Who authorized this?

Thursday, April 21, 2011 | 2:05 a.m.

The Nevada Constitution caps taxes on mining operations, and companies are allowed to take deductions to further reduce their bills. But the industry’s favorable tax position doesn’t end there.

As lawmakers have recently learned, the Nevada Tax Commission, which sets regulation and oversees the state tax department, has given the industry extra breaks beyond what the law specifically authorizes. That comes on top of the news that the tax department went at least two years without anyone trained to audit mining companies’ deductions.

On Monday, Senate Majority Leader Steven Horsford, D-North Las Vegas, petitioned the Tax Commission to review regulations on the mining industry’s deductions and to pass emergency rules to close some of the deductions the industry is allowed to take.

“I am asking you to put a stop to the loss of revenue by putting the regulations back to where they need to be, in line with state law,” Horsford said.

As Anjeanette Damon reported, the commission agreed to review the regulations, saying it was unclear whether they conflict with state law, but it declined to take immediate action, fearing a lawsuit for changing the rules.

One commissioner said the Legislature should change the law to make it more clear. Horsford said lawmakers may take up the issue, but he rightly pointed the commission back to its role. He said in the past the commission had overruled the “objections of the state tax department and the attorney general’s office” to approve some of the deductions.

The law allows mining companies to deduct expenses directly related to extracting and processing minerals. The Tax Commission has taken a broad view of that, writing regulations with deductions that are not specified in state law and allowing deductions that are not spelled out in either the law or its regulations.

In a letter to the tax department, Nevada Mining Association President Tim Crowley said the industry has been allowed to deduct costs for employee housing, fees to an industry group, travel and employee severance. Crowley said those deductions were worthy of reconsideration.

Indeed. It’s a real stretch to say those are directly related to the cost of mining, and the Tax Commission should quickly move to tighten its regulations to conform with the law.

This situation is troubling and raises larger issues about how the Tax Commission operates. If the commission has been creating deductions, it is far overstepping its bounds — the Legislature writes tax law, not the commission.

The commission should provide taxpayers with assurance that taxes are being handled fairly, and that’s not the case if one industry is getting special deductions. Of course, the commission, which has a track record of favoring business, may be giving unauthorized deductions to other industries as well. It wasn’t all that long ago that the commission was giving out huge tax breaks to businesses — behind closed doors.

The unauthorized deductions can’t continue, especially considering that in this budget crisis, they could be depriving the state of revenue. Gov. Brian Sandoval should make cleaning up this mess a priority. He has ordered an investigation into the state tax department. Now, he should order an investigation into the Tax Commission’s work. The public should know how this happened and how the administration will prevent it from happening again.