Tax Refund for Imported Coal Denied in Nevada

LAS VEGAS (CN) - Nevada power company NV Energy failed to persuade the state Supreme Court to grant it a nearly $26 million tax refund on imported coal.

As joint operators of NV Energy, Sierra Pacific Power and Nevada Power generate electricity with coal, most of which they import from other states because Nevada coal mines cannot meet the demand.

NV Energy says it paid $25.9 million in use taxes on the coal it bought between April 2002 and October 2006.

Since Nevada law carried a tax exemption for the use of coal mined from state mines, NV Energy petitioned the Tax Commission for a refund.

The 2009 denial of that request led NV Energy to file suit in Washoe County, where a judge struck down the exemption for violating the commerce clause.

In its Dec. 4 ruling affirming the judge's finding, the Nevada Supreme Court noted that there is dispute as to the unconstitutionality of "NRS 372.270's tax exemption for locally mined minerals."

The ruling finds that the offending statutory language is not severable, and that NV Energy is not entitled to a refund.

As to the first issue, the court found that severance would undermine the purpose of the law.

"Were the district court to strike only the offending language, the resulting statute would exempt all sales, storage, and use of the proceeds of mines from taxation under Chapter 372, regardless of where the minerals are mined," Justice James Hardesty wrote for the court. "Because NRS 372.270 was enacted to prevent double taxation of the proceeds of Nevada mines already subject to the net proceeds tax in Chapter 362 - not to exempt entire categories from taxation - such a result would not be in accord with the Legislature's intent in enacting the exemption."

In addition to an attorney general opinion from 1955, Hardesty noted "that the Legislature originally enacted the exemption statute to avoid taxing the proceeds of mines already subject to the net proceeds tax."

NV Energy meanwhile is not entitled to a refund because it "did not pay any higher tax than did its competitors," according to the ruling.

"All paid the same tax," Hardesty added.

As such "NV Energy has failed to show that the tax, as actually assessed, discriminates against interstate commerce," the 12-page ruling states.

"In essence, NV Energy would have this court grant it a refund of tax dollars it rightfully paid pursuant to NRS Chapter 372 because NRS 372.270 would have unconstitutionally exempted a hypothetical competitor from paying this same tax. We decline to do so," Hardesty concluded.

The Tahoe Daily Tribune reported that NV Energy operates two coal-fired electricity plants in Nevada - one near Las Vegas and another in Humboldt County,

From 2002 to 2006, the newspaper said, NV Energy paid the state $14.4 million in sales and use taxes for coal used at the Las Vegas plant and $11.5 million for coal used at the Humboldt County plant.

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