot initiative to reword the Consitution limit on taxes to 'not more than 5% of gross revenue' rather than net proceeds. This has been challenged by the Nevada Mining Association (NMA), who argue that this represents a 300% tax increase for the industry. NMA has succceeded in having the First District Judicial Court require PLAN to change the wording of their 2010 ballot, and obtain 97,000 signatures in support by June 15, 2010.

On another front, the Nevada Legislature put through a $25.7 one-time claims tax. This new tax is structured in accordance with the number of claims held. Owners of ten or fewer claims pay no additional tax. Owneres of ten to 200 claims pay $70 per claim, 200 to 1,300 claims pay $85 per claim, and those with more than 1,300 claims pay $195 per claim. This tax format is supported by the major producing mines. Non-producing exploration companies are in opposition.

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