Governor, lawmakers call for audit of tax department
CARSON CITY — Republican Gov. Brian Sandoval and Democratic leaders in the Legislature are all seeking audits of the state’s Taxation Department after news it has been more than two years since auditors reviewed returns from mining companies that have taken deductions worth billions of dollars.
Audit demands are coming three days after Dino DiCianno, the department’s director, retired after admitting Thursday to the Senate Revenue Committee it had been two years since the department had any auditors trained to review net proceeds of minerals payments.
"It is a bad management practice in the last administration to allow two years to go by without an audit," said Dale Erquiaga, policy adviser to Sandoval. "We want an explanation from the staff; we are going to work with them to be sure that going forward that doesn’t happen."
Erquiaga said Deputy Taxation Director Chris Nielsen, who now is leading the agency, is charged with finding out which mining operators were audited most recently, when they were audited and the results.
The governor is calling for a broader review of internal controls and practices of every agency that falls under the Taxation Department.
The only known auditing gap relates to taxes paid by mining companies.
"We are not aware of any other area of taxation collection where there is a gap like that," Erquiaga said. "If one were to be revealed in this process, we would be as vigorous there."
Meanwhile legislators are seeking their own audits.
Sens. Steven Horsford, D-Las Vegas, and Sheila Leslie, D-Reno, are seeking emergency bills calling for legislative branch auditors to conduct their own reviews of payments by mining companies and a broader look at Taxation Department procedures.
"The governor wants a quick response," Leslie said. "What we are asking for is more thorough. This isn’t going to be done before the end of the session. This will be a full legislative performance audit."
In 2009, mines reported a total of nearly $1.8 billion in net proceeds and paid nearly $97.6 million in state and county taxes.
Critics of the industry say the tax is too low and allows billions of dollars in deductions — from major capital expenses to marketing — in calculating the net.
In 2009, the gross proceeds, the value of extracted minerals before deductions, was $5.8 billion, with $5.1 billion coming from gold and silver.
Sandoval supports the audits, but he is opposed to narrowing the deductions.
"If you remove those deductions, it is essentially a tax increase," Erquiaga said.
Leslie, a critic of the mining industry, said Sandoval’s opposition makes it unlikely the Legislature will approve any bills that would reduce the amount of deductions available to mine operators.
"I think those bills are going to be very difficult," Leslie said. "He doesn’t seem very interested in that."