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SENATE BILL NO. 265
INTRODUCED BY D. GRIMES, R. DALE,
E. BERGSAGEL, J. COBB, W. CRISMORE, A. ELLIS, E. FRANKLIN,
L. GROSFIELD, D. HARRINGTON, T. KEATING, J. LYNCH, B. MCCARTHY, R. MENAHAN,
K. MESAROS, D. MOOD, K. OHS, S. ORR, J. QUILICI, D. SHEA, L. SOFT, B. STORY, B. TASH,
B. THOMAS, L. GRINDE
AN ACT PROVIDING FOR EXPLORATION INCENTIVE CREDITS FOR ACTIVITIES INVOLVING EXPLORATION FOR MINERAL AND COAL DEPOSITS IN THE STATE; PROVIDING A TAX DEDUCTION FOR DONATED EXPLORATION INFORMATION; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND A RETROACTIVE APPLICABILITY DATE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Purpose and statement of policy. The legislature recognizes the critical importance of mineral development to the vitality of Montana's economy and the state's revenue base. The legislature also recognizes that there has been a decline in mineral exploration throughout the state. The purpose of [sections 1 through 10] is to encourage mineral exploration in Montana without adversely affecting tax revenue received from existing economic activity in the state.
Section 2. Definitions. For purposes of [sections 1 through 10], the following definitions apply:
(1) (a) "Certified expenditures" means those costs incurred for activities in direct support of exploration activity conducted at a specific exploration site for the purpose of determining the existence, location, extent, or quality of a mineral or coal deposit. The term includes:
(i) the costs of obtaining the approvals, permits, licenses, and certificates for an exploration activity referred to in [section 3];
(ii) direct labor costs and the cost of benefits for employees directly associated with work described in [section 3];
(iii) the cost of renting or leasing equipment from parties not affiliated with the person requesting and taking the credit;
(iv) the reasonable costs of owning, maintaining, and operating equipment;
(v) insurance and bond premiums associated with the activities set out in subsections (1)(a)(i) through (1)(a)(vii);
(vi) payments to consultants and independent contractors; or
(vii) the general expense of operating the person's business, including the costs of materials and supplies, if those expenses and costs are directly attributable to the work described in [section 3].
(b) The term does not include return on investment, insurance or bond premiums not covered under subsection (1)(a)(v), or any other expense that the person has not incurred to complete work described in [section 3].
(2) "Credit" means the exploration incentive credit for activities involving mineral and coal deposits authorized by [sections 1 through 10].
(3) "Exploration activity data list" means, as applicable, a summary of work completed during the year that includes but is not limited to:
(a) the number of core or rotary drilling holes completed;
(b) chemical analytical data available; or
(c) aerial photographs or a topographic or geologic map showing the location of the drill holes, sample locations, or the other exploration activities undertaken.
(4) "Geochemical methods" means geochemical data gathering methods, including the collection of soil, rock, water, air, vegetation, and similar samples and their chemical analyses.
(5) "Geophysical methods" means all geophysical data gathering methods used in mineral or coal exploration, including seismic, gravity, magnetic, radiometric, radar, and electromagnetic and other remote sensing measurements.
(6) "Mineral" means those substances defined as minerals by 82-4-303 and coal as defined by 82-1-111.
(7) (a) "Mining operation" includes all operating and nonoperating activities related to a mineral deposit interest and may be composed of one or more mining properties.
(b) In determining whether mining properties are part of the same mining operation, the department may consider whether the operation, in conducting mining activities on several mining properties, uses common personnel, supply and maintenance facilities, mining-related treatment processes, storage facilities, roads, pipelines, transportation equipment, and mining techniques and technology and may also consider the extent to which the mineral deposit interest comprises a common mining property.
(8) "Person" means a sole proprietorship, corporation, partnership, small business corporation as defined in 15-31-201, or limited liability company as defined in 35-8-102.
(9) "Tax year" means the calendar year.
Section 3. Exploration incentive credit. (1) The department shall grant to a person a credit against the person's tax liability under Title 15, chapter 30 or 31, for the certified expenditures of each of the following exploration activities that are performed on land in the state for the purpose of determining the existence, location, extent, or quality of a mineral or coal deposit, regardless of land ownership:
(a) surveying by geophysical or geochemical methods;
(b) drilling exploration holes;
(c) conducting underground exploration;
(d) surface trenching and bulk sampling; or
(e) performing or other exploratory work, including aerial photographs, geological and geophysical logging, sample analysis, and metallurgical testing.
(2) (a) Except as provided in subsection (3), credit may not be granted under subsection (1) for exploration activity described in subsection (1) that occurs after the construction commencement date of a new mine.
(b) For the purposes of this subsection (2), "construction commencement date of a new mine" means the date no later than which all of the following have occurred:
(i) there has been issued to the owner or an agent of the owner permits, leases, title and other rights in land, and other approvals, permits, licenses, and certificates by federal, state, and local agencies that a reasonable and prudent person would consider adequate to commence construction of a mine in the expectation that all other approvals, permits, licenses, and certificates necessary for the completion of the facilities will be obtained;
(ii) all approvals, permits, licenses, and certificates are in full force and effect and without any modification that might jeopardize the completion or continued construction of the mine; and
(iii) an order, judgment, decree, determination, or award of a court or administrative or regulatory agency enjoining, either temporarily or permanently, the construction or the continuation of construction of the mine is not in effect.
(3) In addition to the grant of a credit for a new mine under subsection (2), a credit may be granted under subsection (1) for exploration activity for a mine that had previously operated, that has ceased to operate, and for which all previous mining approvals, permits, licenses, and certificates that allowed the previous operation are no longer in effect. However, a credit may not be granted under subsection (1) for exploration activity that occurs after the mine reopening date. For the purposes of this subsection (3), "mine reopening date" means the date not later than which all of the following have occurred:
(a) there has been issued to the owner or an agent of the owner permits, leases, title and other rights in land, and other approvals, permits, licenses, and certificates by federal, state, and local agencies that a reasonable and prudent person would consider adequate to commence operation of the former mine in the expectation that all other approvals, permits, licenses, and certificates necessary for the completion of the facilities will be obtained;
(b) all approvals, permits, licenses, and certificates for the reopened mine are in full force and effect and without any modification that might jeopardize the reopening of the former mine; and
(c) an order, judgment, decree, determination, or award of a court or administrative or regulatory agency enjoining, either temporarily or permanently, the reopening of the former mine is not in effect.
Section 4. Procedure for requesting and certifying credit. To obtain the credit authorized by [sections 1 through 10], a person shall submit a request to the department for the credit as follows:
(1) On a form provided by the department, the person shall submit the request and a statement of expenditures for the previous calendar year not later than 60 days after the close of that calendar year.
(2) The request must:
(a) describe the work accomplished during the previous year, the number of employees, and the names and number of consultants; and
(b) provide a detailed list or ledger of expenditures related to the accomplishments described in subsection (2)(a) and an exploration activity data list.
(3) The person submitting the request is not required to transmit copies of receipts with the request, but the statement of expenditures is subject to audit at the discretion of the department.
(4) If the department decides to audit the statement of expenditures, the department may require the person submitting the request to justify claims of expenditures with receipts and other reliable information.
(5) The department shall respond to the request by September 30 by certifying or not certifying the person's expenditures. If the department does not certify expenditures, the department shall state the reasons for denial of certification and give the person making the request an opportunity to correct any deficiencies or to provide additional information. If the department certifies expenditures, the department shall specify the exploration activity data list requirements for that year that must be presented to the department at the time of the taking of the credit.
(6) If the department neither certifies nor denies certification of expenditures by September 30, the expenditures are certified as submitted.
Section 5. Application of credit. (1) In a tax year, a person may take a credit that was approved under [section 4] against taxes payable by the person. The credit may not exceed
50% of the person's tax liability under either Title 15, chapter 30 or 31, for the tax year that is related to production from the mining operation at which the exploration activities occurred.
(2) If a person applies the credit against the person's tax liability under subsection (1), the department shall disallow application of the credit under that provision unless the person files with the person's tax return an accounting of the person's exploration activities for each mining operation that is included in the tax return and as to which the credit is being applied. The accounting of exploration activities required by this subsection must be made on a form prescribed by the department. On the form, the person shall:
(a) identify the mining operations for which the credit is claimed; and
(b) set out the gross income attributable to the mining operations and other information about the mining operations that the department may require.
(3) A person may not apply the credit under this section if the application, when added to credits previously applied under this section, would exceed the total amount of the credits approved under [section 4].
Section 6. Credit carryover. Except as its application is limited by [sections 5 and 7], a portion of a credit that is not applied under [section 5] during a tax year may be carried forward to and applied during a subsequent tax year.
Section 7. Credit limitation. A credit for a specific exploration activity may not exceed $20 million and accrues at the rate of 50% of the certified expenditures each year. The credit must be applied within 15 tax years after the taking of the credit is approved under [section 4]. However, the tax year or years in which the credit is applied need not be:
(1) the tax year in which the person first incurs liability for payment of tax based on the person's activity that is the basis of the claim for the credit; or
(2) consecutive tax years.
Section 8. Credit assignment. A person may assign a credit to the person's successor in interest for the mining operation at which the exploration activities occur, but only if the successor in interest is a person qualified to obtain the credit under [section 3]. A credit may not be assigned except as permitted in this section.
Section 9. Record of credit use. For each mining operation, the department may require a person who submits a request to take the credit under [section 4] to provide with the request a record of:
(1) the person's past use of credits taken under [section 4] and [section 5]; and
(2) other information that the department requires to determine if approval of the taking of the credit by the person would exceed the limits on use of the credit under [sections 1 through 10].
Section 10. Deduction for donation of exploration information. (1) In addition to all other deductions from adjusted gross individual income allowed in computing taxable income under Title 15, chapter 30, or from gross corporate income allowed in computing net income under Title 15, chapter 31, part 1, a taxpayer may deduct documented expenses for the donation of mineral exploration information generated as part of the certified expenditures. The information must be donated to the Montana tech foundation to reside as part of the Montana tech research library, and the documented expenses must be based on the cost of recreating the donated information.
(2) The Montana tech foundation has the right to limit information accepted and deductions granted to that exploration activity data that is needed as part of the Montana tech research library.
(3) A deduction under this section may not exceed 20% of the actual value of the data if a tax credit for the same exploration activity data is taken under [sections 1 through 10].
Section 11. Codification instruction. [Sections 1 through 10] are intended to be codified as an integral part of Title 15, chapter 32, and the provisions of Title 15, chapter 32, apply to [sections 1 through 10].
Section 12. Effective date. [This act] is effective on passage and approval.
Section 13. Retroactive applicability. [This act] applies retroactively, within the meaning of 1-2-109, to December 31, 1998.
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Latest Version of SB 265 (SB0265.ENR)
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