H.B. 362 Tax Payments with Gold: transcript

Uh, Representative Ivory, the time is yours. Thank you, Mr. Chair. Representative Peterson said he would do that in three minutes, and, uh, we'll, we'll make up for the lost time and, and get this through quickly. This is, uh, the bill that you saw last year that didn't get through the Senate. I've got with me our good treasurer, Marlowe Oaks, and then also Brian Summers, the Utah Mining Association. This bill's very simple, and I'll be speaking to the first substitute, uh, first substitute at lines 7 44 describes who a qualified taxpayer is. And when a qualified taxpayer, uh, operates a mine in Utah, that mines gold and rare earth or critical minerals that are defined in the bill, and they pay their tax in gold, they get a 5% tax credit if for an existing mine for five years from 2028 and for new mine for 15 years. And, uh, Brian Summers can explain the value of mining jobs to Utah, the durability, the wage, the uh, uh, what that does to our, our economy. Gold is one of our top imports. It's also one of our top exports as a state. And, uh, we had, last year we had our speaker, we had senate president, governor, all talking about the importance of rare and critical minerals. We've seen that from our president lately, and we've also seen China actually cut off nations and cut off the United States on rare elements. And so this helps to develop that supply, incentivize that supply also helps to begin developing a pilot on a revenue stream for the state in a medium other than dollars, which is what the rest of the world is doing at our breakneck pace. With that, I'd, uh, uh, seat time to our good treasurer to talk about, uh, some of the basic mechanics and then to, uh, to Mr. Summers.

Thank you, uh, Representative Ivory and thank you, uh, committee for the opportunity to speak to this. Yeah, we have, um, pretty much all of the processes in place because of our gold holdings already. So miners, you know, the, the gold would have to be refined and then sent into our vaulting provider. And, and we do have plenty of space for, for the, uh, this, uh, gold coming in. So we, it would be great to have a natural source, a a tax revenue source coming in, uh, as precious metal. So, um, there's really no additional procedures or handling that would be needed. It's pretty straightforward, so

Thank you. And, uh, my name is Brian Summers. I'm the president of the Utah Mining Association. Uh, appreciate the opportunity to present, uh, mining jobs in Utah, um, are a very important part of our economy. So, according to a recent USU report, uh, the energy and extractive industries account for about $23 billion of Utah's GDP, which is roughly 10% of the GDP, but actually account for almost 20% of the, the tax base in the, in the state. Um, and also mining jobs are jobs that, uh, foster other jobs. So usually for every one mining job you have between four and five service jobs that are also attached to that. Um, so this bill, uh, representative Ivory's bill signals Utah commitment to, uh, to gold production and also to critical mineral production, uh, by explicitly using a very broad suite of critical minerals, um, and tying a tax incentive to their co-production, uh, with gold. And this also differentiates Utah from other competing jurisdictions. And we are very much in competition, uh, for investment in the, in the mining space, especially right now. Uh, so very few other states allow for severance tax to be paid in physical metal, um, and off. And, uh, this targeted, uh, severance tax incentive tied to in-state gold production and critical mineral production makes Utah an even more, uh, attractive, uh, jurisdiction for, for capital. Um, obviously this is a, something that the legislature's been working on in terms of putting, uh, Utah in a position to, uh, continue to be one of the top global mining jurisdictions and especially, uh, in terms of, uh, being a leader in critical mineral production. There's a couple of different bills out this session, including this one from Representative Ivory that helped get us to that, uh, to those goals and would appreciate your support on this Bill. Just A couple last points. This is only to the severance tax. It has nothing to do with what we have in the rainy day fund. Completely separate, completely separate reserve account. And, uh, it, it makes sense when you have miners producing gold, refining gold, they would have to sell that to get dollars, lose the bid, ask spread, and then pay the tax. And, you know, we've demonstrated a commitment to acquiring, uh, gold and other, you know, as, as a reserve, as a hedge against inflation. It allows us to, to, to retain that bid, ask spread, even with the credit to the benefit of the state. So, uh, with that, I'd be happy to answer any questions, Mr. Chair.

Okay. Thank you. Can, Can I just ask a question? Is there any difference in the way the two of you pronounce your last name? No, no difference. He just spells it wrong. Okay. Yeah. Thank you. I just, okay. Alright. I just thought that was amusing that they make you chair and vice chair so that we kind of hammer in the pronunciation. I thought that was and yes, we're related. It's distant, so, okay.

Yeah, thank you. Uh, so what, what kind of incentives, uh, does the mining already receive? I mean, mining companies do get some incentives, right? Do you want, do you want me Yeah, go ahead, Mr.

Chair, if I could. Um, so in terms of incentives right now, I mean the two major incentives that apply to the mining industry, uh, one applies only to the mining industry, which is the mineral exploration tax credit, which, uh, specifically incentivizes exploration. So sort of making sure that we have new projects that are coming online. Um, and then the high cost infrastructure tax credit, which doesn't apply just to mining, but a lot of other heavy industries, um, and other types of large, uh, large projects, um, can be used, uh, especially for, for uh, different high cost infrastructure projects for mineral processing and things of that nature. But those are the two major incentives that apply to mining.

And I'm sorry, I could, I could add a little bit to that if you wouldn't mind. I mean, and this is being limited to rare earth elements, right? So they're producing gold, but they have to also be producing rare and critical elements because we know that's a national security issue. We've been hearing that from the president, we've known that for a long time. And with the credit, if gold continues to maintain even a, a small amount of the, the trend that it has, and gold is almost a one-to-one trend with a national debt, one-to-one trend with the money supply, the, the, the credit is made up in a matter of months. 'cause you see me checking the rates every single day and, you know, even, even if it doesn't maintain the pace it's at, and it goes back to pre, you know, 20, 24 trends that credit is made up in a matter of months.

If I may another question. Uh, so the, the minerals you, there's a, um, a severance tax that we put on those minerals, is that right? Yes. I mean, it, it depends. The, the mineral, the severance t is specific to metal ferous minerals, which would include gold and most of the critical minerals. So it seems kinda odd that we have severance tax and then we're giving a tax incentive. I just would say, why don't we lower the severance tax? Would that, I mean that would do the same thing but not quite as complex. Is that, am I looking at that right?

Well, I mean, yeah, you could go that way, but, but this is targeted at a very, very specific issue of national security that the president has identified. We already have a really low severance tax rate compared to other states, and we're actually looking at maybe the need to adjust that up going forward. But, but the point of doing it this way is it targets to that very, very specific, uh, range of elements that have been identified that are critical to economic security, national security. And, and by tying it to, to gold in the payment of gold, like I said, we make up that credit, you know, in a, in a matter of months.

Okay. Well I like the rest of it real well. I just have a concern about that. But anyway, yeah. Thank you Mr. Chair.

Thank you Mr. Chair. Um, I found this really fascinating. I really appreciate the bill. So I just wanna clarify lines 6 84 through 7 43, these are the rare minerals that if a mining operation mines any one of these and gold, they get the tax credit on the severance tax for the critical minerals if they pay the severance tax in gold. Correct. Okay. Um, I'm curious how the fiscal note zeros out because I mean, we're giving them the tax credit. Is that basically assuming that the state then reaps the benefit of the increased value in gold over time? 'cause it seems like a dynamic fiscal note and we're not supposed to do that.

Yeah, I have tried all my life to figure out the magic of fiscal notes fair and, um, haven't quite come there, but I think the fact that this is starting out into 2028, that, that it's out beyond that. And then, you know, what you were talking about the, you've got the offset.

Okay. Alright. Well that's fascinating and I'm with you on the fiscal note. It's a, it's a mystery to me. Um, one more question if I may, Mr. Chair? Yes. Um, representative, can you tell me how to say line 7 22? 7 22?

Um, chair has a question. Um, as I read the fiscal note, it has an ongoing fiscal note of 463,000. 'cause that says it's ongoing. It would be offset by one time, but ongoing of 4 63 maybe could the sponsor, Representative Ivory explain the ongoing?

Yeah, honestly, Mr. Chair, I, I would be at a loss to, to do that. Um, I'd be happy to get with the fiscal analysts and get back to you though.

Yeah, thank you Mr. Chair. Um, I know a lot of this is focused on mining, but I know we do a lot of refining of gold that comes from out of the state as we think about maybe including that as well.

We, we could, um, this really would only pay pertain to those that are paying taxes in Utah. So they would have operations in Utah.

I don't know, maybe Mr. Summers could speak To, so I, I think one of our biggest exports is gold and I think a lot of it comes from out of the state, but it's refined in Utah. I'm just wondering if there's any benefit in, in extending that opportunity for, for the gold that comes from out state.

Right. There wouldn't be a severance tax associated with gold that would come in to be refined, but something to look at down there road perhaps.

But I was yeah. Thinking if we could do something because I, there's a, they do a lot of refining here, right? Correct. I was like, maybe we can do something as well to Keep some of that gold.

Yeah, and the real idea on this is gold is now the number one reserve asset for foreign central banks. So all central banks other than the United States, gold is their number one reserve asset and increasingly using it as a payment mechanism. So while this is a small pilot, it, it gets us in the game of having a gold revenue stream. And from there the possibilities are really tremendous. I mean, you know, just speculative, but you know, we could let out a bond and gold based bond and have, as, you know, negative interest rate. I think a lot of that gold that we export is going to London probably to banks. There is my guess, but it's something we we might wanna be thinking about. Yeah.

Yeah. Thank you Mr. Chair, can you re-explain to me? 'cause I thought I heard you say there was a 5% tax credit and then you said something about 15%. Did I miss? Oh, I'm sorry. I don't think, yeah, I didn't mean to say 15%. If I did, if you look at, and I may have said percent instead of years. Um, Okay, I I just need clarification on that.

Yeah, let get seven. If you look at lines 7 1 2, 7 50 to 7 58. So if you're an existing mining operation, the tax credit is good for five years. The 5% tax credit is good for five years. If you're a new mining operation, you're coming in, you're establishing new mining operations, both gold and rare earth elements, paying your tax in gold, then that credit extends for 15 years. Okay, perfect. And that's where we really, you know, like Brian was talking about, we're one of the top mining, uh, jurisdictions in the world, in the mining industry. And to attract those kinds of jobs and be at the heart of what is very essential to national security. In 2010, Japan had a, had a dispute with China over the, the inland sea and the fishing rights on the inland sea China shut off rare earth elements to Japan. It shut down their economy. And, and you know, we, we, we've seen that being used as a weapon and this is a way to start developing those domestic supplies.

Maryanne Christensen, executive director of Utah Legislative Watch and I'm here to speak in favor of the bill because I'm just super excited about the state of Utah becoming a holder of gold and other precious medals. I have spent a lot of years learning about the dollar and separated how we separated the dollar from the gold standard, how we became a fiat currency, how, uh, baked into the Federal Reserve Act is, um, massive inflation and the devaluation of the dollar. And then I've watched in recent years the rise of the bricks currency with five members, um, Brazil, Russia, India, China and South Africa. South Africa being one of the, the having gold as a major resource there. Their intention is to launch the bricks in onto the world currency, to, to take, to remove the dollar from the world currency and take over, um, backed by gold tied to gold. And so, um, when that happens, it's gonna be a really dreadful day for the dollar. So it is time for us as a state to just stabilize our finances by moving more to these precious metals. Everything that helps us do that is a huge step that's very, very necessary to our future. So thank you very much for voting. Yes.

Just in the nick of time. Yep. Great. So there's a theory. Oh, my name is Trevor D***s student and John s College and it talks about the difference between fragile systems, resilient systems, and what's called anti-fragile systems. And that term was used to define systems that get stronger under pressure. That's what this bill does and that's why I'm in support. Thanks.

Thank you Mr. Chair. I'd like to make a motion to pass out. First substitute or to adopt first. Oh, we've already substituted it. I think the substitute needs to be adopted. Yeah. I would like to make a motion to adopt first substitute house bill 360 2.

I think it, at this point, every time I speak I mess it up. So let's just go with that.

Yeah. Thank you for the motion. What was mentioned on the Bricks Plus they announced the first week of December a a, a gold back currency for all of the Brazil, Russia, India, China, South Africa, about 40 other nations that 40% gold-backed, and then the rest backed by their own currencies. This is moving very quickly. Ray Dalio, who was the head of Bridgewater largest hedge fund in the world, just last week speaking at the World Government Summit, said gold is the, uh, safest money in the world right now. And anyway, we're seeing a lot of change. Money is changing and this just takes a foot in the door to start developing that revenue stream. Appreciate the motion. Thank you.

Um, be, I would like to make a motion to pass out favorably first substitute house bill 360 2 tax payments with gold.

I'll speak very briefly. This has been a really interesting policy area that you've embarked upon and it has, I'm sure we all noticed, raised, um, a lot of voices of support and in opposition. Um, I really appreciate that this walks it out carefully and as a pilot program so that we can begin to work on those that have got, um, some concerns about it and build trust and demonstrate the, the benefit that that may come. Thank you.

Good morning, Mr. Chair. Members of the Committee. You pulled that microphone a little closer to Candace. That, is that a little better? That's much better. Good morning, Mr. Chair, members of the committee great to be with you today. Just wanted to comment that we have been working with Representative Peterson on this bill to try to find the balance, as was mentioned in previous comments and discussion. It is a tricky thing, so giving the flexibility to locals to do what they need to do while giving the overall state policy direction on trying to get more water to Great Salt Lake is, was kind of the balance we were working on. Candace, you, we, I, I know you and I, we all know each other, but would you mind giving us your full name and who you represent? Thank You for the reminder.

Uh, Candace Hager. I'm the director at the Division Water Quality.

Thank you, Mr. Chair. Can you respond to the Jordan River situation? I, that just alarmed me a little bit. That's in my district, so any help will be greatly appreciated. Sure.

Thank you Senator. Mr. Chair, if I might please. Um, yes. So there, as was mentioned, there are concerns about water quality getting to ga, Jordan River, especially when you have these storms that come in and as was discussed, all the pollutants kind of go into those waterways. Uh, with retention basins and detention basins, they can help to settle the water, reduce the amount of pollutants going into it. Um, the, the question really becomes is does the water get held there indefinitely or does it have an outfall to release into waterways? And so this po this bill, uh, really focuses on that. At, at some point, has an outfall and will get to the waterways. It still has the opportunity to settle out some of the pollutants. It's not geared solely on infiltration, as was discussed, but it, it does help to address some of the issues.

Um, just a follow up question, Mr. Chair. Thank you.

Representative Ivory, Mr. Speaker pro tem, I have a very important announcement to make. This is my last gold bill of the 2020 succession. This is actually an incentive for our largest well incentive. It's an ability for one of our largest industries in the state mining industry to instead of mining gold and then losing the spread by converting it to dollars and then paying the tax, it allows 'em to pay the tax directly in gold, refined to a pure standard deposited with the Brink's vault completely separate from our rainy day account, but it allows them to transact in gold and then between the miners in the state, we get to capture that spread by capturing the spread on the buy sell. We're also, uh, able then in this bill to allow for an incentive to critical and rare earth miners who mine in Utah and pay their tax in gold. And that Mr. Speaker pro tem is the bill.

Will waive. Thank you.