Tax Law

Taxation of Mining Operations

Taxation of Mining Operations on the LexisNexis® Tax Center provides current analytical insight into:

  • Electricity Produced from Renewable Resources. The American Recovery and Reinvestment Act of 2009 (ARRA) allows taxpayers to make an irrevocable election to have the certain qualified facilities be treated as energy property eligible for a 30-percent investment credit: wind facilities, closed-loop and open-loop biomass facilities, geothermal and solar energy facilities, landfill gas facilities, trash facilities, qualified hydropower facilities, and marine and hydrokinetic renewable energy facilities. For this purpose, qualified facilities are most of the facilities otherwise eligible for the PTC which are placed in service in 2009, 2010, 2011, 2012, or 2013 (wind in 2009, 2010, 2011, or 2012).However, this ARRA ITC is not allowable if a PTC has been allowed; and a PTC is not allowable if this ARRA ITC is elected... For further discussion, see Taxation of Mining Operations -- 6.02[2][b][iv].
  • Nontaxable Exchanges. Is Section 1031 treatment appropriate for two mineral lessees, both of whom want to consolidate their holdings by subleasing to each other, i.e. each assigns his lease to the other and retains an overriding royalty in the property subleased? Even though economically they would seem to have exchanged their operating rights, in the author's view they have each subleased from a tax standpoint since each has transferred his operating rights retaining a nonoperating interest which will endure for the life of the property rights transferred. If lease treatment is appropriate for each, then the question arises whether the value of the rights received should be accorded bonus treatment or whether each sublease is treated separately. For additional insight, see Taxation of Mining Operations -- 8.05.
  • Intangible Amortization. Combined licenses (construction and operation license) issued for nuclear power plants have been held to be § 197 intangible within the meaning of  § 197(d)(1)(D). Each combined license was not excepted from the definition of § 197 by reason of 1.197-2(c)(3). For more details, see Taxation of Mining Operations -- 6.01[7].

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