November 8, 2012, Introduced by Rep. Huuki and referred to the Committee on Tax Policy.
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 all of the following:
(i) 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 to reimburse the taxpayer 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 subparagraph 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 subparagraph 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 subparagraph 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.
(ii) Those cash costs and noncash costs attributable to
transportation of raw or beneficiated ore, or both, between the
producing mine and the first point of sale or transfer.
(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,
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 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, limestone,
salt, low-grade iron ore that is defined and taxed under 1951 PA
77, MCL 211.621 to 211.626, or any property that is defined and
taxed under 1963 PA 68, MCL 207.271 to 207.279.
(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. Contiguity is not broken by a road, a right-of-way, or
property purchased or taken under condemnation proceedings by a
public utility for power transmission lines if the 2 parcels
separated by the purchase or condemned property were a single
parcel prior to the sale or condemnation. Mineral-producing
property also includes all the following within this state:
(i) Fee lands that are mineral-bearing property.
(ii) Mineral leases, options, and mining rights on mineral-
bearing 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-bearing 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
milling, processing, or other 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 1 or more of the following:
(i) Used for transportation of minerals between any locations,
unless it is specifically described in subdivision (g).
(ii) Located on parcels that do not contain the shaft, incline,
or adit and are not contiguous with the parcel containing the
shaft, incline, or adit. This subparagraph does not apply to real
or personal property that is used for beneficiation of extracted
minerals.
(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) Except as provided in subsection (9), 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.
(8) Except for a district that does not receive any state
portion of its foundation allowance, as calculated under section
20(4) of the school aid act of 1979, 1979 PA 94, MCL 388.1620, for
interim minerals severance taxes spread for school operating
purposes, the amount that would otherwise be disbursed to a local
school district shall be paid by the local tax collecting unit
instead of to the state treasury and credited to the state school
aid fund established by section 11 of article IX of the state
constitution of 1963. For a district that does not receive any
state portion of its foundation allowance, as calculated under
section 20(4) of the school aid act of 1979, 1979 PA 94, MCL
388.1620, the amount disbursed shall be determined as provided in
subsection (5).
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 (4), (6), and (7), the
minerals severance tax collected under this act shall be
distributed as follows:
(a) 60% 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) 40% to the department for deposit into the rural
development fund.
(4) Except for a district that does not receive any state
portion of its foundation allowance, as calculated under section
20(4) of the school aid act of 1979, 1979 PA 94, MCL 388.1620, for
minerals severance taxes spread for school operating purposes, the
amount that would otherwise be disbursed to a local school district
shall be paid by the local tax collecting unit instead to the state
treasury and credited to the state school aid fund established by
section 11 of article IX of the state constitution of 1963. For a
district that does not receive any state portion of its foundation
allowance, as calculated under section 20(4) of the school aid act
of 1979, 1979 PA 94, MCL 388.1620, the amount disbursed shall be
determined as provided in subsection (1).
(5) 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.
(6) 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).
(7) 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
Senate Bill No. ____ or House Bill No. 6007(request no. 03102'11
**) of the 96th Legislature is enacted into law.