State Senate Majority Leader Requests Emergency Bill To Audit Tax Department

(Updated at 2:12 p.m. on March 14, 2011 to include new comments from Sandoval Administration)

CARSON CITY – Senate Majority Leader Steven Horsford has requested emergency legislation to conduct a performance audit of the revenue collection functions of the Department of Taxation following questions last week about the thoroughness of the agency’s review of mining tax payments.

“We were told by the head of the Tax Department that they haven’t had properly trained individuals in place for two years on the net proceeds – that’s a major problem,” he said. “I am glad that the governor is going to immediately try to address that but the question then becomes what else isn’t being properly audited at a time when we have a $2.5 billion budget hole.”

Sen. Steven Horsford/
Photo: Cathleen Allison/ NevadaPhotoSource.com

Horsford, D-Las Vegas, is working with Sen. Sheila Leslie, D-Reno, the chairwoman of the Legislative Commission’s Audit Subcommittee and Chairwoman of the Senate Revenue Committee, on the precise language for the bill.

A number of the members of the Senate Revenue Committee expressed concern at a hearing Thursday when former Tax Department Executive Director Dino DiCianno told the panel that his agency has not had trained auditors to review the net proceeds of minerals tax reports submitted by mining companies, “for a couple of years.”

This at the same time gold prices have reached record levels.

Horsford asked DiCianno if he had informed former Gov. Jim Gibbons about the lack of trained auditors to review mining deductions claimed under the law, which are self reported by the companies.

DiCianno replied he had not, and that maybe he should have informed the governor.

The following day, DiCianno submitted his resignation to Gov. Brian Sandoval effective immediately.

In announcing DiCianno’s departure, Sandoval also named Deputy Director Chris Nielsen to lead the agency until the governor can appoint a successor. Sandoval asked Nielsen to begin preparing a full transition plan, including an immediate strategy to resume auditing mine operators to ensure the proper payment of the net proceeds of minerals tax. Sandoval has also directed the state Internal Audit Division to assist the Department of Taxation as it resumes the net proceeds audits.

Sandoval Senior Adviser Dale Erquiaga today said at a press briefing the governor has instructed the interim tax agency director to determine when the last mining audits were performed, which operators were audited and whether any deficiencies were identified.

The information will then be presented at a special meeting of the Tax Commission set for March 21. Sandoval may also call the Executive Branch Audit Committee together to consider evaluating other revenue sources collected by the Tax Department.

Erquiaga said there is at least one audit of a mining operator that the Tax Department is aware of. The Tax Department is required to conduct random audits so it is not clear if the 100 mining operators in the state could all be reviewed right away, he said.

Sandoval in his proposed budget made only a minor reduction in the agency funding to ensure it could effectively collect tax revenue, Erquiaga said.

“It’s bad management practice in the last administration to allow two years to go by without an audit,” Erquiaga said. “We want an explanation from the staff. We’re going to work with them to be sure going forward that doesn’t happen.”

Horsford said he does not know if the tax deductions claimed by the mining industry over the past few years are legitimate or not. The audit being requested will help answer that question, as well as whether audits of other revenues owed to the state are also being handled appropriately by the agency, he said.

“I was a little concerned about the fact that we’ve had increased revenues from mining, but also increased deductions,” he said. “So the tax payments are down.”

Horsford said the state needs to make sure the reporting is accurate.

“It’s obviously a top priority,” he said.

Leslie said one major focus will clearly be the auditing of the net proceeds of mines.

“This is a direct result of the testimony at the Revenue Committee last week which seemed to shock everyone,” she said. “That at a time when the price of gold is at record highs, we have not been auditing. And I think many of us are concerned about the whole idea of self reporting.”

The huge mining corporations likely have the best tax attorneys available to ensure they take advantage of every “loophole” in claiming exemptions from the mining tax, Leslie said.

“I’m sure they have been looking very closely at how to minimize their tax obligations, and that’s not illegal,” she said. “Right now it seems very one-sided on behalf of the mining companies.”

Leslie said she has questions about whether the mining exemptions have possibly been expanded over the years through the regulatory process that the Legislature may not be fully aware of.

The state has to ensure the exemptions are appropriate and the state is collecting all that is owed, she said.

“We’re outgunned to begin with,” Leslie said. “But the idea that we have nobody and haven’t had anybody looking at that for the last two years is preposterous. We need to be armed with our experts and right now we are unarmed.”

The mining industry has been a major target of both Democratic and Republican lawmakers already in the 2011 session. Some lawmakers have suggested the mining industry can afford to pay more in taxes and lessen the severity of cuts to education and state programs proposed in Sandoval’s $5.8 billion general fund budget.

Leslie said she wants to look at the multiple exemptions the mining industry can take on the minerals tax paid to the state and county governments and whether they are still appropriate, particularly the changes made in 1989.

Audio clips:

Senate Majority Leader Steven Horsford says the Tax Department has not been properly auditing the net proceeds tax:

031411Horsford1 :11 a major problem.”

Horsford says the question is what else has not been audited:

031411Horsford2 : 15 $2.5 billion budget hole.”

Horsford says mining revenues are up but tax payments are down:

031411Horsford3 :21 payments are down.”

Sen. Sheila Leslie says the bill request is a direct result of the shocking testimony last week:

031411Leslie1 :25 idea of self-reporting.”

Leslie says she is certain that mining companies are taking every tax deduction they can:

031114Leslie2 :13 that’s not illegal.”

Leslie says the state is outgunned in the auditing process:

031411Leslie3 :30 years is preposterous.”

Sandoval Senior Adviser Dale Erquiaga says it was bad management practice by the Gibbons Administration not to audit mining companies:

031411Erquiaga :11 that doesn’t happen.”

  • http://OrganizedLaborParty.com/ Tony’s Take

    I’m starting to wonder if anyone is counting the silver that gold mines produce. It’s not waste and silver production is something like 10 ounces of silver for every ounce of gold, if not much more. Silver is also at record highs. There is not one ounce of any valuable material that is thrown away by the mining industry.

  • Deacon427

    For god’s sake Horsford can’t you see or don’t you know that although Dicianno might have been right about no mining audits being performed that doesn’t mean that auditors for dept of taxation are not properly trained, and that they are not otherwise doing their jobs. Get a clue! Quite frankly I was counting on you as the legislature to be the smart ones in the bunch because Sandoval is clueless, but perhaps I counted my eggs before they hatched. Why don’t you spend your time doing something constructive like trying to stop this ridiculously stupid budget of the Governor’s, and get something that makes sense for all of Nevada and not just the ultra conservative nutjobs and tea partiers that are in the minority in this state. Geez!

  • Deacon427

    Sen Horsford I thought, mistakenly it seems, that you were a smart cookie that knew better than to go on witch hunts that lead nowhere. The thing to do is to get the department of taxation the auditors that they need, part of which were given up by the former director to get a call center. The proactive approach by the call center is not a bad move it is just that it should not have been at the sacrifice of auditors. You need to inform on the front end, and audit, teach and bring into compliance on the back end. DO NOT waste time on auditing the department but rather spend time and energy to get them the tools they need to do the job they are suppose to do and want to do. By all means lets go after the mines and audit the living daylights out of them because God knows they are getting away with murder, but lets make this an all out approach to bring everyone into compliance. By the way and along the way why don’t you try fixing and broadening the tax system so it makes some bloody sense! Lets stop cow towing to the industries that have more money than anyone else and can send scores of lobbyists to crush the opposition and get what they want even though it makes NO SENSE! Continue on this path Sen Horsford and you will be spending the next legislative go around on the sidelines!

  • tax insider

    Dino DiCianno was a troll and cheated millions from this State and it’s people. Dino should go directly to jail for his corruption.

  • Deacon427

    Tax insider, cheat is a strong word, and unless you have absolute proof of such and are willing to share, I would not use that word. Was he lax in the job when it came to certain things? Obviously.

    Sen Horsford, changing of the guard is not good enough for you, eh? I am with you on that one, so why don’t you go home and let the professionals do their job, huh, how about that? You want to go looking for the problems then look no further than the Governor’s office. Gibbons and Sandoval just like any other Governor had their favorites, and as such let them get away with murder. Do you think for one moment that any Director makes such decisions in a vaccuum?? Are you nuts??? Sandoval knew or at the very least he should have known. You would think he would make it his business to know exactly what the agency, who brings in a majority of the revenue for the state, was doing? One would think. When looking for where to place the blame then look no further then the Governor or his staff. Dino Dicianno was a good soldier who fell on his sword for someone. Sandoval needed a scapegoat, and Dicianno was it. Gibbons had blown it, and Sandoval did not want to get blamed for it, so the perfect patsy was Dicianno. If you think otherwise than you are an IDIOT!

  • cheat is a strong word

    Go here: http://tax.state.nv.us/documents/AnnualReport_FY10_final.pdf

    the insider knows what to look for and knows more than most… Look into the Elko office closure, the removal of the Elko auditors (who were trained to audit the mines). Look at the other inside info that will be given to Mr. Steven Horsford by the insider… Dino your time has come – paybacks a bitch, bud.

  • 1550 college parkway, 89706

    “Sandoval also named Deputy Director Chris Nielsen to lead the agency until the governor can appoint a successor”

    This is putting the junior wolf/embezzler in charge of the hen house. In case you forgot, Chris Nielsen was the former law chief for jim gibbons whom some say is the man behind the scheme and Dicianno was just the patsy.. Wake up, they’re all in bed together. …And is a sick but true thought.

  • Deacon427

    Provide proof. Where is the smoking gun? You point to an annual report? Don’t get me wrong I don’t intend to stand up for anyone cheating the system, but provide the proof, concrete indisputable proof. Anyone can point fingers, I mean just look at Horsford and the gang, they can point fingers better than most. The Governor can point a mean finger too, but that is all it is, pointing fingers. Just remember when you point a finger at someone else there are 3 pointing back at you. Think about that one.

  • Shlomo

    Tax has been mismanaged and dysfunctional for years. I have heard very interesting stories about their cash handling procedures, and would encourage a look at them. Chris Nielsen is not the man for the job, as he has been a part of the problem. Governor, appoint someone from the private sector to clean up Taxation.

  • yo Deacon

    The proof will be shown to the people investigating. Dino and Chris Nielsen are two in the same. The data is in the reports to prove problems -they’ll be detailed later… Auditors who audit the auditors will know where to look. That TAS computer system is also a big problem with little ROI and less revenue collected.

  • Deacon427

    No computer system is perfect. Not saying Chris Nielsen is the man for the job. Private sector person to come in and clean up taxation? You mean the same way most of the companies have been run over the last few years?? Companies being sued because their management has played fast and loose with the truth, and fudged the numbers so bad that Rachael Ray be proud of the books they cooked. Not saying the department is perfect, but there are a lot of good people working for the department and when you start labeling then you might hit some of those good people. Perhaps we clean house at the top and get some new blood, but please, please give us somebody that does not have his/her nose so far up somebody’s you know what that they are no darn good to the cause, and only serve to be a problem.

  • Deacon Blues

    …There is the Tax Commission to keep a keen eye on things and the commission contains private sector people. Maybe they need a “media pundit” in there?

  • Deacon427

    You are kidding right? The same tax commission that is going to be called on the carpet on Monday for not doing their job as successfully as they should have by keeping a better eye on things? I would not be surprised if the Governor unappoints a few members of the tax commission because of the lack of oversight they have given the department. Not saying the Governor will be right in every case, but he will have some points to be made. Here is the thing. The department is understaffed and has been since the beginning of time. There are good people there, but there just needs to be more to cover all the ground they want covered. The Gov is a putz. Horsford is not as smart as I thought he was. There needs to be real answers not the dog and pony show they are giving and are going to give over the next ever how long. A job needs to be done, and once they clean house, then maybe they can get on with it.

  • Good point

    Deacon’s right here, the tax commission is another racket because they are after all appointed by BS. Some real outsiders need to be appointed to keep an eye on the hen house. Don’t forget that issue with Reno and tax a few weeks ago too. …And yes tax is understaffed and the majority of the workers do a good job.

  • NX tax commission

    http://tax.state.nv.us/taxcomm.htm

    This one needs to be looked at: Mr. John E. Marvel has been the mining industry member of the Commission since April of 1990. Mr. Marvel has been practicing law in Elko since 1978, with a significant amount of his practice devoted to mining, ranching, and natural resource issues. Many of his ranch clients also hold mineral interests. Mr. Marvel is a partner/member in the law firm of Marvel & Krump, Ltd. He is a member of the Nevada Mining Association and a former director of the Nevada Cattlemen’s Association.

  • http://nevadanewsbureau michael

    I find hard to believe how many think horseturd is smart!
    Try this; Nevada spends 1 billion dollars per year (for those who think horesturd is smart that is 2 billion dollars per budget) OVER and ABOVE private sector or national average for public unions and public sector
    FIRE all, admit politicians are thieves and whores and should never be allowed to set wages and benefits with those who put them in office
    OR YOU COULD find another 2 billion per budget spent in Nevada due to illegal alliens

  • nevada blue

    Michael chill out and get some medical marijuana

  • Deacon427

    Ok Michael I am lost exactly how do you figure that when the state workers do not have unions with collective bargaining powers? If you are thinking pensions, then get that little thought out of your head, because state workers actually pay into their retirement unlike county workers who get the PERS paid by the county. State workers earn every flipping dollar we get. There is as much work expected out of state workers as is for the county workers and more, for less money. You are getting a damn bargain when it comes to state workers. Now if you want to give state worker collective bargaining powers then by all means, but until you do stop you damn complaining. I do agree with the deal about illegal immigrants, because the state and other states pay through the nose to support these people who have a right to none of it. The Fed spend even more, and it ic criminal. What Nevada pays for them is a budget killer you are right on that score.

  • hen house
  • Nevadawikileaks

    ‘We do a helluva job collecting taxes’

    http://carsonnow.org/story/03/17/2011/we-do-helluva-job-collecting-taxes

    Dino DiCianno, director of the Nevada Department of Taxation, resigned last week after admitting that the department can’t audit the tax deductions claimed by the state’s mining industry. But in this 2006 video, he does a short comedy routine about how well they collect taxes: