Mining Tax Guide - Minnesota State Legislature

Taconite Production Tax (cont.)
granted from the fund must be repaid to the taconite economic
development fund. The portion of the money to be repaid is 100
percent of the grant if the equipment is removed from the taconite
tax relief area within 12 months after receipt of the money from
the fund, declining by ten percent for each of the subsequent nine
years during which the equipment remains within the taconite
tax relief area.”
Each producer has two potential sources of TEDF money:
1. Acid or fluxed pellets: The production tax amount credited to
each producer’s share of the Taconite Economic Development
Fund is 30.1 cpt.
2. Pellet chips and fines: This remains the same as last year—an
amount equal to 50 percent of the tax for pellet chips and fines
sold not exceeding 5/16 inch is allocated to each company’s
share of the Taconite Economic Development Fund. The
total amount may not exceed $700,000 for all companies.
If the total claimed exceeds $700,000, each company’s share
will be prorated. The determination of this allocation is
based on current production year sales of chips, fines and
concentrate—not the three-year average of production. Sales
of crushed pellets do not qualify for this credit. [M.S. 298.28,
subd. 9a(b).]
Therefore, each company is eligible to receive 30.1 cents per
taxable ton plus an additional amount based on current year tons
of chips and fines sold. A list of TEDF-funded projects and yearly
distributions is shown in Figure 21.
Fluxed Pellets
Fluxed pellets have limestone or other basic flux additives
combined with the iron concentrates before pelletizing. Two
companies, Minorca and USS, produce fluxed pellets, although all
have experimented with them. United Taconite, Hibbing Taconite,
Keewatin Taconite and Northshore are producing a partially fluxed
pellet containing a low percentage of limestone additives.
M.S. 298.24, subd. 1(f) allows the weight of flux added to be
subtracted from the pellet weight for production tax purposes.
All tables in the Minnesota Mining Tax Guide with production
statistics use an equivalent or calculated weight for fluxed pellets.
The taxable weight is the dry weight less the weight of the flux.
The weight of the flux is determined by a metallurgical calculation
based on the analyses of the finished pellet, the concentrate and
the flux stone. Beginning in 1988 (1987 production year), a flux
credit was allowed against production tax.
Occupation tax is based on iron units and uses the full weight
including flux.
Pellet Weighing
Pellet tonnages are reported on a dry weight basis. This began
with the 1990 production year.
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Definition of Taconite Tax Relief Area
One common prerequisite exists for all taconite aids and grants; the
recipient must be within the geographic confines of the Taconite
Tax Relief Area or the Taconite Assistance Area. This is defined by
state laws (M.S. 273.134 and M.S. 273.1341) as follows:
“Tax relief area” means the geographic area contained within
the boundaries of a school district that meets the following
qualifications:
(1) It is a school district in which the assessed valuation of
unmined iron ore on May 1, 1941, was not less than 40
percent of the assessed valuation of all real property and
whose boundaries are within 20 miles of a taconite mine or
plant; or
(2) It is a school district in which, on Jan. 1, 1977, or the applicable
assessment date, there is a taconite concentrating plant or
where taconite is mined or quarried or where there is located
an electric generating plant which qualifies as a taconite
facility.
Definition of Taconite Assistance Area
A “taconite assistance area” means the geographic area that
falls within the boundaries of a school district that contains a
municipality in which the assessed valuation of unmined iron
ore on May 1, 1941, was not less than 40 percent of the assessed
valuation of all real property. Any area within the Taconite Tax
Relief Area is also considered to be within the Taconite Assistance
Area.
State Contribution (M.S. 298.28)
The commissioner of revenue shall determine a state aid amount
equal to a tax of 33 cents per taxable ton of iron ore concentrates
for production year 2001 and 22 cents per taxable ton of iron ore
concentrates for production years 2002 and thereafter. There
is appropriated from the general fund to the commissioner an
amount equal to the state aid determined under this section.
It must be distributed under M.S. 298.28, as if the aid were
production tax revenues.
2011 Legislation
Taconite Production Tax
For 2011 production and future years, if there are excess
distributions from the 3.43 cent, 15.72 cent, and taconite railroad
school funds after covering the levy reduction in M.S. 126C.48,
subd. 8, then the excess money must be distributed to the cities
and townships within the school district in the proportion that
their taxable net tax capacity within the school district bears to the
net tax capacity of the school district for property taxes payable
in the year prior to distribution.