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By Robert B. Parsons

"During hard times, the focus on tax issues makes a slight change in direction. Mining companies contemplate the tax treatment of transactions and circumstances which are the product of a difficult financial environment. Some of these issues are discussed in this month's edition of Tax Notes.Every industrial sector in Canada is undergoing a major restructuring of some form, and the mining industry is not an exception. The longest recession since the Great Depression continues to affect the economy. Mining firms seek to bring their debt/equity ratios into line, and try to replenish depleted retained earnings by selling assets. This month, Tax Notes briefly examines some of the tax issues which are generally encountered during the course of such a restructuring process.Debt SettlementOne question which commonly arises during hard times concerns the tax treatment of a "" gain "" realized by a debtor on the settlement of a debt. Consider, for example, a simple situation where a creditor wants to protect itself from further losses, and makes a deal with the mining company to accept a cash payment of $8 million in full settlement of a $10 million loan. In financial terms, the debtor has made a $2 million gain on the settlement of the debt. What is the tax treatment of that gain?The Income Tax Act (the Act) contains provisions in section 80 of the Act and in section 5400 of the Income Tax Regulations which deal specifically with this question. First of all, it is noted that the $2 million gain is not brought directly into income for tax purposes. However, as indicated below, the gain could affect the debtor's income indirectly to the extent that certain of the debtor's tax pools must be reduced by the amount of the gain."

Jan 1, 1993

By John J. McCabe

INTRODUCTION Over the years, Congress has written into the Internal Revenue Code various provisions aimed at lessening at least one financial burden faced by taxpayers in the mining industry - the federal income tax burden. These provisions include the election to deduct exploration expenses, the election to defer deduction of development expenses, and the percentage depletion deduction. Careful tax planning from the very beginning of a mining venture is essential in taking maximum advantage of these tax benefits. A major decision to be made is the choice of organizational structure. (For a more detailed discussion of this subject, see McCabe, John J., "Developing Structures for Investments in Mineral Property," New York University Institute on Federal Taxation, 42 NYU 24, 1984). One such structure is the use of multiple corporations, with mining activities conducted by one corporation and nonmining activities, such as manufacturing, financing and administration, conducted by the other corporation. This technique, which will be discussed in detail below, can be particularly advantageous in delaying recapture of previously deducted exploration expenses and in maximizing depletion deductions. TAX BENEFITS IN MINING Exploration Subject to certain restrictions discussed below, exploration expenditures (i.e., expenditures paid or incurred during the taxable year for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, and paid or incurred before the beginning of the development state of the mine are deductible at the election of the taxpayer (Section 617(a)).* Were it not for this option, exploration expenditures would be required to be capitalized and recovered through depletion, after production begins. Exploration of a mineral deposit can be very costly and may not result in commercial production for some time. If the taxpayer has income to he offset by the deductions, a mining venture can usually be structured in such a way as to allow the offset of mining losses against the other income. With today's high interest rates, this election can be quite valuable in present value terms. Corporate and noncorporate taxpayers are subject to different restrictions on this tax benefit. Corporations may elect to deduct only 85 percent of eligible exploration expenditures (Section 291(b)). (The Tax Reform Act of 1984 reduced this to 80 percent effective for expenditures after December 31, 1984, in taxable years ending after such date). The remaining 15 percent (20 percent after December 31, 1984) is capitalized and recovered at the same rate as five-year ACRS property (Section 291(b)). Individual taxpayers are not subject to this 85 percent rule; however, any amount deducted in excess of ten-year straightline amortization is a tax preference item for individuals (Section 57(a)(5)). Individuals may avoid the tax preference by electing to capitalize exploration expenditures and amortize them over ten years (Section 58(i)). In order to prevent the taxpayer from, in effect, converting ordinary income into capital gain by selling property that has given rise to exploration expense deductions, the Code requires recapture of such deductions upon the occurrence of certain events (Section 617): 1. Upon disposition of the property, adjusted exploration expenditures are recaptured to the extent of gain realized on the disposition (Section 617(d)). 2. If the property is leased, the lessor is disallowed any depletion deduction until his adjusted exploration expenditures have been recaptured in the form of foregone depletion deductions (Section 617(c)).

Jan 1, 1985

By T. K. Matthews

Minerals are mined as a one-time crop, and the processing of one ton of ore results in there being one ton less to be recovered from the deposit. Although some minerals occur in greater abundance than others, they are to a greater or lesser degree exhaustible. Depletion Allowances One of the distinctive features of the mineral industries is the allowance for depletion. The depletion allowance is a much maligned and misunderstood principal of our tax structure. Although imperfect in design, it has nevertheless served as a constructive incentive for the development and expansion of the minerals industry.

Jan 1, 1969

By Johne Jesus Mol Peixoto

No reator RH, a otimização do fluxo recirculatório de aço entre a câmara de vácuo e a panela é a chave para promover as reações de refino. Neste trabalho, foram utilizados água e solução de cloreto de zinco (ZnCl2) como fluido similar ao aço para investigar a taxa de circulação no modelo a frio de um reator RH em escala 1:7,5. A taxa de circulação foi determinada utilizando o método de pontes de Strain Gages. A técnica PIV foi utilizada de modo a calibrar e validar os resultados. O aumento da vazão de gás de 30l/min para 120l/min resultou na elevação da taxa de circulação para ambos os fluidos. Cálculos preliminares demonstraram que há grande diferença nas condições de arraste de escória entre os sistemas água/óleo e ZnCl2/óleo.

Aug 17, 2017

By Granville S. Borden

This brief is a reconnaissance report on some prospects in the field of taxation which can safeguard our Mineral Resources. The brief is a prospectus soliciting help and enthusiastic cooperation in the common task of developing these prospects in a manner which will be most beneficial to all parties-the owners, operators, employees, tradesmen, the federal and state governments, and the people of this nation.

Jan 4, 1950

By Robert B. Parsons

"This article addresses the relationship between mine evaluation, the tax system, and economic risk. It is based on a paper presented by the author at recent seminars in Moscow and Tashkent on the subject of mine evaluation.IntroductionTaxation can have a strong influence on the feasibility of a mining project. For the most part, because metal prices are determined on a global basis, the mining concern is not able to pass on to its customers any portion of taxes which the concern has to pay. Taxes are a direct charge against the project. The purpose of the article is to highlight the various ways whereby different taxes can affect the financial viability of a mining operation.The first part of the paper identifies different forms of taxation, and the second part of the paper addresses the different forms of taxation in terms of risk analysis and impacts on the mining project. Finally, the third part of the paper makes brief mention of using the taxation system to provide incentives with respect to investment in mining activities."

Jan 1, 1993

By Robert B. Parsons

"While it might seem like heresy to suggest that ""taxation"" can be a source of financing, never the less some generous tax rules can considerably enhance the tax savings pertaining to a particular expenditure or project. A basic tax knowledge, and careful tax planning, can optimize government participation in a project. INTRODUCTIONIn trying to identify sources of financing for a project, ""government"" as a source of funding is normally thought of in terms of government grants, loan guarantees, interest rate buy downs, property tax waivers, hydro subsidies, and so on. Generally, such concessions are somewhat difficult to obtain, especially in the current period of apparent fiscal restraint. One source of government funding which should not be overlooked is the income tax regime, and, at the provincial level, the various provincial mining tax regimes.While the taxpayer would not normally view a tax system as a potential source of government financing, nevertheless various federal and provincial rules applicable to the mining industry can offer attractive tax deductions - and tax savings - with respect to particular expenditures. In fact, it is not unusual for a civil servant to refer to a tax deduction as a tax ""subsidy"". For example, in the right circumstances, the cost of a smelter expansion in New Brunswick would cost the operator only 31 cents on the dollar, with the federal and provincial governments paying for the other 69 cents by foregoing tax revenues (Table I). In a sense, such tax savings could be compared to a government grant equal to 69% of project costs. Of course, not every project expenditure will generate that degree of government funding. The fact of the matter is that the percentages of tax savings attached to different expenditures cover a wide range, depending on a complex mix of factors. The point to understand is that the tax rules can offer some valuable savings, even after tax reform, and that a basic knowledge of the tax rules can yield some fruitful rewards."

Jan 1, 1989

The cost of constantly extending a decline tunnel that plays a part in the actual extractive process is a revenue cost. The characteristics of such a decline tunnel are that it is dug in a series of relatively small excavations. It follows the ore body and is dug as close to the ore body as practicable. In addition, the decline allows for the extraction of ore in the immediate vicinity, with the ore being extracted in a relatively short period of time.

Jan 1, 1990

The Government signalled its intention in the Economic Statement on 17 December 1987 to improve the fairness of the taxation system and to facilitate the process of economic adjustment by: removing tax concessions that benefit some taxpayers at the expense of other taxpayers,ensuring that those who can afford it shoulder their fair share of the tax burden,securing a revenue base which will provide sufficient resources to maintain effective social services,reducing artificial protection and concessions that discriminate against some sectors, and encouraging confidence through an economic environment with a medium-term orientation. The Government has clearly stated to all sectors that tax preferences will be phased out and businesses need to look inwardly to their investment policies if they are to survive in an open economy. This paper will address the effect of these Government objectives on the taxation structure for all forms of mineral exploration in New Zealand. The present tax structure will firstly be analysed, in particular setting out the tax advantages available to the industry. The effect of changes to the tax system within the recent past which relate to mineral exploration will then be examined. Finally the paper will address the question of possible future changes, particularly in the light of Government's intention to move towards a tax system which does not provide an advantage for any one sector of the economy.

Jan 1, 1988

By E. D. Fox

Introduction The financial statement of the hypothetical Gold Mining Company, which forms the background of this survey, was designed for the Institute with the express abject of having it assessed in respect to Profits by the several taxing bodies representing the Federal and Provincial Governments, which comprise the Dominion of Canada. On the completion of the figures, copies were sent to the several Ministers of Mines, accompanied by a request that they be submitted to their taxing authorities and assessed accordingly. The response, while it was not general, was very favourable, and at all times we were treated with the utmost courtesy and patience, and what has been set forth in the compilation bears the authentication of the various government officials who are immediately concerned with taxation. The data itself constitutes a fairly comprehensive digest of taxation as it directly applies to gold mining profits in Canada. The Hypothetical Balance-Sheet (See Exhibit A) In the balance-sheet schedules 1 and 2 (Exhibit A), income is divided between taxable and non-taxable classifications, and here it should be noted that the division contemplates only the assessment for Dominion income tax. The same applies to the factors of exchange and depletion. Therefore, in making comparisons, it is to be borne in mind that the set-up for assessment to the Provinces, that is, Manitoba and Alberta, will stand as if the gross non-operating income is taxable, with the reservations as shown in the notes below the schedules.

Jan 1, 1934

By E. A. Holbrook

LOCAL yearly taxes levied on bituminous coal lands in Pennsylvania have become a cost of first importance to the coal industry of the State. In Pennsylvania there is no State tax on real estate, but local taxation of real estate furnishes the greater part of the revenue necessary for the small governmental unit, as counties, townships, boroughs, and local school, road, and poor districts. Coal in place in the ground, whether or not title thereto has been severed from ownership of the surface, is assessed as real estate and on its supposed sale or market value. There are eight classes of counties in Pennsylvania, based on population; in populous counties of the first, second and third class, assessments are made by a county board appointed by the county commissioners and are fairly uniform throughout the county. In counties of the fourth to the eighth classes inclusive, property assessments are made by property assessors elected by and for each township within a county. In these counties the board of county commissioners acts as a board of equalization and review to hear appeals. In most counties, therefore, where there is a large unmined reserve of coal, assessments on that coal vary for each township, irrespective of the fact that the coal bed is continuous under many townships.

Jan 1, 1933

Consents Required for Overseas Persons Overseas Investment Regulations 1974 Foreign investment proposals must be reviewed by the Overseas Investment Commission to ensure that these are in accord with national interests. Consent must be obtained from the Commission for: 1. New investment proposals which include: a. An overseas person acquiring 25 per cent or more of any class of share in a company. b. A New Zealand company issuing shares to an overseas person where this will result in that person owning 25 per cent or more of the company. c. An overseas person acquiring business assets for consideration in excess of $100 000. d. An overseas person commencing business in New Zealand. 2. Borrowing in New Zealand: An overseas person must obtain consent to raise funds in excess of $300 000 in New Zealand. 3. Borrowing Overseas: New Zealand incorporated companies must obtain consent to borrow overseas. Current policy is borrowing will be approved where the loan is for a specified fixed term of one year or more.

Jan 1, 1982

By Granville S. Borden

The fruits of industry are divided between capital, labor, and governments. Capital takes its redemption and remuneration through profits or dividends; labor takes its share through wages; governments take their share through taxes. Each must have a just share, and the question of what is a just share and the question of who-shall make the allocation are vital current political and economic issues. Certain political philosophies con- tend that government should take all the fruits and that some dictator or politician should have irrevocable discretion and power to distribute the fruits. Believers in democracy and free enterprise adhere to the view that capital is entitled to redemption and fair remuneration; that labor shall have a fair wage; and that governments shall make equitable levies. But since all human beings, both individually and in groups, are inherently selfish, there are many variable views in regard to the question of what ratios shall be applied in a division of the fruits and who shall have the power to fix these ratios. Perhaps all parties should devote more energy to means of increasing the crop, and not so much time to quarreling over a division of the existing crop. Moreover, all three parties must guard against killing the goose that lays the mineral eggs. For example, if the tax burden becomes oppressive and the taxpayer refuses to carry it, then business stagnates, with consequent unemployment, reduction of profits, and curtailment of government revenue. If a producer assumes the increased tax burden, marginal operations must be closed down, and again the consequences are increased unemployment and diminished government revenue. Quite often an increase in a rate of tax results in a reduction of government revenue. Perhaps the worst detrimental feature of selfishness and greed on the part of any one of the three distributees of the fruits of industry is the retardation of expansion of the enterprise. Growth means new jobs, more government revenue, better trade, and better standards of living. Explorations and discoveries have resulted in tremendous contributions

Jan 1, 1959

By Granville S. Borden, Frank H. Madison

The fruits of industry are divided between capital, labor, and governments. Capital takes its redemption and remuneration through profits or dividends; labor takes its share through wages; governments take their share through taxes. Each must have a just share, and the question of what is a just share and the question of who shall make the allocation are vital current political and economic issues. Certain political philosophies con- tend that government should take all the fruits and that some dictator or politician should have irrevocable discretion and power to distribute the fruits. Believers in democracy and free enterprise adhere to the view that capital is entitled to redemption and fair remuneration; that labor shall have a fair wage; and that governments shall make equitable levies. But since all human beings, both individually and in groups, are inherently selfish, there are many variable views in regard to the question of what ratios shall be applied in a division of the fruits and who shall have the power to fix these ratios. Perhaps all parties should devote more energy to means of increasing the crop, and not so much time to quarreling over a division of the existing crop. Moreover, all three parties must guard against killing the goose that lays the mineral eggs. For example, if the tax burden becomes oppressive and the taxpayer refuses to carry it, then business stagnates, with consequent unemployment, reduction of profits, and curtailment of government revenue. If a producer assumes the increased tax burden, marginal operations must be closed down, and, again the consequences are increased unemployment and diminished government revenue. Quite often an increase in a rate of tax results in a reduction of government revenue. Perhaps the worst detrimental feature of selfishness and greed on the part of any one of the three distributees of the fruits of industry is the retardation of expansion of the enterprise. Growth means new jobs, more government revenue, better trade, and better standards of living. Explorations and discoveries have resulted in tremendous contributions

Jan 1, 1964

New Zealand's Land and Income Tax Act 1954 contains unique incentives for companies engaged in mining certain specified minerals or petroleum. Sections 152 and 153 provide for the taxable income of such companies to be based not on profits made but on dividends paid to shareholders. A significant saving in tax results, particularly where profits are not distributed: but the Act attempts to ensure that undistributed profits are used for further mineral exploration and development. To encourage investment in the mining industry, persons taking up shares in a company mining for the specified minerals or petroleum are entitled to a one-third deduction in respect of monies paid on the shares and used by the company for its purposes; and company shareholders may make loans to the company and write-off such loans for tax purposes to an amount of up to half their taxable income. Maximum utilisation of the tax incentives calls for careful consideration as to whether a mining or petroleum company should be financed by way of loan capital or share capital.

Jan 1, 1971

This paper compares and evaluates the impact of income tax and value-added tax on the decision to explore for minerals or to develop a mine in four countries: Australia, Papua New Guinea, Argentina and Indonesia. Three aspects are considered in depth:- domestic tax rules applicable to mining projects;- taxation of foreign mining investment and foreign providers of expertise;- taxation of project finance (other than equity) from foreign sources.Specific tax issues discussed include tax deductibility of various costs, treatment of tax losses, special tax incentives, comparative treatment of various corporate structures, non-resident withholding taxes, and tax costs of various forms of project finance. The paper also illustrates the comparative impact of income tax on rates of return by means of a simulation of a mining project in each of the four countries. The simulation demonstrates why the highest rate of return may be obtained in Argentina and the lowest in Australia.Relevant features of the income tax systems in each country (at 15 February 1990) are summarized and compared in several tables annexed to the naner.

Jan 1, 1990

By Louis Ware

A leading executive finds this a bad time to "cry" about taxes. Needed reforms must cede to emergency demands.

Jan 7, 1951

By R. D. Brown

For the first time in years, the spring budgets of federal and provincial governments have not brought down major new proposals affecting the tax burdens of the mining industry in Canada. It seems appropriate to use this unaccustomed period of tranquility to set out an extremely abbreviated summary of the principal features of the federal and provincial income and mining tax rules affecting the mining industry.

Jan 1, 1977

By Robert D. Brown

The federal government kicked off the new budget season in November 1978, when Finance Minister Chretien announced a handful of proposed amendments to provisions of the federal Income Tax Act and Regulations affecting mining. (See Tax Notes in the January 1979 issue of the CIM Bulletin.) Declaring in his budget speech that these changes were in response to the report of the joint federal/provincial task force on resource taxation, Mr. Chretien tossed the ball to the provinces-" I want to take the lead here... I feel confident that the provinces will do their part". Quebec and Ontario, picking up the ball in their spring budgets, have announced favourable modifications to the provincial taxes on mining, with these moves being paralleled in the recent Manitoba budget, which proposes a flatrate mining tax to replace the previous controversial two-tier royalty. In the meantime, the federal government passed a host of amendments to the federal earned depletion regulations. The result is yet another batch of complex tax changes for the industry to note and digest, but this time with the hopeful factor that most of the changes are favourable to the industry. This article reviews the current status of the federal budget changes, comments on the Ontario, Quebec and Manitoba proposals, and reports on the changes to the earned depletion regulations that were passed by Order-in Council in March 1979.

Jan 1, 1979

By Valcana Stoyanova

Data and information for this study were collected in June-July 2009 onboard the RV Yuzhmorgeologiya in the area covers about 7000 km2 in the eastern part of the CCFZ between 10º05? - 10º55?N and 119º25? ? 121º08?W. In accordance with the IOM research program the cruise was intend to acquire both geological and environmental data and information necessary for delineation of nodule deposits and also data for identification of the baseline of benthic ecosystem. Having implementation of its 15-year plan of work for exploration under the contract with ISA, current activities of IOM were focused on nodule fields within prime areas that could be mined in the future. Bottom photographs obtained by towed deep-sea vehicle NEPTUN along 6 profiles with common length about 300 km (Fig. 1). In total, about 11,500 digital photographs (what cover approximately 40,000 m2 of the ocean floor) were analyzed for assessment of nodule coverage and investigation of megafauna (animals, visible in photographs, the dimension more than 2 cm). The giant single-cell organisms Xenophyophorida were the most multiple animals in seabed photographs. Their number on the site area averaged 1187 ind/ha. However, the vertical camera position does not allow counting all xenophyophorids, therefore their valid number is represented 10 times more. According to all available information these protozoans play the relevant role in assemblage of deep-water environment, giving for other animal groups an [ ] additional source of nutrition and a substratum for settlement and attachment. The ophiuroids are found in assemblage with xenophyophorids in many cases, standing on a sediment at their base.

Jan 1, 2010