The Net Proceeds Tax applies to the mining or producing of nonferrous minerals and energy resources, i.e., all ores, metals and minerals mined, extracted, produced or refined within Minnesota, except for sand, silica sand, gravel, building stone, crushed rock, limestone, granite, dimension granite, dimension stone, horticultural peat, clay, soil, iron ore and taconite concentrates.
The tax is equal to 2 percent of the net proceeds from mining in Minnesota. Net proceeds are the gross proceeds from mining less allowable deductions. Gross income from mining or producing nonferrous minerals or energy resources is calculated differently from the method used for ferrous minerals.
For non-equity or arms-length transactions, gross income is based on actual sales. Generally, for non-arms-length transactions, gross income is based on the average annual market price as published in the Engineering and Mining Journal.
The Net Proceeds Tax was designed to apply to mining and beneficiation, generally to the point of a saleable product. In the case of some hydrometallurgical processes, the saleable product may be a refined metal.
Deductions from the tax include only those expenses necessary to convert raw materials to marketable quality. Expenses such as transportation, stockpiling, marketing or marine insurance that are incurred after marketable ores are produced are not allowed, unless the expenses are included in gross proceeds.
Distribution of the Tax
If the minerals or energy resources are mined outside the Taconite Assistance Area, the tax is deposited in the state’s General Fund. If they are mined or extracted within the Taconite Assistance Area, the tax is distributed to:
Cities and towns (5%), counties (20%), and school districts (10%) where the minerals or energy resources are mined or extracted, or where the concentrate is produced. If concentrating occurs in a different taxing district from where the mining occurs, 50 percent is distributed to the taxing districts where mined and the remainder to those districts where processed. In addition, counties must pay 1 percent of their proceeds to the Range Association of Municipalities and Schools.
- Regular School Fund (20%)
- Taconite Municipal Aid Account (10%)
- Taconite Property Tax Relief (20%), using St. Louis County as fiscal agent
- Minnesota Department of Iron Range Resources and Rehabilitation (IRRR) (5%)
- Douglas J. Johnson Economic Protection Trust Fund (5%)
- Taconite Environmental Protection Fund (5%)
Distributions are made annually on July 15; however, there are currently no companies subject to the Net Proceeds Tax.
For more information, see Minnesota Statutes 298.015-298.018