Title 15 . Revenue

Chapter 65 . (Repealed)

Section 120. Deductible mining expenses; inventory costs

15 AAC 65.120. Deductible mining expenses; inventory costs

(a) Except for a person permitted to compute federal net income using the cash basis method, a person shall inventory the costs of production in the state and deduct those costs at the time of sale, the time of export, or the time when the value of the mineral product is included in gross income for the purpose of calculating the mining license tax.

(b) In order to reflect mining net income accurately, both direct and indirect mining expenses must be included in the computation of costs to be inventoried, in a manner consistent with the person's federal income tax records, if the records are kept in a method consistent with generally accepted accounting principles and are consistent from year to year. Mining costs must be allocated to the product extracted during the tax year, whether sold during the tax year or in inventory at the close of the taxable year. Costs that must be accounted for in inventory include:

(1) direct mining expenses that are costs incident and necessary to the extraction of mined materials and ordinary treatment processes, including

(A) direct labor costs that are specifically identified or associated with particular units of mined materials;

(B) mine costs incurred in severing and extracting the materials from the mine, pit, or ground;

(C) maintenance and repair of mining equipment and facilities directly associated with the mine operation and ordinary treatment processes;

(D) supplies used in the mining operation and ordinary treatment processes;

(E) payments made to holders of economic interests in the mining property, including royalties, production payments and net profits;

(F) depreciation on mining equipment, buildings, and other facilities engaged directly in extraction and ordinary treatment processes, computed in accordance with 15 AAC 65.125(f) ;

(G) depletion as calculated in accordance with 15 AAC 65.125(d) and (e);

(H) costs associated with transporting the mined materials through completion of ordinary treatment processes, except transportation costs to transport the resource out of the state.

(2) indirect mining expenses that are costs incident and necessary to extraction and ordinary treatment processes other than direct mining costs, including:

(A) insurance;

(B) general administrative and office expenses;

(C) rent;

(D) utilities;

(E) repair expenses;

(F) losses relating to casualty or theft to the extent uncompensated by insurance;

(G) employee benefits;

(H) taxes paid on Alaska operations, including severance, property, sales, use, and excise taxes.

(c) If two or more properties are involved, indirect expenses allowed under 15 AAC 65.120(b) (2) must be allocated between the properties, based upon the ratio of each property's production during the tax year to the person's total production from the properties.

History: Eff. 8/9/86, Register 99

Authority: AS 43.05.080

AS 43.65.010

AS 43.65.060