Las Vegas Sun

March 29, 2024

SUN EDITORIAL:

A failure of oversight

State hasn’t had anyone trained to audit billions in mining tax deductions

During a hearing in the Legislature last week, lawmakers heard a disturbing admission from Dino DiCianno, head of the state’s Taxation Department: The department hasn’t been auditing the lucrative deductions that mining companies claim.

As the Las Vegas Sun’s Anjeanette Damon reported, the Senate Revenue Committee sat stunned for a moment after DiCianno’s comment. Senate Majority Leader Steven Horsford, D-North Las Vegas, asked DiCianno if he had told Gov. Brian Sandoval that.

“Ahhh … that’s my fault,” DiCianno answered. “Maybe I should have.”

DiCianno said the department does a basic review of companies’ deductions to make sure the numbers add up, but it hasn’t had anyone trained to do a full audit in at least two years. Lawmakers were told that mining companies are essentially on the honor system.

Seriously?

The news created a political shock wave in Carson City, and the next day, Sandoval announced that DiCianno had resigned. The governor named Chris Nielsen, DiCianno’s deputy, as the acting department head, ordering him to come up with plans to start auditing mining deductions. He also called an emergency meeting of the state Tax Commission to investigate. Horsford has introduced an emergency bill to commission a performance audit of the state’s Taxation Department.

There are many questions to answer. For example, it’s not clear why the Taxation Department didn’t have people trained to audit mining companies or whether the previous administration knew of the issue.

Dale Erquiaga, Sandoval’s senior adviser, said he had “no good answer” for why the governor wasn’t told of the problem and called it poor management by the “previous administration.”

But this goes beyond poor management practices. It’s negligence. The state has a budget shortfall estimated at $2.2 billion, and it could be losing out on a significant amount of money because of this.

The Nevada Constitution limits the tax on mining to 5 percent of net proceeds, but the companies are allowed to take significant deductions. According to the Taxation Department, the industry this year is projected to claim $4.2 billion in deductions.

Horsford said he appreciated DiCianno admitting the mistake but said that “changing the guard is not good enough.”

“We are being asked to cut millions from education and essential social services,” Horsford wrote on Twitter. “If our state is losing money because tax reports are being rubber-stamped we need to fix that.”

The idea that mining has been allowed to report its own tax deductions without anyone checking is ridiculous. Who else gets that kind of treatment? It’s not as if businesses that submit sales taxes to the state get to pay on the honor system. The state doesn’t take car owners’ word that they’ve paid their full vehicle taxes. So why does mining get a pass?

The governor and Legislature are taking appropriate steps to examine the situation, and they should press on in their investigations. The state should know why this was allowed to happen and there should be concrete steps to make sure it doesn’t happen again.

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