A graduated net proceeds occupational tax, by taxing profitability at rates which vary with the level of profitability, encourages important state goals, such as:
Gradual, continuous and complete extraction of metalliferous minerals.
Taxation based on the privileges enjoyed by persons mining metalliferous metallic minerals.
Municipalities incur long-term economic costs as a result of metalliferous mineral mining after the mining operation shuts down. An impact fund, in which is deposited a portion of the tax revenues, should assure that moneys will be available to such municipalities for long- and short-term costs associated with social, educational, environmental and economic impacts of metalliferous mineral mining.
(2) Legislative intent.
It is the declared intent of the legislature to establish a net proceeds occupation tax on persons engaged in the activity of mining metalliferous minerals in this state. The tax is established in order that the state may derive a benefit from the extraction of irreplaceable metalliferous minerals and in order to compensate the state and municipalities for costs, past, present and future, incurred or to be incurred as a result of the loss of valuable irreplaceable metallic mineral resources.
History: 1977 c. 31
Net proceeds occupation tax on mining of metallic minerals; computation. 70.375(1)(ab)
"Controlled entity" means a person at least 50% of the voting stock of which is owned directly or indirectly by another person who is engaged in mining metalliferous minerals.
"Controlling entity" is a person who owns directly or indirectly at least 50% of the voting stock of another person who is engaged in mining metalliferous minerals.
"Extraction of ores or minerals from the ground" includes the extraction, by owners or operators of mines, of ores or minerals from the waste or residue of prior mining unless the extraction is made by a purchaser of waste or residue or by a purchaser of the rights to extract ores or minerals from the waste or residue.
"Gross income from mining" means that amount of income which is attributable to the processes of extraction of ores or minerals from the ground and the application of mining processes, including mining transportation and as further defined in 26 CFR section 1.613-4. In this paragraph "income" means the actual amount for which ore or mineral, less trade and cash discounts actually allowed, is sold if the taxpayer sells the ore or mineral after the application of mining processes. If ore or minerals are sold after the application of nonmining processes, gross income from mining shall be computed as provided in 26 CFR section 1.613-4.
"Gross proceeds" means gross income from mining except as provided under sub. (3)
"Internal revenue code", for taxable year 1981 and thereafter, means the internal revenue code and regulations as amended to December 31, 1981.
"Mine" means an excavation in or at the earth's surface made to extract metalliferous minerals for which a permit has been issued under s. 293.49
"Mine site" means the underground and surface area disturbed by a mine, including the locations from which the minerals or refuse or both have been removed, the surface area covered by refuse, and any surface areas in which structures, haulageways, pipelines, equipment, materials and any other things used directly in connection with the mine are situated.
"Mining" has the meaning under section 613
(c) of the internal revenue code and includes the extraction of ores or minerals from the ground, the transportation of ores or minerals from the point of extraction to the plants or mills at which the treatment processes are applied and the following treatment processes applied to an ore or mineral for which the owner or operator is entitled to a deduction for depletion under section 611
of the internal revenue code:
In the case of iron ore, bauxite and other ores or minerals that are customarily sold in the form of a crude mineral product; sorting, concentrating, sintering and substantially equivalent processes that bring the ore or mineral to shipping grade and form, and loading for shipment.
In the case of lead, zinc, copper, gold, silver, uranium and other ores or minerals that are not customarily sold in the form of the crude mineral product; crushing, grinding and beneficiation by concentration by means of gravity, flotation, amalgamation, electrostatic or magnetic processes, cyanidation, leaching, crystallization or precipitation; not including electrolytic deposition, roasting, thermal or electric smelting or refining; or by substantially equivalent processes or by a combination of processes used in the separation or extraction of the products from other material taken out of the mine or out of another natural deposit.
Any treatment processes provided for by rules promulgated by the department.
For purposes of this section, "mining" does not include the extraction or beneficiation of sand or gravel or the following treatment processes unless they are provided for under subd. 1. d.
: electrolytic deposition, roasting, calcining, thermal or electric smelting, refining, polishing, fine pulverization, blending with other materials, treatment effecting a chemical change, thermal action, molding and shaping.
"Mining-related purposes" means activities which are directly in response to the application for a mining permit under s. 293.37
; directly in response to construction, operation, curtailment of operation or cessation of operation of a metalliferous mine site; or directly in response to conditions at a metalliferous mine site which is not in operation. "Mining-related purposes" also includes activities which anticipate the economic and social consequences of the cessation of mining. "Mining-related purposes" also includes the purposes under s. 70.395 (2) (g)
"Municipality" means any county, city, village, town or school district.
"Person" means a sole proprietorship, partnership, limited liability company, association or corporation and includes a lessee engaged in mining metalliferous minerals.
"Secretary" means the secretary of revenue.
In respect to mines not in operation on November 28, 1981, there is imposed upon persons engaged in mining metalliferous minerals in this state a net proceeds occupation tax effective on the date on which extraction begins to compensate the state and municipalities for the loss of valuable, irreplaceable metalliferous minerals. The amount of the tax shall be determined by applying the rates established under sub. (5)
to the net proceeds of each mine. The net proceeds of each mine for each year are the difference between the gross proceeds and the deductions allowed under sub. (4)
for the year.
The secretary may promulgate any rules necessary to implement the tax under ss. 70.37
and 70.395 (1)
. In respect to mines not in operation on November 28, 1981, ss. 71.10 (1)
, 71.30 (1)
, 71.74 (2)
, 71.80 (6)
, 71.83 (1) (a) 1.
and (b) 2.
and (2) (a) 3.
and (b) 1.
and 71.85 (2)
apply to the administration of this section.
There is imposed upon persons engaged in mining metalliferous minerals in this state in respect to mines in operation on November 28, 1981, a net proceeds occupation tax effective on the date on which extraction begins to January 1, 1991, to compensate the state and municipalities for the loss of valuable, irreplaceable metalliferous minerals. The amount of the tax shall be determined by applying the rates established under sub. (5)
to the average of the net proceeds of the person for the preceding 3-year period. The net proceeds of a person for each year shall be the difference between the gross proceeds, computed under sub. (3)
for the year, and the deductions allowed under sub. (4)
for the year.
(3) Alternate computation of gross proceeds.
If products are sold or transferred to a person operating a smelting, refining or other processing or marketing facility which is located outside of the United States or to a controlled entity or controlling entity of the seller or transferor and if the secretary determines that the gross proceeds under sub. (1) (am)
do not reflect or demonstrate the gross proceeds that would have been received from an unrelated purchaser for the product under similar circumstances, the gross proceeds shall be computed under this subsection. For the purpose of this subsection "control" means direct or indirect ownership of at least 50% of the total combined voting stock of the corporation. The gross proceeds shall be computed by multiplying that part of the production of recovered metalliferous minerals which were sold or transferred during the taxable year by the average price of that mineral for the taxable year and then subtracting the cost of postmining processes, including the cost of capital (interest and earnings) imputed to that production. The average price shall be computed from the monthly prices published in the engineering and mining journal as follows:
Taconite pellets, lower lake ports price, net of unloading charges.
Copper, United States producer price, F.O.B. refinery.
Other metalliferous minerals or other forms of metalliferous minerals not including mineral aggregates such as stone, sand and gravel, at a price determined by the secretary, by rule, from a nationally known publication or other nationally known source listing prices of metalliferous minerals.
If the costs are not excluded in determining gross proceeds and are actually incurred or accrued, there shall be allowed to persons subject to the tax under sub. (2)
the following deductions:
The actual and necessary expenses incurred during the taxable year for labor, tools, appliances and supplies used in mining metalliferous minerals, including the labor of the lessee and the lessee's employes and the amount expended by the lessee for tools, appliances and supplies used by the lessee in the mining operation. The personal labor of the lessee shall be computed at the prevailing wage rate.
The actual and necessary expenses for mining including extracting, transporting, milling, concentrating, smelting, refining, reducing, assaying, sampling, inventorying and handling the ore and for further processing and transferring related to the product for which gross proceeds are received, including the cost of capital (interest and earnings) imputed to smelting and refining expenses.
The actual and necessary expenses for administrative, appraising, accounting, legal, medical, engineering, clerical and technical services directly related to mining metalliferous minerals in this state, excluding salaries and expenses for corporate officers and for lobbying, as defined in s. 13.62 (10)
The actual and necessary expenses directly related to the repair and maintenance of any machinery, mills, reduction works, buildings, structures, other necessary improvements, tools, appliances and supplies used in mining metalliferous minerals extracted in this state.
Except as provided in par. (em)
, federal income taxes paid, state income or franchise taxes paid, property taxes, sales taxes and use taxes paid and other taxes paid and deductible by corporations in computing net income under s. 71.26 (2)
which are allocable to the mine, excluding the tax under this section.
In the case of a mine owned by a corporation that owns other business operations or is part of an affiliated group of corporations eligible to file consolidated federal income tax returns, the determination of deductible state income or franchise taxes and federal income taxes shall be made by calculating the taxable income from the mine as though the mine were a separate entity and applying the federal income tax laws and state income or franchise tax laws to this income as though the mine were filing a separate income or franchise tax return. To calculate taxable income, federal taxable income as it applies to the depletion deduction under section 613
of the internal revenue code shall be adjusted to reflect the difference between Wisconsin income or franchise tax law and federal income tax law.
Rents paid on personal property used in mining metalliferous minerals.
The cost of relocating employes within this state.
The cost of premiums for insurance on persons or tangible assets relating to mining metalliferous minerals.
Losses from uninsured casualty losses and the sale of personal property used in mining metalliferous minerals.
Depreciation or amortization on property used in connection with mining. With respect to property first eligible for depreciation or amortization before January 1, 1981, the deduction shall be limited to the deduction under s. 70.375 (4) (k)
, 1979 stats. With respect to property first eligible for depreciation or amortization on or after January 1, 1981, the deduction shall be limited to the amount allowable as a deduction to corporations in computing net income under s. 71.26 (2)
. The following assets may be depreciated or amortized:
Permit fees, license fees and any other fees for formal written authorization required by a department or instrumentality of the state.
Development of the mine after the date on which extraction begins.
Royalties paid to owners of the mineral rights to the lands where the mine or an extension of the mine is located. In this paragraph, "owners" does not include the person mining or a controlled entity or controlling entity of the person mining.
Amortization by a straight-line method over the life of the mine commencing with production of premining costs, including costs for drilling, geological and engineering studies, design of facilities, pilot mines, mine testing, environmental surveys, facilities siting surveys and other exploration and development activities.
Expenses under par. (m)
incurred after mining begins, those costs to be expensed currently.
Actual and necessary reclamation and restoration costs associated with a mine in this state, including payments for future reclamation and postmining costs which are required by law or by department of natural resources order and fees and charges under chs. 281
, except s. 281.48
, not otherwise deductible under this section. Any refunds of escrowed or reserve fund payments allowed as a deduction under this paragraph shall be taxed as net proceeds at the average effective tax rate for the years the deduction was taken.
If the interest is specifically allocable to the development or operation of a mine or beneficiation facility from which net proceeds are derived, all of the interest is deductible.
If the interest is not specifically allocable to the development or operation of a mine or beneficiation facility, the proportion of the interest that equals the proportion of the capital investment in the mine and beneficiation facilities as compared to the taxpayer's total capital investment.
If a mine is owned by a corporation that is part of an affiliated group of corporations, "interest" means the interest paid to nonmembers of the group.
The deduction for interest under this paragraph shall not exceed 5% of the total gross proceeds for the taxable year.
An allowance for depletion of ores on the basis of their actual original cost in cash or the equivalent of cash.
The tax to be assessed, levied and collected upon persons engaging in mining metalliferous minerals in this state shall be computed at the following rates:
On the amount from $250,001 to $5,000,000, at a rate of 3%.
On the amount from $5,000,001 to $10,000,000, at a rate of 7%.
On the amount from $10,000,001 to $15,000,000, at a rate of 10%.
On the amount from $15,000,001 to $20,000,000, at a rate of 13%.
On the amount from $20,000,001 to $25,000,000, at a rate of 14%.
On the amount exceeding $25,000,000, at a rate of 15%.
For calendar year 1983 and corresponding fiscal years and thereafter, the dollar amounts in sub. (5)
and s. 70.395 (1)
and (2) (d) 1m.
and 5. a.
and (2) (dg)
shall be changed to reflect the percentage change between the gross national product deflator for June of the current year and the gross national product deflator for June of the previous year, as determined by the U.S. department of commerce as of December 30 of the year for which the taxes are due, except that no annual increase may be more than 10%. The revised amounts shall be rounded to the nearest whole number divisible by 100 and shall not be reduced below the amounts under sub. (5)
on November 28, 1981. Annually, the department shall adopt any changes in dollar amounts required under this subsection and incorporate them into the appropriate tax forms.
Reports, appeals, estimated liability. 70.38(1)(1)
On or before June 15, persons mining metalliferous minerals shall file with the department a true and accurate report in the form the department deems necessary to administer the tax under s. 70.375
. The books and records of the person shall be open to inspection and examination to employes of the department designated by the secretary and to the state geologist.
(1m) Estimated liability.
Upon written request and for sufficient reason shown, the department shall allow a person subject to the tax under s. 70.375
to file, on or before June 15, a net proceeds tax return and to pay that tax based upon estimated tax liability. On or before September 15, that person shall file a final report and pay any additional tax due along with interest at the rate of 1% per month from June 15 until the date of payment. If the additional tax exceeds 10% of the person's tax under s. 70.375
for the previous year, the penalty and interest under s. 70.39 (1)
apply. If the final report indicates that the person overpaid the person's liability, the department shall refund the overpayment.
(2) Combined reporting.
If the same person extracts metalliferous minerals from different sites in this state, the net proceeds for each site for which a permit has been issued under s. 293.49
shall be reported separately for the purposes of computing the amount of the tax under s. 70.375 (5)
Any person feeling aggrieved by the assessment notice shall, within 60 days after the receipt of the notice, file with the department a petition for redetermination setting forth the person's objections to the assessment. The person may request an informal conference with representatives of the department prior to September 15. The request shall be indicated in the petition. The secretary shall act on the petition on or before October 1. On or before November 1, the person shall pay the amount determined by the secretary pursuant to the secretary's action on the petition. If the person is aggrieved by the secretary's denial of the petition the person may appeal to the tax appeals commission if the appeal is filed with the commission on or before December 1.
Determinations of the tax appeals commission shall be subject to judicial review under ch. 227