Title 15 . Revenue

Chapter 65 . (Repealed)

Section 200. Temporary exemption for new mining operation

15 AAC 65.200. Temporary exemption for new mining operation

(a) As provided in AS 43.65.010 (a), a new mining operation is exempt from the tax under AS 43.65 for three and one-half years after production begins. The department will, in its discretion, suspend passage of the exemption period if mine production ceases for other than seasonal or ordinary shutdowns. Under AS 43.65.010 (a), the tax exemption granted to new mining operations does not apply to the mining of sand and gravel.

(b) As provided in AS 43.65.010 (b) and 15 AAC 65.210, the Department of Natural Resources will notify the department of the date on which production begins for each new mining operation. If the department determines that an operation qualifies as a new mining operation, the department will issue a certificate of exemption in accordance with 15 AAC 65.220.

(c) The department will consider the following factors in determining whether a person's operation is a new mining operation eligible for the three and one-half year exemption:

(1) whether the person or a prior owner or operator of the property was liable to pay the mining license tax on net income from the property after January 1, 1948;

(2) the location of the operation in relation to other properties being operated by the person;

(3) the geological structure of the ore body in relation to other ore bodies the person mines;

(4) the mining techniques and technology used; and

(5) the extent to which the person is required to invest new capital, employ different personnel and use additional facilities to exploit the resource.

(d) A temporary exemption will be granted to a person making extensive capital additions or improvements, and to a person applying new mining methods and techniques to a property previously owned and operated by another person, but only if the previous mining operation has been closed, shut down, or abandoned for more than one mining season. An exemption will not be granted

(1) to a person who merely extends or expands an operation onto previously unmined properties, or

(2) when changes in ownership of an existing operation take place.

(e) The following examples illustrate eligibility for the three and one-half year tax exemption:

(1) Mining Company A has been a gold dredging operator for more than three and one-half years on three properties which it owns or leases. The properties are joined contiguously and lie within a single river valley. To extend its current operation, Company A acquires an additional lease which shares a common boundary with the other properties. Expanding the operation by developing and mining the additional leased property does not create a new mining operation eligible for the exemption.

(2) Company B has been conducting mining operations on 15 coal leases for 20 years. In 1985, the company sells the entire operation to Company C. Company C continues to operate on the properties and expands the operation by adding new equipment, including dredges, crushers, and bulldozers. Company C is not entitled to an exemption. A change in ownership of existing mining properties does not create a new mining operation.

(3) Company D owns and operates a hard rock gold mining operation on the southern side of Hurricane Ridge. This mine has been in production for 10 years. Company D acquired a lease for undeveloped gold mining properties on the northern side of Hurricane Ridge, completed development of the property, and began production on June 1, 1985. In anticipation of this new development, Company D made extensive capital expenditures, leased additional mining equipment and hired additional mining personnel. A geologist's study indicated that the gold bearing ore bodies on the north side of the hill are not part of a geological structure having any correlation with or similarity to the ore bodies on the south side. The distance between the two properties is 40 miles and is linked by a company-owned haul road. Although there is a road link and close proximity between the northern and southern properties, Company D is eligible for the exemption on the northern mining property because it made extensive capital expenditures for an operation on previously unmined property and hired additional personnel to operate the mine. The operation is not merely an extension of another ongoing operation.

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

Authority: AS 43.05.080

AS 43.65.010

AS 43.65.060