HB-6008, As Passed House, November 29, 2012

 

 

 

 

 

 

 

 

 

 

 

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) "Deductible costs" means, subject to approval by the

 

department, for the first 3 years in which a producing mine is

 

subject to the minerals severance tax, not more than 40% of the

 

amount of the minerals severance tax levied in that year for

 

environmental obligations assumed by, or actual costs incurred by,

 

the taxpayer that would otherwise be incurred by this state or a

 

local governmental unit of this state in order to comply with state

 

or federal environmental laws or regulations. The deduction allowed

 

under this subdivision is limited to the obligations assumed or

 

actual costs incurred by the taxpayer in the 3 years immediately

 

preceding the year the producing mine became subject to the

 

minerals severance tax and the first 3 years that the producing

 

mine is subject to the minerals severance tax. The amount of the

 

obligations assumed or actual costs incurred that exceed the

 

allowable deduction in this subdivision may be carried forward only

 

for the first and second year in which a producing mine is subject

 

to the minerals severance tax. The deduction allowed under this

 

subdivision shall not be available to a taxpayer for any costs for

 

which the taxpayer has been reimbursed, for which the taxpayer is

 

entitled to claim a credit or other deduction against any other tax

 

levied by this state, or which have been paid for on behalf of the

 

taxpayer from any source other than the taxpayer.

 

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

 

     (d) "Gross 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,

 


House Bill No. 6008 (H-1) as amended November 28, 2012

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 between unrelated

 

persons reflects the gross mineral value. In determining the gross

 

mineral value of a taxable mineral for contracts of sale or

 

transfer between related persons, there is a rebuttable presumption

 

that gross mineral value for related party sales shall be based on

 

the average daily price of the mineral as quoted on published

 

market indices. The gross 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 gross 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 in accordance with

 

rules promulgated by the department under section 8 or guidelines

 

published by the department.

 

     (e) "Interim minerals severance tax" means the interim

 

minerals severance tax imposed under section 3.

 

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

 

can be 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,

 


House Bill No. 6008 (H-1) as amended November 28, 2012

[  ] 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].

 

     (g) "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 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 contiguous to mineral-producing property.

 

     (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.

 

     (h) "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 (g).

 

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

 

specific tax levied under section 4.

 

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

 

adit has been started or overburden has been stripped.

 

     (k) "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.

 

     (l) "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.

 

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

 

created in section 5 of the rural development fund act.

 

     (n) "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.

 

     (o) "Taxable mineral value" means gross mineral value less

 

deductible costs.

 

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

 

under this act.

 

     (q) "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. (1) Beginning December 31, 2012, minerals located at

 

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

 

tax act, 1893 PA 206, MCL 211.7pp.

 

     (2) Beginning January 1, 2013 and through December 31 in a

 

year in which the department declares property at that open mine to

 

be mineral-producing property, an interim minerals severance tax is

 

levied on all minerals that were valued by the state geologist

 

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

 

MCL 211.24, for open mines opened beginning January 1, 2011 through

 

June 30, 2013.

 

     (3) The amount of the interim minerals severance tax is equal

 

to 50% of the general ad valorem taxes 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, for 2012. The interim minerals severance tax levied

 

under this section is in addition to any general ad valorem taxes

 

levied on the mine's surface property, surface improvements, and

 

personal property.

 

     (4) Each year, the interim minerals severance tax shall be

 


paid in 2 installments. Fifty percent of the interim minerals

 

severance tax shall be paid when the summer levy is due and 50% of

 

the interim minerals severance tax shall be paid when the winter

 

levy is due under the general property tax act, 1893 PA 206, MCL

 

211.1 to 211.155.

 

     (5) The local tax collecting unit shall collect the interim

 

minerals severance tax as provided in this section 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. Minerals taxed

 

under this section 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.

 

     (6) If minerals taxed under this section are 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.

 

     (7) Sums collected under this section shall be distributed 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.

 

     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) Except as otherwise provided in this section, the minerals

 

severance tax required to be paid by each taxpayer each year shall

 

be 2.75% of the taxable mineral value for the immediately preceding

 

calendar year.

 

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

 

computed as of the time of sale or transfer. Except as otherwise

 


provided in this subsection, 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 second year in which the department

 

declares the property to be mineral-producing property under

 

section 6. In the first calendar year immediately following the

 

year in which the department determines the property is mineral-

 

producing property under section 6, the taxpayer shall pay not

 

later than July 15 a partial mineral severance tax equal to the

 

summer levy of the ad valorem taxes levied on that mineral-

 

producing property in the immediately preceding calendar year under

 

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

 

     (4) If a taxpayer sells the minerals to another taxpayer, the

 

seller shall add to the sales price, or to the value of the

 

consideration with respect to a transfer, the minerals severance

 

tax the seller paid under this act 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 that is itemized on the invoice.

 

     (6) If a producing mine begins operation in 2014 or 2015,

 

then, for the first 5 years in which the producing mine 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 plus the amount

 

of the interim minerals severance tax paid for each year through

 

the end of the year in which the department determines the property

 

to be mineral-producing property plus interest. Interest shall

 

accrue to the taxpayer at the rate provided for in section 37 of

 

the tax tribunal act, 1973 PA 186, MCL 205.737. However, if the

 

taxpayer is delinquent on any ad valorem property taxes on the

 

producing mine, then the taxpayer is not eligible to claim a credit

 

under this subsection.

 

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

 

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

 

that year is equal to the greater of the following less the amount

 

of the partial minerals severance tax described in subsection (3)

 

that was paid by the taxpayer:

 

     (a) The minerals severance tax calculated under subsection

 

(2).

 

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

 

levied on the mineral-producing property in the immediately

 

preceding 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, a schedule of all deductible costs,

 

and any other information required by the department for valuation

 

purposes and to substantiate a taxpayer's deductible costs.

 


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

 

classified under this act as mineral-producing property. 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 beginning January 1, the calendar year immediately

 

following in which the property is determined to be mineral-

 

producing property by the department.

 

     (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

 


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 determine all deductible costs against the

 

property, 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 subsections (5) and (6), 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 the 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 deduction of deductible costs does not

 

reduce the distributions to local units of government under

 

subsection (3)(a).

 

     (6) 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 the rural development fund under

 

subsection (3)(b).

 

     Sec. 10. 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 specific taxes levied under this act shall be

 

administered by the department pursuant to 1941 PA 122, MCL 205.1

 

to 205.31, and this act. If the provisions of 1941 PA 122, MCL

 

205.1 to 205.31, and this act conflict, the provisions of this act

 

shall control.

 

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

 

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