Mining Tax Guide - Minnesota State Legislature

Income Tax Withholding on Mining and Exploration Royalty (cont.)
Royalty Recipients
Individuals who had no Minnesota income tax liability in the
preceding year and reasonably expect to have no liability for the
current year are exempt from the withholding tax. Nonresident
individuals will not incur a Minnesota income tax liability for
2011 and are not required to file a Minnesota individual income
tax return if their Minnesota assignable gross income is less than
$9,500. A W-4 exemption certificate must be filed with the royalty
payer so that Minnesota income tax will not be withheld from the
royalties received.
If tax is incorrectly withheld by the royalty payer, the royalty
recipient must file a Minnesota income tax return, M-1NR,
to obtain a refund. Royalty recipients are not eligible to use
percentage depletion on their individual income tax returns.
Year
Figure 30
Royalty Paid and Income Tax Withheld
(Taconite, natural ore and others)
Royalties paid to the state on state-managed mineral lands are not
subject to withholding tax. However, these revenues are allocated
by law primarily for educational purposes.
The Minnesota Department of Natural Resources manages stateowned
mineral rights for the permanent school fund, permanent
university fund, and taxing districts throughout the state. Interest
and dividends from the permanent school fund are distributed to
school districts throughout the state. Interest and dividends from
the permanent university fund are split between a scholarship
account for students at the University of Minnesota and for
minerals research conducted by the Natural Resources Research
Institute.
Royalty paid
2001 $45,448,947 $265,587
2002 $37,903,733 $142,422
2003 $45,173,508 $216,629
2004 $56,726,329 $214,962
2005 $77,298,269 $332,015
2006 $86,238,285 $238,142
2007 $87,154,748 $334,975
2008 $118,761,439 $415,491
2009 $62,952,973 $207,365
2010 $128,435,093 $137,943
40
Questions
Questions should be directed to the Minnesota Department of
Revenue, Minerals Tax Office, Eveleth.
An instruction booklet, Minnesota Income Tax Withholding, is
available on the department’s website. Although the booklet is
designed for withholding on Minnesota wages, the general filing
requirements also pertain to royalty withholding.
Royalty Tables
The royalty costs per ton beginning in 1995 to the present are
shown in Figure 32.
Income tax
withheld
Revenue from mining on tax forfeited lands is split between the
state’s general fund (20 percent) and local taxing districts (80
percent). From the 80 percent distributed to local taxing districts,
3/9 of the revenue goes to the county, 4/9 to the school district and
2/9 to the township or city where the mining occurs.
For more information, contact the Transactions Section, Lands
and Minerals Division, DNR, in St. Paul (see address and phone
information before the table of contents).