HB-6008, As Passed House, December 13, 2012HB-6008, As Passed Senate, December 13, 2012

 

 

 

 

 

 

 

 

 

 

 

 

SENATE SUBSTITUTE FOR

 

HOUSE BILL NO. 6008

 

 

 

 

 

 

 

 

 

 

 

 

 

     A bill to levy specific taxes on certain nonferrous metallic

 

minerals on certain taxpayers in this state; to provide for the

 

levy, collection, and administration of the specific tax; to

 

provide certain reporting requirements; to provide for certain

 

penalties; to provide certain exemptions, credits, and refunds; and

 

to provide for the distribution of the specific tax.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 1. This act shall be known and may be cited as the

 

"nonferrous metallic minerals extraction severance tax act".

 

     Sec. 2. As used in this act:

 

     (a) "Beneficiation" means milling, processing, grinding,

 

separating, concentrating, pelletizing, and other processes

 

necessary to prepare nonferrous metallic mineral ore for sale or


 

transfer.

 

     (b) "Department" means the department of treasury.

 

     (c) "Mineral" means a naturally occurring solid substance that

 

is extracted from the earth in this state primarily for its

 

nonferrous metallic mineral content for commercial, industrial, or

 

construction purposes. Mineral does not include gypsum, lime,

 

limestone, salt, dolomite, basalt, granite, sandstone, shale, clay,

 

stone, gravel, marl, peat, sand, gemstones, coal, substances

 

extracted from potable water or brine, substances extracted from

 

oil or natural gas, low-grade iron ore that is defined and taxed

 

under 1951 PA 77, MCL 211.621 to 211.626, any property that is

 

defined and taxed under 1963 PA 68, MCL 207.271 to 207.279, or any

 

other substance not extracted primarily for its nonferrous metallic

 

mineral content.

 

     (d) "Mineral-producing property" means real and personal

 

property in this state that is part of a producing mine or utilized

 

directly in association with a producing mine on a parcel on which

 

the shaft, incline, or adit is located, or a parcel contiguous or

 

appurtenant to a parcel on which the shaft, incline, or adit is

 

located. As used in this section, contiguity is not broken by a

 

road, an easement, a right-of-way, or property occupied by power

 

transmission lines or buffer zones. Mineral-producing property also

 

includes all the following within this state:

 

     (i) Mineral rights in mineral-producing property.

 

     (ii) Mineral leases, options, and mining rights on or in

 

mineral-producing property.

 

     (iii) Mineral stockpiles and mineral inventories that are owned,


 

leased, or controlled by a taxpayer.

 

     (iv) Leach pads, waste rock repositories, and tailings impounds

 

that are owned, leased, or controlled by a taxpayer.

 

     (v) Buffer lands that are owned, leased, or controlled by a

 

taxpayer and are appurtenant to mineral-producing property. For

 

purposes of determining appurtenance to mineral-producing property

 

for buffer lands owned, leased, or controlled by a taxpayer, there

 

is a rebuttable presumption that all of the following apply:

 

     (A) Land that is no more than 1/4 mile from nonbuffer land

 

mineral-producing property, is held by the taxpayer for use as

 

buffer land.

 

     (B) Land that is more than 1/4 mile from nonbuffer land

 

mineral-producing property and that a taxpayer is required to own,

 

lease, or control due to requirements imposed by federal, state, or

 

local law, is held by the taxpayer for use as buffer land.

 

     (vi) Buildings, improvements, fixtures, and nonmobile equipment

 

located upon, beneath, or appurtenant to a mine, including

 

administrative and support facilities appurtenant to a mine

 

provided that such property is located upon, beneath, or on a

 

parcel that is a mineral-producing property.

 

     (vii) Property owned and primarily used by the taxpayer in the

 

transportation of minerals from a producing mine to the point where

 

beneficiation activities begin.

 

     (viii) Property used for beneficiation of extracted minerals if

 

the person that owns or controls the property is a taxpayer.

 

     (e) "Mineral-producing property" does not include real and

 

personal property that is used for transportation of minerals


 

between any locations, unless it is specifically described in

 

subdivision (d). Also, mineral-producing property does not include

 

real property owned, leased, or controlled by a taxpayer that is

 

used as residential real property.

 

     (f) "Minerals severance tax" or "severance tax" means the

 

specific tax levied under section 4.

 

     (g) "Open mine" means a mine at which a shaft, incline, or

 

adit has been started or overburden has been stripped.

 

     (h) "Person" means an individual, firm, limited partnership,

 

limited liability partnership, copartnership, partnership, joint

 

venture, corporation, association, subchapter S corporation,

 

limited liability company, receiver, estate, trust, or any other

 

legal entity or combination of legal entities acting as a unit.

 

     (i) "Producing mine" means a mineral mine in this state at

 

which a taxpayer is producing 1 or more minerals. Producing mine

 

does not include a mine operated primarily for tourism purposes or

 

a mine in which the minerals produced are used for artistic

 

purposes and are incidental to the business operation of the owner.

 

     (j) "Rural development fund" means the rural development fund

 

created in section 5 of the rural development fund act.

 

     (k) "Taxable mineral" means the first marketable mineral or

 

mineral product sold or transferred by the taxpayer that is taxable

 

under this act. Taxable mineral also includes a mineral which has

 

been sold or transferred by a taxpayer following beneficiation in

 

this state and a mineral which is otherwise taxable under this act.

 

     (l) "Taxable mineral value" means the total value received by a

 

taxpayer for the sale or transfer of taxable minerals, whether or


 

not in a beneficiated state, including premiums, bonuses,

 

subsidies, or noncash consideration, with no deductions. There is a

 

rebuttable presumption that the purchase price of a taxable mineral

 

under a bona fide arm's-length contract of sale or transfer between

 

unrelated persons reflects the taxable mineral value. In

 

determining the taxable mineral value of a taxable mineral for

 

contracts of sale or transfer between related persons, there is a

 

rebuttable presumption that taxable mineral value for related party

 

sales or transfers shall be based on the average daily price of the

 

mineral as quoted on published market indices as of the date of

 

sale or transfer. The taxable mineral value of taxable minerals

 

sold or transferred by a taxpayer following beneficiation shall

 

reflect the total value of the taxable mineral in its beneficiated

 

state. For taxable minerals which are to be shipped or transported

 

outside this state for beneficiation outside this state or

 

otherwise removed by a taxpayer from this state and which are

 

considered to have been sold as provided in section 4(1), the

 

taxable mineral value shall reflect the total value of the minerals

 

immediately prior to the shipment or removal based on the average

 

daily price of the mineral as quoted on published market indices as

 

determined by the department.

 

     (m) "Taxpayer" means a person subject to a specific tax levied

 

under this act.

 

     (n) "Transfer" means an in-kind exchange or other disposition

 

of an interest in minerals, whether or not beneficiated, other than

 

through a sale.

 

     Sec. 3. Beginning December 31, 2012, any mineral and any


 

right, claim, lease, or option in or of any mineral is exempt and

 

any shaft, incline, adit, or value of overburden stripping located

 

at an open mine is exempt under section 7pp of the general property

 

tax act, 1893 PA 206, MCL 211.7pp.

 

     Sec. 4. (1) The minerals severance tax is levied on taxable

 

minerals that a taxpayer extracts from the earth in this state or

 

that a taxpayer beneficiates in this state. A mineral extracted

 

from the earth in this state by a taxpayer which is shipped outside

 

this state for beneficiation outside this state or otherwise

 

removed from this state prior to actual sale or transfer is

 

considered to have been sold by the taxpayer immediately prior to

 

the shipment or removal and is subject to the minerals severance

 

tax levied under this section. A taxpayer subject to the minerals

 

severance tax is exempt from all of the following as provided in

 

this act:

 

     (a) The collection of taxes under the general property tax

 

act, 1893 PA 206, MCL 211.1 to 211.155, as provided in section 7qq

 

of the general property tax act, 1893 PA 206, MCL 211.7qq.

 

     (b) The tax levied under part 2 of the income tax act of 1967,

 

1967 PA 281, MCL 206.601 to 206.699, as provided in sections 31b

 

and 623 of the income tax act of 1967, 1967 PA 281, MCL 206.31b and

 

206.623.

 

     (c) The tax levied under the general sales tax act, 1933 PA

 

167, MCL 205.51 to 205.78, as provided in section 4dd of the

 

general sales tax act, 1933 PA 167, MCL 205.54dd.

 

     (d) The tax levied under the use tax act, 1937 PA 94, MCL

 

205.91 to 205.111, as provided in section 4aa of the use tax act,


 

1937 PA 94, MCL 205.94aa.

 

     (2) The minerals severance tax required to be paid by each

 

taxpayer each year shall be 2.75% of the taxable mineral value.

 

     (3) The taxable mineral value of all minerals shall be

 

computed as of the time of sale or transfer. Each taxpayer shall

 

pay the minerals severance tax to the local tax collecting unit on

 

or before February 15 beginning on February 15 in the calendar year

 

immediately following the year in which the department declares the

 

property to be mineral-producing property under section 6.

 

     (4) If a taxpayer sells or transfers the minerals to another

 

taxpayer, the seller or transferor shall add to the sales price, or

 

to the value of the consideration with respect to a transfer, any

 

minerals severance tax the seller or transferor paid under this act

 

for those minerals and itemize the minerals severance tax paid

 

under this act on the invoice.

 

     (5) A taxpayer that purchases taxable minerals from another

 

taxpayer may claim a credit against the minerals severance tax

 

imposed under this act for the minerals severance tax paid under

 

this act by the seller or transferor for those minerals that is

 

itemized on the invoice.

 

     (6) For open mines opened at any time between January 1, 2011

 

and June 30, 2013, for the first 5 years in which that open mine is

 

a producing mine and is subject to the minerals severance tax, the

 

taxpayer may claim a credit of not more than 20% of the amount of

 

the ad valorem property tax levied on that open mine in 2012

 

attributable to those minerals valued by the state geologist under

 

section 24(2) of the general property tax act, 1893 PA 206, MCL


 

211.24, in 2012.

 

     (7) In the first year that a minerals severance tax is levied

 

on a taxpayer under this act, the minerals severance tax for that

 

year is equal to the greater of the following:

 

     (a) The minerals severance tax calculated under subsection

 

(2).

 

     (b) The amount of general ad valorem property tax that was

 

paid on the mineral-producing property for that year.

 

     Sec. 5. Each year, a taxpayer shall prepare and submit to the

 

department and to the local tax collecting unit a report in the

 

time, form, and manner required by the department, showing the

 

total amount of minerals sold, transferred, or beneficiated during

 

the preceding year, the taxable mineral value of the minerals sold,

 

transferred, or beneficiated, and any other information required by

 

the department for valuation purposes.

 

     Sec. 6. (1) The department shall determine when property is

 

classified under this act as mineral-producing property. A taxpayer

 

shall notify the department within 30 days of beginning operation

 

of a producing mine. Upon making this determination, the department

 

shall notify all local assessing authorities of those properties

 

that are classified as a mineral-producing property and are subject

 

to the minerals severance tax under this act. Beginning on December

 

31 in the calendar year in which property is determined by the

 

department to be mineral-producing property, that property is

 

exempt from taxes collected under the general property tax act,

 

1893 PA 206, MCL 211.1 to 211.155. The property shall be subject to

 

the minerals severance tax when the property is determined to be


 

mineral-producing property by the department. Beginning on the date

 

an open mine becomes a producing mine, the mineral-producing

 

property is exempt from the taxes set forth in section 4(1)(b),

 

(c), and (d) as provided in this act.

 

     (2) If the department determines that property previously

 

determined to be a mineral-producing property is no longer mineral-

 

producing property, the department shall notify the taxpayer and

 

the local assessing authorities that the property is no longer

 

subject to the minerals severance tax under this act beginning

 

December 31 in the year that determination is made and that

 

property shall be subject to the collection of taxes under the

 

general property tax act, 1893 PA 206, MCL 211.1 to 211.155. The

 

local tax collecting unit in which the property is located is

 

responsible for assessment of that property as of the date of the

 

department's notification to the local assessing authority. Ten

 

days after the date of the department's notification to the

 

taxpayer shall be the date on which the minerals severance tax

 

shall cease and all related tax exemptions described in section

 

4(1)(b), (c), and (d) shall cease.

 

     (3) On or before February 10 of each year, the state geologist

 

shall provide a list of all mineral-producing properties as of the

 

end of the previous calendar year to the department.

 

     (4) If a taxpayer ceases operation of a producing mine for 30

 

or more consecutive days, the taxpayer shall notify the department,

 

in writing, that it has ceased operations within 7 business days.

 

     Sec. 7. (1) Each taxpayer shall prepare, keep, and preserve a

 

full and complete record for each tax year of all minerals


 

extracted from the earth in this state or beneficiated in this

 

state, and that record shall be open at all times to the inspection

 

of the department.

 

     (2) Annually, the department shall publish the value of all

 

minerals reported under this act.

 

     Sec. 8. The department may promulgate rules to implement this

 

act pursuant to the administrative procedures act of 1969, 1969 PA

 

306, MCL 24.201 to 24.328.

 

     Sec. 9. (1) The department shall allocate the minerals

 

severance tax and the local tax collecting unit shall collect the

 

minerals severance tax as provided in this act and collect the same

 

collection charges as general property taxes under the general

 

property tax act, 1893 PA 206, MCL 211.1 to 211.155. Property

 

listed and taxed under this act shall be subject to return and sale

 

for nonpayment of taxes in the same manner, at the same time, and

 

under the same penalties as property returned and sold for

 

nonpayment of taxes levied under the general property tax act, 1893

 

PA 206, MCL 211.1 to 211.155.

 

     (2) If mineral-producing property is located in more than 1

 

local tax collecting unit, the department, or a person designated

 

by the department, shall determine the portion attributable to each

 

local tax collecting unit.

 

     (3) Except as provided in subsection (5), the minerals

 

severance tax collected under this act shall be distributed as

 

follows:

 

     (a) 65% by the local tax collecting unit to school districts,

 

this state, and local governmental units in the same proportion as


 

the general ad valorem property taxes are distributed. The amounts

 

distributed may be used by the receiving entities for any use for

 

which such entity is permitted to use general ad valorem property

 

tax revenues.

 

     (b) 35% to the department for deposit into the rural

 

development fund.

 

     (4) The local tax collecting unit shall report all collections

 

and distributions under this act to and remit the portion of the

 

minerals severance tax described in subsection (3)(b) to the

 

department for deposit in the rural development fund no later than

 

30 days after a payment is received from the taxpayer. If a local

 

tax collecting unit fails to make any distribution or remittance

 

required under this act to another entity, the department shall

 

deduct an equivalent amount from any revenues the local tax

 

collecting unit would otherwise be entitled to receive under the

 

Glenn Steil state revenue sharing act of 1971, 1971 PA 140, MCL

 

141.901 to 141.921, and distribute the amount deducted to those

 

entities entitled to receive that distribution under this act.

 

     (5) In determining the distribution under subsection (3), the

 

department shall modify the distributions so all minerals severance

 

tax revenue lost due to the credit described in section 4(6) does

 

not reduce the distributions to school districts, this state, and

 

local governmental units under subsection (3)(a).

 

     (6) For open mines opened at any time between January 1, 2011

 

and June 30, 2013, all of the following apply:

 

     (a) For the first 5 years in which that open mine is a

 

producing mine and is subject to the minerals severance tax, if the


 

amount distributed under subsection (3)(a) is less than

 

$3,500,000.00, the taxpayer shall, in addition to the amount

 

distributed under subsection (3)(a), pay the difference between

 

$3,500,00.00 and the amount distributed under subsection (3)(a),

 

which additional amount shall be distributed to the school

 

districts, this state, and local governmental units in the

 

proportion provided in subsection (3)(a).

 

     (b) For the sixth and seventh years in which that open mine is

 

a producing mine and is subject to the minerals severance tax, if

 

the amount distributed under subsection (3)(a) is less than

 

$1,600,000.00, the taxpayer shall, in addition to the amount

 

distributed under subsection (3)(a), pay the difference between

 

$1,600,000.00 and the amount distributed under subsection (3)(a),

 

which additional amount shall be distributed to the school

 

districts, this state, and local governmental units in the manner

 

provided in subsection (3)(a).

 

     (c) If the taxpayer makes any additional payments as provided

 

under this subsection in addition to the amount distributed under

 

subsection (3)(a), the amount of that additional payment shall be

 

recovered as a credit, without interest, by the taxpayer against

 

subsequent payments made under this act and distributed under

 

subsection (3)(a) until the taxpayer has been reimbursed in full,

 

provided that in no case shall this credit cause the distribution

 

made under subsection (3)(a) in that year to fall below the minimum

 

amounts provided in subdivision (a) or (b) for that year. The

 

credit shall be cumulative and shall not expire until the taxpayer

 

has been fully reimbursed under this act.


 

     Sec. 10. Unless the minerals severance tax is being contested

 

as provided by law, upon an action being filed under the direction

 

of the attorney general in the circuit court for the county of

 

Ingham, that court shall have power to restrain by injunction any

 

taxpayer or person that has failed to comply with this act and in

 

the same manner to restrain any taxpayer or person from continuing

 

to extract minerals while delinquent in the filing of any report or

 

the paying of any tax, penalty, or cost required under this act.

 

     Sec. 11. The minerals severance tax levied under this act

 

shall be administered by the department.

 

     Enacting section 1. This act does not take effect unless House

 

Bill No. 6007 of the 96th Legislature is enacted into law.