Mining Tax Guide - Minnesota State Legislature

2011 PRODUCTION TAX DISTRIBUTION ..........Inside front cover
Minerals and Mining Agencies ..............................................................i
INTRODUCTION .................................................................................. 1
TACONITE PRODUCTION TAX (M.S. 298.24, M.S. 298.28) ........ 5
2011 Legislation ............................................................................... 6
Distribution of Funds (M.S. 298.28) .............................................. 7
Aid Guarantee (M.S. 298.225) ......................................................11
Taconite Production Tax Distribution Calculation ....................12
Taconite Property Tax Relief .........................................................14
Taconite Homestead Credit Example ...........................................15
DIRECT REDUCED IRON (DRI) ....................................................24
IRON RANGE RESOURCES .............................................................25
OCCUPATION TAX (M.S. 298.01 - 298.18) ......................................30
2010 Occupation Tax Final Directive ..........................................31
Backup 2010 Data to Final Directive ...........................................32
INCOME TAX WITHHOLDING ON MINING AND
EXPLORATION ROYALTY (M.S. 290.923) ......................................39
SALES AND USE TAX - Taconite and Iron Ore ................................42
CAPITAL EQUIPMENT EXEMPTIONS AND REFUNDS ..........44
SALES AND USE TAX - Aggregate Material .....................................45
AD VALOREM TAX ON AUXILIARY MINING LANDS FOR
TACONITE OPERATIONS (M.S. 272.01) .........................................46
St. Louis County Mining Land Assessment Schedule ........................46
AD VALOREM TAX ON UNMINED TACONITE (M.S. 298.26) .47
AD VALOREM TAX ON UNMINED NATURAL IRON ORE
(M.S. 272.03, M.S. 273.02; M.S. 273.12 - 273.13, M.S. 273.165,
M.S. 273.1104) .........................................................................................48
AD VALOREM TAX ON TACONITE RAILROADS
(M.S. 270.80 - 270.88) ............................................................................50
AD VALOREM TAX ON SEVERED MINERAL INTERESTS
(M.S. 272.039, M.S. 272.04, M.S. 273.165) ..........................................51
TAXES ON OTHER MINING AND/OR EXPLORATION
Ad Valorem Tax (M.S. 272 - M.S. 273) ........................................53
Net Proceeds Tax (M.S. 298.015 - 298.018) ................................54
Occupation Tax/Corporate Income Tax (M.S. 298.01) .............55
Withholding Tax on Royalty (M.S. 290.923) ..............................55
Sales and Use Tax (M.S. 297A) .....................................................55
GLOSSARY OF TERMS .......................................................................56
MINING INDUSTRY TAX CALENDAR .........................................58
MINNESOTA MESABI RANGE MAPS ...........................................59
MAP OF NORTHEASTERN MINNESOTA ...................................60
Table of Contents
INTRODUCTION
Figure 1 — Iron Ore Production Comparison ................................................................................1
Figure 2 — Distribution of Mining Taxes .......................................................................................2
Figure 3 — History of Minnesota Taconite Production ..............................................................3
Figure 4 — Minnesota Taxes Levied on Taconite ..........................................................................4
TACONITE PRODUCTION TAX
Figure 5 — Douglas J. Johnson Economic Protection Trust Fund and
Environmental Protection Fund .............................................................................. 13
Figure 6 — Taconite Property Tax Relief Fund Balance ............................................................ 14
Figure 7 — Taconite Property Tax Relief Fund Distribution ................................................... 14
Figure 8 — 57% & 66% Taconite Homestead Credit Example - 2011 ..................................... 15
Figure 9 — Taconite Production Tax Distribution - (2005-2010) ........................................... 16
Figure 10 — Taconite Production Tax Distributions to Cities & Townships - 2011 ...... 17 & 18
Figure 11 — Taconite Production Tax Distributions to School Districts - 2011 .................... 19
Figure 12 — Taconite Production Tax School Bond Credits and Payments ........................... 19
Figure 13 — Taconite Production Tax Distributions to Counties - 2011 ................................ 20
Figure 14 — Taconite Production Tax and Tax Revenue - by Company ................................. 20
Figure 15 — 2010 Production by Product Type ........................................................................... 21
Figure 16 — The Changing Trends in Minnesota Taconite Production ................................... 21
Figure 17 — Production Tax Rate History & Index Summary (new) ....................................... 22
Figure 18 — Taconite Produced and Production Tax Collected ................................................ 23
DIRECT REDUCED IRON (DRI)
Figure 19 — World Direct Reduced Iron Production ................................................................. 24
IRON RANGE RESOURCES AND REHABILITATION BOARD
Figure 20 — Fiscal Year 2012 IRRRB Budget ............................................................................... 27
Figure 21 — Taconite Economic Development Fund ................................................................. 28
Figure 22 —Taconite Industry Investments .................................................................................. 29
OCCUPATION TAX
Figure 23 — Occupation Tax Mine Value-Taconite ................................................................... 33
Figure 24 — Occupation Tax Mine Value and Occupation Tax Paid - 2010 ........................... 34
Figure 25 — Occupation Tax Paid By Company (2003 - 2010) ................................................. 34
Figure 26 — Crude Ore Mined ..................................................................................................... 35
Figure 27 — Occupation Tax Collected on Iron Ore, Direct Reduced Iron & Taconite
Production ................................................................................................................................... 36
Figure 28 — Taconite Industry Occupation Tax Report Averages on a Per Ton Basis ........... 37
Figure 29 — Taconite Industry Occupation Tax Report Average Cost Per Ton ...................... 38
INCOME TAX WITHHOLDING ON MINING AND EXPLORATION ROYALTY
Figure 30 — Royalty Paid and Income Tax Withheld ................................................................ 40
Figure 31 — Average Royalty Cost Per Ton of Pellets Produced .............................................. 41
Figure 32 — Royalty Costs Per Ton (graph) ................................................................................ 41
SALES AND USE TAX
Figure 33 — Use Tax Paid .............................................................................................................. 43
AD VALOREM TAX ON UNMINED TACONITE
Figure 34 — Unmined Taconite Tax Paid ..................................................................................... 47
AD VALOREM TAX ON UNMINED NATURAL IRON ORE
Figure 35 — Minimum Rates.......................................................................................................... 49
Figure 36 — Iron Ore Ad Valorem Tax Payable ........................................................................... 49
AD VALOREM TAX ON TACONITE RAILROADS
Figure 37 — Taconite Railroad Ad Valorem Tax Assessed ......................................................... 50
AD VALOREM TAX ON SEVERED MINERAL INTERESTS
Figure 38 — Tax Collection and Distribution .............................................................................. 51
Figure 39 — Severed Mineral Interest Return .............................................................................. 52
TAXES ON OTHER MINING AND/OR EXPLORATION
Figure 40 — Index of Other Mining/Exploration Taxes ............................................................. 53
Figure 41 — Mining Employment and Wages.............................................................................. 55