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Mining Taxes

Miners don’t have to dig for this tax break: depletion allowance for hard rock mining companies

Depletion Allowance for hard Rock Mining Companies

Hard rock minerals include gold, silver, copper, uranium, lead, zinc, and a few others.

What is depletion allowance? When you start a business, you usually total all your startup costs and put them on your balance sheet. If all your startup costs totaled $10,000 and those assets would last ten years, you could reduce your income by $1000 a year. That method is the norm.

Hard rock miners have a choice

Hard rock miners have a choice; they can do normal depreciation, like In the example above, or depending on what metal they’re mining, they can elect to use the depletion allowance, which allows them to deduct 15% to 22% of the revenue each year as long as the mine operates. That saves them a lot of taxes.

According to the Congressional Budget Office, this tax break reduces federal revenue by $8.4 billion over ten years. That generous tax break is on top of the fact that hard rock miners pay no royalties to the government for all the minerals they take out.

View the video for this post here!


You can read more on the royalty issue in previous blog posts.

Abandoned Mines, No Royalties, Black Lung Disease Costs Taxpayers Billions
Hard Rock Mining in America. Miners get the Minerals, and the Taxpayers Get the Shaft

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Sources

Corporate tax avoidance in the first year of the Trump tax law. (2019, December 16). ITEP. 

Eastman, S. (2021, April 17). Hollywood entertainers of Yore dodged higher income tax rates. Tax Foundation. https://taxfoundation.org/alexandria-ocasio-cortez-income-tax-rates/

Kagan, J. (2021, January 17). What is the percentage depletion deduction? Investopedia. https://www.investopedia.com/terms/p/percentage-depletion.asp

Testimony on federal support for developing, producing, and using fuels and energy technologies. (2017, March 29). Congressional Budget Office. https://www.cbo.gov/publication/52521

The federal royalty and tax treatment of the hardrock mineral industry: An economic analysis. (2008, June 13). CRS Reports. https://www.everycrsreport.com/reports/RL34268.html#_Ref224698668

What tax incentives encourage energy production from fossil fuels? (2020, May). Tax Policy Center. https://www.taxpolicycenter.org/briefing-book/what-tax-incentives-encourage-energy-production-fossil-fuels

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