NAC: CHAPTER 362 - TAXES ON PATENTED MINES AND PROCEEDS OF MINERALS

[Rev. 6/10/2014 4:50:39 PM]

[NAC-362 Revised Date: 6-14]

CHAPTER 362 - TAXES ON PATENTED MINES AND PROCEEDS OF MINERALS

GENERAL PROVISIONS

362.001 Definitions.

362.005 “Department” defined.

PROCEEDS OF MINERALS

General Provisions

362.010 Determination of gross value of mineral products.

362.020 Separate report of royalties.

362.030 Annual statement of gross yield and claimed net proceeds: Form and contents.

362.035 Deductions: Interpretation of certain statutory terms. [Effective through December 31, 2015.]

362.035 Deductions: Interpretation of certain statutory terms. [Effective January 1, 2016.]

362.040 Deductions: Depreciation of capitalized costs.

362.050 Deductions: Operating costs. [Effective through December 31, 2015.]

362.050 Deductions: Operating costs. [Effective January 1, 2016.]

362.060 Deductions: Electric power.

362.070 Deductions: Loading and transportation costs.

362.081 Date of receipt of material mailed to Commission.

362.083 Annual statement of gross yield and claimed net proceeds: Failure to include all applicable information, documentation, reports and statements.

362.085 Annual statement of gross yield and claimed net proceeds: Penalty for failure to file.

362.087 Annual statement of gross yield and claimed net proceeds: Documentation of proper filing and waiver of penalty for failure to file.

362.090 Report of amount of net proceeds of minerals taxes plus pro rata penalties and interest; distribution.

Deductions for Reclamation Costs

362.200 Definitions.

362.210 “Closure of a mine” defined.

362.250 “Reclamation” defined.

362.270 “Reclamation plan” defined.

362.280 “Reporting period” defined.

362.290 “Taxpayer” defined.

362.310 Allowable deduction. [Effective through December 31, 2015.]

362.310 Allowable deduction. [Effective January 1, 2016.]

Geothermal Resources

362.350 Definitions.

362.352 “Field” defined.

362.354 “Mining function” defined.

362.356 “Plant” defined.

362.358 “Processing” defined.

362.360 “Processing allowance” defined.

362.362 “Repowering” defined.

362.364 “Transaction” defined.

362.366 “Transportation allowance” defined.

362.368 Determination of gross yield.

362.370 Calculation of net proceeds.

PATENTED MINES

362.410 Assessment; removal from secured roll for miscellaneous property.

REVISER’S NOTE.

The regulation of the Nevada Tax Commission filed with the Secretary of State on December 30, 2011 (LCB File No. R058-11), which makes various changes to this chapter on January 1, 2012, and January 1, 2014, contains the following provisions not included in NAC:

“Sec. 16. Sections 1 to 6, inclusive, 9, 11, 12 and 15 of this regulation [creating NAC 362.001, 362.006, 362.007, 362.008 and 362.035, amending NAC 362.050, 362.200 and 362.310, and repealing NAC 362.220, 362.230, 362.240, 362.260, 362.300, 362.320 and 362.330 on January 1, 2012]:

1. Do not apply to or affect any determination of gross yield or net proceeds required pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2011.

2. Apply for the purposes of estimating and determining gross yield and net proceeds pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2012 and each calendar year thereafter.

Sec. 17. Sections 10, 13 and 14 of this regulation [amending NAC 362.035, 362.050 and 362.310 on January 1, 2014]:

1. Do not apply to or affect any determination of gross yield or net proceeds required pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2013.

2. Apply for the purposes of estimating and determining gross yield and net proceeds pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2014 and each calendar year thereafter.”

GENERAL PROVISIONS

NAC 362.001 Definitions. (NRS 360.090) As used in this chapter, unless the context otherwise requires, the words and terms defined in NAC 362.005 to 362.008, inclusive, have the meanings ascribed to them in those sections.

(Added to NAC by Tax Comm’n by R058-11, 12-30-2011, eff. 1-1-2012)

NAC 362.005 “Department” defined. (NRS 360.090) “Department” means the Department of Taxation.

(Added to NAC by Tax Comm’n by R048-01, eff. 11-1-2001; A by R058-11, 12-30-2011, eff. 1-1-2012)

NAC 362.006 “Developmental work” defined. (NRS 360.090)

1. Except as otherwise provided in subsection 2, “developmental work” means any activities performed on the property of a mine which outline the location of the mineral reserves of the mine or prepare the mineral reserves of the mine for production, including, without limitation, drilling, rock work and the construction of support systems to increase the mineral reserves of the mine.

2. The term does not include any mineral exploration.

(Added to NAC by Tax Comm’n by R058-11, 12-30-2011, eff. 1-1-2012)

NAC 362.007 “Mineral exploration” defined. (NRS 360.090) “Mineral exploration” means any activities relating to the search for mineral reserves which do not occur during the development or production stages of a mine, including drilling, sampling, assaying, metallurgical testing, engineering studies, studies of economic feasibility and procedures to obtain appropriate permits.

(Added to NAC by Tax Comm’n by R058-11, 12-30-2011, eff. 1-1-2012)

NAC 362.008 “Mineral reserves” defined. (NRS 360.090) “Mineral reserves” means the portion of a measured or indicated mineral resource that has been analytically determined to justify mining, taking into account, at the time of that determination, any mining, metallurgical, marketing, legal, environmental, social, economic and other conditions which apply to that determination.

(Added to NAC by Tax Comm’n by R058-11, 12-30-2011, eff. 1-1-2012)

PROCEEDS OF MINERALS

General Provisions

NAC 362.010 Determination of gross value of mineral products. (NRS 360.090, 362.120)

1. For the purposes of assessment and taxation of the net proceeds of minerals pursuant to chapter 362 of NRS, the gross value of mineral products must be determined in accordance with the provisions of this section.

2. In those cases where a mineral product is sold by the producer in an arms-length transaction in free market competition, the gross value of the product is an amount equal to the proceeds of the sale of the product. This subsection applies to sales realized on all minerals produced from mining, including, without limitation, reduction, beneficiation or any treatment used by the producer within or outside this State to obtain a mineral product which is commercially marketable.

3. In those cases where a product is exchanged for any thing or service or removed from the State in a form ready for use or sale, but not used or sold during the period covered by the statement required by NRS 362.110 to be filed, the gross value of the product is:

(a) For sales of minerals that do not involve derivative financial transactions, the price stated in the contract or other document of sale if one is in existence; or

(b) If minerals are transferred in kind or used to support derivative financial transactions, the closing spot price on the date of the taxable event. The spot price for precious metals will be determined by the Department by using a recognized national or international publication of prices such as the London PM fix. If no organized commodity exchange exists for a particular mineral product, the price will be the realized sales price of the mineral product.

4. In those cases where the mineral product is used by the producer or disposed of by the producer in any kind of transaction which is not at arms-length, including, without limitation, such transactions with associated or affiliated companies, the gross value of the mineral product so used or disposed of will be determined by the Department by utilizing information supplied by the producer under this subsection and from such other appropriate sources as the Department deems necessary. The mineral producer shall supply the Department with the following information for each reporting period:

(a) The producer’s profit and loss statements;

(b) The proportionate profit reports and the calculations used to prepare them;

(d) The amount used to calculate the percentage of depletion allowances; or

(e) The monthly average price of the product for the months in which it was used in a manufacturing process or to provide a service.

5. Any information submitted pursuant to paragraphs (a) to (d), inclusive, of subsection 4 must be the same as submitted to the Internal Revenue Service.

6. The producer has the burden of proof in any determination under this section of the gross value of mineral products used or disposed of by the producer.

7. As used in this section:

(a) “Derivative financial transaction” means a financial transaction which uses:

(1) A financial instrument that has no intrinsic value, but which derives its value from a contract to deliver minerals in the future at a specific price; or

(2) An option that gives a party to the transaction the opportunity to buy minerals from or sell minerals to the other party to the transaction at a prearranged price.

(b) “Spot price” means the price established for physical delivery of a mineral by an organized commodity exchange on the date of the taxable event.

(c) “Transferred in kind” means a transaction in which a mineral product is delivered instead of cash to complete the transaction.

[Tax Comm’n, Mine Proceeds Reg. No. 26, eff. 1-24-78; renumbered as Reg. No. 1, 1-22-79]—(NAC A 5-3-84; R048-01, 11-1-2001)

NAC 362.020 Separate report of royalties. (NRS 360.090, 362.110) All royalties received by a lessor must be reported separately from other receipts.

[Tax Comm’n, Mine Proceeds Reg. No. 21, eff. 6-28-65; A and renumbered as Reg. No. 6, 1-22-79]

NAC 362.030 Annual statement of gross yield and claimed net proceeds: Form and contents. (NRS 360.090, 362.110)

1. All information in the statement which is required by NRS 362.110 to be filed must be submitted on forms supplied by the Department or in a manner which is acceptable to the Department.

2. The following property must be reported:

(a) Leasehold improvements and buildings;

(b) Fixed machinery and equipment;

(d) Automobiles and light service vehicles such as pickups and panel trucks.

3. Each cost submitted for depreciation must be the complete cost to the taxpayer, and must include all delivery, taxes and installation charges.

4. Each asset must be listed on a table which sets forth:

(a) A clear identification of the asset;

(b) The cost of the construction or acquisition of the asset and the date on which the construction of the asset was completed or the asset was acquired;

(c) The depreciation class, such as buildings, fixed equipment, mobile machinery and equipment, or automobile and light service vehicles;

(d) The total amount of depreciation granted; and

(e) The amount claimed for the present tax period.

Ê An integrated processing assembly which consists of components of individual manufacture, and which is installed as a unit, may be reported as a unit. The report must describe the function of the unit and list its principal components in detail.

[Tax Comm’n, Mine Proceeds Reg. No. 3 § 1, eff. 8-6-80]—(NAC A by R048-01, 11-1-2001; R058-11, 12-30-2011, eff. 7-1-2012)

NAC 362.035 Deductions: Interpretation of certain statutory terms. [Effective through December 31, 2015.] (NRS 360.090, 362.120) For the purposes of:

1. Paragraph (j) of subsection 3 of NRS 362.120, the Nevada Tax Commission will interpret the term “developmental work” to have the meaning ascribed to it in NAC 362.006.

2. Paragraph (c) of subsection 7 of NRS 362.120, the Nevada Tax Commission will interpret the term “costs of severing the employment of any employees” to:

(a) Exclude, without limitation, the costs of:

(1) Any wages, salary or production bonuses earned by an employee before the date of termination of his or her employment; and

(2) Any pension benefits, vacation leave and sick leave accrued by an employee before the date of termination of his or her employment; and

(b) Except as otherwise provided in paragraph (a), include, without limitation, the costs of any:

(1) Additional payments based on length of service;

(2) Cash bonuses;

(3) Stock options;

(4) Medical insurance, dental insurance and life insurance;

(5) Payments made in lieu of a required period of notice;

(6) Negotiated financial sums paid pursuant to an agreement absolving the employer from any further liability to an employee;

(7) Voluntary redundancy packages offered by an employer to attract volunteers to leave the employment of the employer; and

(8) Assistance in searching for new positions of employment.

3. Paragraph (f) of subsection 7 of NRS 362.120, the Nevada Tax Commission will interpret the term “mineral exploration” to have the meaning ascribed to it in NAC 362.007.

(Added to NAC by Tax Comm’n by R058-11, 12-30-2011, eff. 1-1-2012; A by R058-11, 12-30-2011, eff. 1-1-2014)

NAC 362.035 Deductions: Interpretation of certain statutory terms. [Effective January 1, 2016.] (NRS 360.090, 362.120) For the purposes of:

1. Paragraph (k) of subsection 3 of NRS 362.120, the Nevada Tax Commission will interpret the term “developmental work” to have the meaning ascribed to it in NAC 362.006.

2. Paragraph (c) of subsection 7 of NRS 362.120, the Nevada Tax Commission will interpret the term “costs of severing the employment of any employees” to:

(a) Exclude, without limitation, the costs of:

(1) Any wages, salary or production bonuses earned by an employee before the date of termination of his or her employment; and

(2) Any pension benefits, vacation leave and sick leave accrued by an employee before the date of termination of his or her employment; and

(b) Except as otherwise provided in paragraph (a), include, without limitation, the costs of any:

(1) Additional payments based on length of service;

(2) Cash bonuses;

(3) Stock options;

(4) Medical insurance, dental insurance and life insurance;

(5) Payments made in lieu of a required period of notice;

(6) Negotiated financial sums paid pursuant to an agreement absolving the employer from any further liability to an employee;

(7) Voluntary redundancy packages offered by an employer to attract volunteers to leave the employment of the employer; and

(8) Assistance in searching for new positions of employment.

3. Paragraph (f) of subsection 7 of NRS 362.120, the Nevada Tax Commission will interpret the term “mineral exploration” to have the meaning ascribed to it in NAC 362.007.

(Added to NAC by Tax Comm’n by R058-11, 12-30-2011, eff. 1-1-2012; A by R058-11, 12-30-2011, eff. 1-1-2014)

NAC 362.040 Deductions: Depreciation of capitalized costs. (NRS 360.090, 362.120)

1. Leasehold improvements and buildings must be depreciated over a 20-year period using the straight-line method.

2. Fixed machinery and equipment must be depreciated over a 20-year period using the straight-line method.

3. Mobile machinery and equipment must be depreciated over a 10-year period using the straight-line method.

4. Automobiles and light service vehicles must be depreciated over a 5-year period using the straight-line method.

5. An integrated processing assembly must be depreciated over a 20-year period using the straight-line method. Subsequent additions to the unit must also be reported and be depreciated over a 20-year period using the straight-line method.

6. If any property is disposed of before the end of the depreciation period, the remaining amount of allowable depreciation, if the property had remained in use, may be reported in total as an additional expense of depreciation for the reporting period. The amount of depreciation must be reduced by the amount of any consideration received for the property from sale, insurance recovery, trade-in or any other reimbursement, but not below zero.

7. A mining operator may petition the Nevada Tax Commission for reconsideration of the allowable depreciation of property. The Commission may adjust the allowable depreciation if the petitioner presents satisfactory evidence that the expected life of the property is longer than that which is provided for in this section.

[Tax Comm’n, Mine Proceeds Reg. No. 3 § 2, eff. 8-6-80]—(NAC A 9-13-91; R161-05, 2-23-2006; R172-12, 12-23-2013)

REVISER’S NOTE.

The regulation of the Nevada Tax Commission filed with the Secretary of State on December 23, 2013 (LCB File No. R172-12), which amended this section, contains the following provision not included in NAC:

“Sec. 4. Sections 1, 2 and 3 of this regulation [NAC 362.040 and 362.368] do not apply to or affect:

1. Any depreciation of assets approved by the Nevada Tax Commission before December 23, 2013; or

2. Any powers or duties of the Department of Taxation or any mining operator relating to any depreciation of assets approved by the Nevada Tax Commission before December 23, 2013.”

NAC 362.050 Deductions: Operating costs. [Effective through December 31, 2015.] (NRS 360.090, 362.120)

1. In computing the costs enumerated in subsection 3 of NRS 362.120, the following specific items are deductible except as limited by subsection 2 of this section and subsection 6 of NRS 362.120:

(a) The cost of renting equipment, if the amount paid as rental is commercially reasonable in the circumstances;

(b) The cost of contracting for all or part of the mine’s operations, if the contract price is commercially reasonable in the circumstances and the cost would otherwise be deductible if the service or activity contracted for was provided or performed directly by the operator of the mine;

(c) The cost of Nevada-based corporate services, as defined in subsection 8 of NRS 362.120, which a Nevada mine receives under contract from its corporate office or the office of a related corporation, if:

(1) The cost is commercially reasonable in the circumstances; and

(2) The cost is separately stated in a manner consistent with good accounting practices;

(d) The reasonable cost of management provided to a joint venture by a member, if the fees relate directly to the operation of the mine;

(e) If the taxpayer has a policy which prohibits the personal use of a vehicle by an employee, the cost of vehicle allowances to the extent that the vehicle is actively engaged in the business of the mine;

(f) The cost of transportation services between points of origin and destination within this State provided by a third party or the owner of the mine for employees to get to and from a point of extraction or reduction of the mine, excluding any cost for the repair, maintenance and depreciation of any facilities or equipment under the jurisdiction of the Public Utilities Commission of Nevada or the Nevada Transportation Authority; and

(g) The cost of compensation for employees. As used in this paragraph, “compensation” means wages, salaries, paid vacation leave, paid sick leave, performance-related bonuses, contributions to and administrative costs of qualified pension and retirement plans, 401k and similar deferred benefit plans, Medicare contributions, social security payments, state and federal unemployment compensation contributions or payments, and postemployment training expenses for training conducted in compliance with the Mine Safety and Health Administration and the Division of Industrial Relations of the Department of Business and Industry or their successor organizations.

2. In computing the costs enumerated in subsection 3 of NRS 362.120, the following specific items are not deductible:

(a) Cost or expenses which are capitalized;

(b) Gifts, grants and donations;

(d) Costs of developmental work related to ore bodies outside the geographic area described in the plan for the mine filed with the Division of Minerals of the Commission on Mineral Resources pursuant to NRS 519A.210;

(e) Any tax that an operator of a mine is required to pay to the Federal Government, this State or any other state, or a political subdivision thereof;

(f) Costs associated with providing health clubs for employees;

(g) Costs incurred for preemployment activities, including, without limitation, reimbursement for expenses for moving and relocation;

(h) Except as otherwise provided in paragraph (g) of subsection 1 of this section and paragraph (g) of subsection 3 of NRS 362.120, costs associated with union trust funds;

(i) Costs associated with providing day care facilities for the children of employees;

(j) General liability insurance;

(k) Excess policies of general liability insurance;

(l) Fire insurance on any machinery, equipment, apparatus, works, plants or facilities; and

(m) Expenses described in subsection 7 of NRS 362.120.

3. The taxes described in paragraph (e) of subsection 2 of this section and paragraph (g) of subsection 7 of NRS 362.120 do not include any contributions or payments described in paragraph (g) of subsection 3 of NRS 362.120.

4. If a cost is partially deductible and partially nondeductible, the deductible portion must be allowed. In determining the portion of such costs which is allowable as a deduction, a reasonable allocation must be made based upon available information. For the purposes of paragraph (b) of subsection 1, there is a rebuttable presumption that not less than 20 percent of the cost of contracting for all or part of a mine’s operations is attributable to the cost of services and activities that would not be deductible if provided or performed directly by the operator of the mine.

[Tax Comm’n, Mine Proceeds Reg. Nos. 1-7, 9-14, 19, 20 & 25, eff. 6-28-65; A and renumbered as Reg. No. 2, 1-22-79]—(NAC A 5-3-84; R048-01, 11-1-2001; R161-05, 2-23-2006; R058-11, 12-30-2011, eff. 1-1-2012; R058-11, 12-30-2011, eff. 1-1-2014)

REVISER’S NOTES.

1. Do not apply to or affect any determination of gross yield or net proceeds required pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2011.

2. Apply for the purposes of estimating and determining gross yield and net proceeds pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2012 and each calendar year thereafter.

Sec. 17. Sections 10, 13 and 14 of this regulation [amending NAC 362.035, 362.050 and 362.310 on January 1, 2014]:

1. Do not apply to or affect any determination of gross yield or net proceeds required pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2013.

2. Apply for the purposes of estimating and determining gross yield and net proceeds pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2014 and each calendar year thereafter.”

The reference to paragraph (g) of subsection 3 of NRS 362.120 in subsection 3 of this section was temporarily removed from that subsection by Senate Bill No. 493 of the 2011 Nevada Legislature, which was further amended by Assembly Bill No. 499 of the 2013 Nevada Legislature (see chapter 449, Stats. 2011, at p. 2695, and chapter 553, Stats. 2013, at p. 3795, respectively). The language contained in that paragraph will be restored effective January 1, 2016.

NAC 362.050 Deductions: Operating costs. [Effective January 1, 2016.] (NRS 360.090, 362.120)

1. In computing the costs enumerated in subsection 3 of NRS 362.120, the following specific items are deductible except as limited by subsection 2 of this section and subsection 6 of NRS 362.120:

(a) The cost of renting equipment, if the amount paid as rental is commercially reasonable in the circumstances;

(1) The cost is commercially reasonable in the circumstances; and

(2) The cost is separately stated in a manner consistent with good accounting practices;

(d) The reasonable cost of management provided to a joint venture by a member, if the fees relate directly to the operation of the mine;

2. In computing the costs enumerated in subsection 3 of NRS 362.120, the following specific items are not deductible:

(a) Cost or expenses which are capitalized;

(b) Gifts, grants and donations;

(e) Any tax that an operator of a mine is required to pay to the Federal Government, this State or any other state, or a political subdivision thereof;

(f) Costs associated with providing health clubs for employees;

(g) Costs incurred for preemployment activities, including, without limitation, reimbursement for expenses for moving and relocation;

(h) Except as otherwise provided in paragraph (g) of subsection 1 of this section and paragraph (g) of subsection 3 of NRS 362.120, costs associated with union trust funds;

(i) Costs associated with providing day care facilities for the children of employees;

(j) General liability insurance;

(k) Excess policies of general liability insurance;

(l) Fire insurance on any machinery, equipment, apparatus, works, plants or facilities; and

(m) Expenses described in subsection 7 of NRS 362.120.

NAC 362.060 Deductions: Electric power. (NRS 360.090, 362.120)

1. The installation of power and light lines is a capital charge, while the upkeep and purchase costs of electric power are operating costs.

2. When electric power is generated and distributed to various departments, the upkeep of the power plant must be written off, and the distribution of the power is an operating cost. New engines, boilers and similar equipment are chargeable to a capital account.

[Tax Comm’n, Mine Proceeds Reg. No. 8, eff. 6-8-65; A and renumbered as Reg. No. 4, 1-22-79]—(NAC A by R048-01, 11-1-2001)

NAC 362.070 Deductions: Loading and transportation costs. (NRS 360.090, 362.120) The actual cost of transporting the product of the mine to the place of reduction, refining and sale, is affected directly by both demurrage charged and dispatch earned credits. These charges and credits become a part of the cost of loading and unloading ore. Additional assessments for demurrage penalties incurred for any cause increases the cost of loading and transportation; dispatch earned credit paid for efficiency in loading or unloading vessels or other transport equipment directly reduces the cost of transportation. The actual cost of loading is the gross cost less any dispatch earned credits plus any demurrage.

[Tax Comm’n, Mine Proceeds Reg. No. 26, eff. 4-24-69; renumbered as Reg. No. 15, 11-9-78; A and renumbered as Reg. No. 5, 1-22-79]

NAC 362.081 Date of receipt of material mailed to Commission. (NRS 360.090, 362.110)

1. An annual statement which is required to be filed pursuant to NRS 362.110 and which is transmitted through the United States mail shall be deemed to have been received on the date shown by the post office cancellation mark stamped on the envelope containing it, or on the date it was mailed if proof satisfactory to the Commission establishes that the document or remittance was timely deposited in the United States mail, postage prepaid, and properly addressed to the Commission.

2. A receipt for material sent by certified or registered mail, if different than the post office cancellation mark, will prevail if the date on the receipt is earlier than the cancellation date.

3. A record authenticated by the post office that the cancellation date on certain batches of mail was erroneous is proof satisfactory to the Commission that the mailing was made on a date other than the post office cancellation date.

4. If it is known that the postal service was inoperative at a certain time due to strikes, riots, warfare, acts of God or other reasons, the Commission will consider the circumstances and, if there is other evidence of timely mailing, will accept the evidence and deem the return or payment timely.

5. Under no circumstances will:

(a) The cancellation date affixed by a postage meter in the possession of the taxpayer or other person; or

(b) Statements by the taxpayer or the taxpayer’s employees,

Ê be considered sufficient to refute the post office cancellation date as the date of mailing.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006)

NAC 362.083 Annual statement of gross yield and claimed net proceeds: Failure to include all applicable information, documentation, reports and statements. (NRS 360.090, 362.110) If a taxpayer submits an annual statement which is required to be filed pursuant to NRS 362.110 and which does not include all applicable information, documentation, reports and statements, the Department may require the taxpayer to resubmit the annual statement with all applicable information, documentation, reports and statements within 10 days after receiving notice from the Department. If all applicable information, documentation, reports and statements are not included with the statement upon the resubmission of the statement, the Department may consider the taxpayer to have failed to file the statement.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006)

NAC 362.085 Annual statement of gross yield and claimed net proceeds: Penalty for failure to file. (NRS 360.090, 362.230) If a taxpayer fails to file the statement required by NRS 362.110, the Department shall impose a penalty pursuant to NRS 362.230 in the following amounts:

1. For net proceeds or royalties not exceeding $5,000, the penalty is 10 percent of the net proceeds or royalties or $100, whichever is less.

2. For net proceeds or royalties greater than $5,000 but not exceeding $10,000, the penalty is $500.

3. For net proceeds or royalties greater than $10,000 but not exceeding $50,000, the penalty is $1,000.

4. For net proceeds or royalties greater than $50,000 but not exceeding $100,000, the penalty is $2,500.

5. For net proceeds or royalties of more than $100,000, the penalty is $5,000.

(Added to NAC by Tax Comm’n, eff. 9-6-96; A by R161-05, 2-23-2006)

NAC 362.087 Annual statement of gross yield and claimed net proceeds: Documentation of proper filing and waiver of penalty for failure to file. (NRS 360.090, 362.110, 362.230) If the Department does not receive an annual statement which is required to be filed pursuant to NRS 362.110 and alleges that the taxpayer has not filed the statement, the taxpayer may submit documentation which establishes that the statement was properly filed. If the Department subsequently determines the annual statement was filed properly, the Department shall waive the penalty for the failure to file a statement which is imposed pursuant to NAC 362.085.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006)

NAC 362.090 Report of amount of net proceeds of minerals taxes plus pro rata penalties and interest; distribution. (NRS 360.090, 362.170)

1. The Department shall report to the State Controller pursuant to NRS 362.170 on or before May 25 the amount of any net proceeds of minerals taxes plus pro rata penalties and interest collected for distribution to each county.

2. The Department shall distribute penalties and interest pursuant to NRS 362.170 in the same manner and percentage as computed for the net proceeds of minerals tax for each county.

(Added to NAC by Tax Comm’n, eff. 9-6-96; A by R048-01, 11-1-2001)

Deductions for Reclamation Costs

REVISER’S NOTE.

1. Do not apply to or affect any determination of gross yield or net proceeds required pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2011.

2. Apply for the purposes of estimating and determining gross yield and net proceeds pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2012 and each calendar year thereafter.

Sec. 17. Sections 10, 13 and 14 of this regulation [amending NAC 362.035, 362.050 and 362.310 on January 1, 2014]:

1. Do not apply to or affect any determination of gross yield or net proceeds required pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2013.

2. Apply for the purposes of estimating and determining gross yield and net proceeds pursuant to NRS 362.100 to 362.240, inclusive, for the calendar year 2014 and each calendar year thereafter.”

NAC 362.200 Definitions. (NRS 360.090, 362.120) As used in NAC 362.200 to 362.310, inclusive, unless the context otherwise requires, the words and terms defined in NAC 362.210 to 362.290, inclusive, have the meanings ascribed to them in those sections.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006; A by R058-11, 12-30-2011, eff. 1-1-2012)

NAC 362.210 “Closure of a mine” defined. (NRS 360.090, 362.120) “Closure of a mine” means the time at which:

1. The revegetation, treatment and rehabilitation of the site of the mine have been completed;

2. Any excess chemical solutions have been eliminated from the site of the mine, to the extent practicable;

3. The maximum degree of passive management has been implemented at the site of the mine in which a method of treatment is applied through the use of any naturally occurring chemical or biological processes to remove any metals or acidity from any waters of the mine which have been contaminated to cleanse the waters from such contamination; and

4. A monitoring program has been implemented to monitor the site of the mine after the production of the mine has been completed.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006)

NAC 362.250 “Reclamation” defined. (NRS 360.090, 362.120) “Reclamation” means actions performed during or after a mining operation or developmental work which are consistent with the provisions of NRS concerning mines and minerals, and any regulations adopted pursuant thereto, and which are identified in a reclamation plan to shape, stabilize, revegetate or otherwise treat the land in order to return it to a safe, stable condition consistent with the establishment of a productive postmining use of the land and the abandonment of a facility in a manner which ensures the public safety, as well as the encouragement of techniques which minimize the adverse visual effects. The term does not include any action performed after the closure of a mine.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006)

NAC 362.270 “Reclamation plan” defined. (NRS 360.090, 362.120) “Reclamation plan” means a plan for reclamation, and any amendments or modifications thereto, which is approved by:

1. The Division of Environmental Protection of the State Department of Conservation and Natural Resources pursuant to chapter 519A of NRS for a mining operation or developmental work which is conducted on land administered by this State;

2. The Bureau of Land Management of the Department of the Interior pursuant to 43 C.F.R. Part 3800 for a mining operation or developmental work which is conducted on land administered by a federal agency; or

3. Any other state or federal agency pursuant to any state or federal law which:

(a) Imposes a duty to reclaim the land disturbed by a mining operation or developmental work; or

(b) Requires a permit to engage in a mining operation or developmental work which is substantially similar to the requirements for a permit set forth in chapter 519A of NRS and any regulations adopted pursuant thereto.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006)

NAC 362.280 “Reporting period” defined. (NRS 360.090, 362.120) “Reporting period” means the calendar year for which the statement required by NRS 362.110 is filed.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006)

NAC 362.290 “Taxpayer” defined. (NRS 360.090, 362.120) “Taxpayer” means a person who is required by the Department to pay a tax on the net proceeds of any mineral extracted in this State pursuant to chapter 362 of NRS.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006)

NAC 362.310 Allowable deduction. [Effective through December 31, 2015.] (NRS 360.090, 362.120) A taxpayer may claim a deduction pursuant to paragraph (k) of subsection 3 of NRS 362.120 for any money paid during the reporting period for reclamation performed by the taxpayer.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006; A by R058-11, 12-30-2011, eff. 1-1-2012; R058-11, 12-30-2011, eff. 1-1-2014)

NAC 362.310 Allowable deduction. [Effective January 1, 2016.] (NRS 360.090, 362.120) A taxpayer may claim a deduction pursuant to paragraph (l) of subsection 3 of NRS 362.120 for any money paid during the reporting period for reclamation performed by the taxpayer.

(Added to NAC by Tax Comm’n by R161-05, eff. 2-23-2006; A by R058-11, 12-30-2011, eff. 1-1-2012; R058-11, 12-30-2011, eff. 1-1-2014)

Geothermal Resources

NAC 362.350 Definitions. (NRS 360.090, 362.120) As used in NAC 362.350 to 362.370, inclusive, unless the context otherwise requires, the words and terms defined in NAC 362.352 to 362.366, inclusive, have the meanings ascribed to them in those sections.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

NAC 362.352 “Field” defined. (NRS 360.090, 362.120) “Field” means the area of operations from which a geothermal resource is extracted and transported before any further beneficiation of the geothermal resource occurs.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

NAC 362.354 “Mining function” defined. (NRS 360.090, 362.120) “Mining function” means any activity relating to the extraction of a geothermal resource, including, but not limited to, any drilling, pumping, reinjection, roadwork or transportation of the geothermal resource, if the activity occurs before any further processing of the geothermal resource by a system for gathering the geothermal resource.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

NAC 362.356 “Plant” defined. (NRS 360.090, 362.120) “Plant” means any facility at which the processing of a geothermal resource occurs, including, without limitation, a plant for generating power.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

NAC 362.358 “Processing” defined. (NRS 360.090, 362.120) “Processing” means any activity that occurs beyond the inlet of a plant that:

1. Changes the physical or chemical characteristics of the production stream of a geothermal resource; or

2. Enhances the marketability of the production stream or the value of any separate component of the production stream.

Ê The term includes, without limitation, any beneficiation, compression, flashing, separation or stabilization that occurs within the plant, other than any reinjection, regulation of wellhead pressure, changing of pressures or temperatures in a reservoir or any other compression that occurs during the production of the geothermal resource.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

NAC 362.360 “Processing allowance” defined. (NRS 360.090, 362.120) “Processing allowance” means any cost associated with converting a geothermal resource into any electricity, heat or other by-product. The term includes, without limitation, any cost associated with an activity occurring after the completion of all mining functions but before the processed product is transported to a market for the product.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

NAC 362.362 “Repowering” defined. (NRS 360.090, 362.120) “Repowering” means to:

1. Remove any inefficient, obsolete or aging equipment that is used in the production stream of a geothermal resource; and

2. Replace that equipment with any new technology or equipment that increases or may increase the efficiency of the processing of the geothermal resource.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

NAC 362.364 “Transaction” defined. (NRS 360.090, 362.120) “Transaction” means a bona fide transaction conducted at arms length involving a geothermal resource at the wellhead.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

NAC 362.366 “Transportation allowance” defined. (NRS 360.090, 362.120) “Transportation allowance” means any cost incurred for the movement of a geothermal resource that is converted to any electricity, heat or other by-product, if the movement of the geothermal resource is performed by the operator and occurs after the geothermal resource is processed.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

NAC 362.368 Determination of gross yield. (NRS 360.090, 362.120)

1. To assess and tax the net proceeds of an operating facility which extracts geothermal resources, the gross yield of the geothermal resources must be determined pursuant to this section.

2. If the transaction involves the direct, arms-length sale of the geothermal resource, the gross yield of the geothermal resource equals the proceeds of the sale of the geothermal resource.

3. If the transaction involves the indirect sale of the geothermal resource, the gross yield of the geothermal resource is the total revenue received from the sale of any electricity, heat or other by-product of the geothermal resource that is agreed upon by the parties to the sale, less any processing allowance or transportation allowance. If the selling price includes any costs for processing or transportation, the person extracting the geothermal resource shall report those costs on a form prescribed by the Department. The Department shall consider those costs in determining the gross yield of the geothermal resource.

4. In the case of an indirect sale of a geothermal resource that is used to produce electricity, all energy, capacity and other payments received, if any, must be included in the gross yield of the geothermal resource.

5. If the costs associated with the processing allowance or transportation allowance are included in a bona fide arms-length contract, the costs shall be deemed to be an appropriate deduction from the selling price. Such costs may include the negotiated costs for the operation, maintenance and replacement of the plant which are paid by the operator of the field, reduced by any negotiated costs for the operation, maintenance and replacement of the field which are paid by the operator of the plant. The negotiated costs must be set forth in a written contract or other document specified by the Department and may include, but are not limited to:

(a) A negotiated sharing by percentage of the operating and maintenance costs of the field and the plant; or

(b) A negotiated agreement that the operator of the field will pay for necessary improvement to the plant.

6. If the costs associated with the processing allowance or transportation allowance are not included in a bona fide arms-length contract, the Department must consider the following:

(a) The annual total cost of operating and maintaining the plant, transmission line and any other facility or equipment used to transport the geothermal product after all mining functions and processing are complete, including, but not limited to, any reasonable and prudent costs incurred for direct wages, benefits, workers’ compensation, supplies, materials and charges for overhead, general liability insurance incurred because of the plant and transmission line and costs for obtaining and maintaining any permit for a site, permit relating to air quality or any other permit or license required to operate the plant or transmission line. The transportation allowance for a transmission line is allowed only in direct proportion to the relationship of the field operator’s investment to the total cost of the transmission line.

(b) The depreciation of the capital investment in the plant and transmission line using the straight-line method over the useful life of the asset established in accordance with the Personal Property Manual.

(d) Amortization of each long-term contract to purchase power using the straight-line method over the stated life of the contract. Any amount amortized pursuant to this paragraph must not exceed 60 percent of the original book value of the plant and transmission line.

(e) An allowance for return on the investment in the plant and transmission line, calculated by multiplying the cost of acquiring the plant and transmission line, as recorded in the books and records of the operator, by the overall rate of return on capital. The overall rate of return on capital must be based on the appropriate electric industry cost of capital study conducted by the Department pursuant to NAC 361.408 and 361.425.

7. For the purpose of paragraph (e) of subsection 6:

(a) If an agreement for the purchase of power is in effect, the Department may grant an allowance for a return on the investment for a period that is equal to the remaining term of the agreement or 15 years, whichever is less. If such an agreement is not in effect, the Department may grant the allowance for a period that is equal to the remaining useful life of the plant and transmission line or 15 years, whichever is less.

(b) If the plant or transmission line is repowered or a reinvestment in the plant or transmission line occurs, the taxpayer may apply to the Department for an extension of the allowance specified in paragraph (a). The Department may grant an extension pursuant to this paragraph for a period that is equal to the remaining life of the assets purchased for the repowering or reinvestment or 15 years, whichever is less. The remaining life of those assets must reasonably reflect the useful life of those assets established in accordance with the Personal Property Manual.

(c) To calculate the allowance specified in paragraph (a), the Department may require the taxpayer to submit any additional information specified by the Department, including, without limitation:

(1) A statement setting forth the amount of any recapitalization or repowering of the plant or transmission line;

(2) A statement setting forth the established life of the assets purchased; or

(3) An audit of the books and records of the taxpayer.

(d) If the Department grants an extension pursuant to paragraph (b), the amount of the return on the investment must not exceed the amount of the recapitalization or repowering of the plant or transmission line.

8. As used in this section, “Personal Property Manual” has the meaning ascribed to it in NAC 361.1361.

(Added to NAC by Tax Comm’n, eff. 10-9-87; A 9-13-91; R012-07, 10-31-2007; R172-12, 12-23-2013)—(Substituted in revision for NAC 362.015)

REVISER’S NOTE.

“Sec. 4. Sections 1, 2 and 3 of this regulation [NAC 362.040 and 362.368] do not apply to or affect:

1. Any depreciation of assets approved by the Nevada Tax Commission before December 23, 2013; or

2. Any powers or duties of the Department of Taxation or any mining operator relating to any depreciation of assets approved by the Nevada Tax Commission before December 23, 2013.”

NAC 362.370 Calculation of net proceeds. (NRS 360.090, 362.120) The net proceeds of a geothermal resource must be calculated using the gross yield of the geothermal resource, as determined pursuant to NRS 362.120 and NAC 362.368, less the amount of any deduction that is available pursuant to NRS 362.120 and this chapter.

(Added to NAC by Tax Comm’n by R012-07, eff. 10-31-2007)

PATENTED MINES

NAC 362.410 Assessment; removal from secured roll for miscellaneous property. (NRS 360.090, 362.030, 362.095)

1. A patented mine which is used for a purpose related to mining or agriculture must be assessed:

(a) At 35 percent of the taxable value of a site of comparable size and similar terrain and location which is used for purposes other than mining; or

(b) At $500,

Ê whichever is greater.

2. Any portion of a patented mine which is used for a purpose unrelated to mining or agriculture and taxed as other property is taxed must be removed from the secured roll of miscellaneous property and added to the secured roll of real property.

(Added to NAC by Tax Comm’n, eff. 1-8-86; A 6-23-86)