The Nevada Tax Commission on Tuesday rejected NV Energy's request that the state refund sales and use taxes paid on the coal that fuels two Nevada power plants.
The utility, formerly Sierra Pacific Power and Nevada Power, is expected to sue in district court to overturn the 5-2 decision.
The request seeks $14.4 million for coal used at the Reid Gardner Power Plant outside Las Vegas and $11.5 million for taxes paid on coal used at Valmy along Interstate 80 in Humboldt County - a total of $25.9 million for the period from 2002-2006. All the coal is imported to Nevada since there are no coal mines in the Silver State.
It was filed with the Department of Taxation after Southern California Edison filed a similar request several years ago. That request, which sought $36 million in tax refunds for coal imported from Arizona, was also finally denied by the Tax Commission and was appealed to Carson District Court.
John Bartlett representing NV Energy argued the tax violates the Nevada Constitution, which exempts mineral and other mining production from the sales and use tax. He also argued that taxing imported coal violates the Commerce Clause of the U.S. Constitution because it treats material produced in Nevada differently than material from other states. The utility also said the vast majority of any refund would go to the benefit of ratepayers in Nevada.
Chief Deputy Attorney General Gina Sessions said the use tax is properly applied to imported coal. She said the exemption was designed to prevent double-taxing minerals extracted within the state which are subject to the net proceeds tax.
Commissioners Hank Vogler of Ely and John Marvel of Elko voted against the motion to deny a refund - as they did in the Southern California Edison case.
Gov. Jim Gibbons and his staff brief legislative Democrats today on the growing revenue crisis and the more than $2 billion budget shortfall that will face the 2011 Legislature.
Director of Administration Andrew Clinger said Republican lawmakers were told Monday that is the projected shortfall to maintain existing services even if revenues come in at levels projected by the May Economic Forum. He added that revenues fell nearly $20 million below those projections in just the final two months of the fiscal year.
Gibbons' Chief of Staff Robin Reedy said one reason for the meetings with lawmakers is to give them all the information the governor's office has and get their input on how to handle the situation if the economy and revenue collections don't rebound. She said the governor wants to get politics out of the decision on if and when a special session should be called.
"It's really going to be the numbers that will tell all," she said.
Asked when the administration will have the answer, Clinger said the end of November because that's how long it will be before actual revenue collections for the first quarter of this fiscal year are available. The quarter ends Sept. 30, but businesses have 30 days to report to the Department of Taxation or Gaming Control and those agencies have another month to compile all the data from thousands of reporting businesses.
Reedy said the vast majority of the projected budget shortfall consists of federal Stimulus money and the tax increases approved by the 2009 Legislature - neither of which will be there for the next biennium.
Nearly $1 billion in Stimulus money used to support or expand programs which would otherwise have had to come from the General Fund will go away at the end of the current two-year budget cycle.
The tax increases, nearly $800 million worth including the sales tax increase and the near doubling of the Modified Business Tax, all sunset at the start of the next biennium unless lawmakers vote to remove the sunsets. Those increases were passed over Gibbons' veto with the support of some Republican lawmakers who asked for concessions including the sunsets.
"When you take all those things away, it does come up to a really big number," said Reedy. She acknowledged that lawmakers may decide to remove the sunsets, "but you build your budget based on current state law."
She said bringing lawmakers into the process was a good way to make sure their questions about state finances are answered and give them a chance to give their input.
An inmate has filed a petition challenging the Nevada Department of Corrections policy prohibiting smoking or any other use of tobacco on prison grounds.
David "Dino" Barnes, 62, charges in the petition for a writ of mandamus that the smoking ban violates state law giving the prison system an exemption from the ban on smoking in public buildings.
He said inmates' legal rights are being violated by prison officials "acting without legal authority by their actions in banning all tobacco products."
Barnes says in his petition state law also prohibits any governmental agency from enacting "more stringent restrictions" on the sale, use or distribution of tobacco products. That section of law was created by tobacco company lobbyists to prevent cities and counties from enacting tougher anti-smoking laws than the state's statutes.
He charges prison officials and the Board of Prison Commissioners have done just that in imposing the ban.
Director of Corrections Howard Skolnik installed the no tobacco ban July 1 - applying it not only to inmates but correctional staff as well. He said Nevada is far from the first state to do so.
He also said it makes good sense since both Washoe and Clark county jails already ban tobacco use.
"So most of our new inmates come to us smoke-free," Skolnik said. "It would be irresponsible of us not to offer them the opportunity to stay that way."
Skolnik said there have been some issues since the ban, "but nothing disastrous at this point." Opponents among the correctional staff had said they were concerned minimal staffing combined with frayed nerves of inmates denied their cigarettes would result in more violence in the institutions.
No action has been taken on the petition, which also seeks a preliminary injunction which would allow inmates to get their tobacco while Carson District Judge Todd Russell makes a decision on the petition.
Barnes is serving a life sentence on a murder conviction out of Washoe County.
- Geoff Dornan of the Nevada Appeal Capitol Bureau may be contacted at (775) 687-8750 or firstname.lastname@example.org.