Current through September 16, 2024
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.
(c) Any charges for wheeling electricity or
for loss of power in the transmission line.
(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
NRS
360.090,
362.120
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."
