Production Tax Overview
The Production Tax is the largest tax paid by the Minnesota mining industry. It is a major source of revenue to the counties, cities, towns and school districts within the Taconite Assistance Area. The tax is paid in lieu of property taxes on the mining and production of taconite, direct-reduced iron (DRI) and other iron-bearing materials.
The Production Tax is assessed on “taxable tons” produced. For taconite and DRI production, this means the tax is based on a mining facility’s average production over three years—the current year and the previous two years. For producers of other iron-bearing materials, the tax is based on the company’s current-year production only. The Production Tax is based on dry tons, not including flux.
Mining companies file annual tonnage reports with the Minnesota Department of Revenue by February 1 each year. We determine the tax due for each mine or producer, and notify them of the amount by February 14. The companies then pay the tax in two installments directly to eligible counties (Aitkin, Cook, Crow Wing, Itasca, Lake and St. Louis) and the Minnesota Department of Iron Range Resources and Rehabilitation (IRRR). The first payment is due February 24; the second is due August 24. We notify the counties on how to distribute the money they receive to their cities, towns, school districts and other recipients. The majority of the money is distributed February 25 and August 25.
State of Minnesota Contribution
The state contributes 22 cents per taxable ton each year, which is distributed with other Production Tax collected.
Taconite Property Tax Relief Account
The Production Tax also funds the Taconite Property Tax Relief Account, which provides homestead credits to eligible homeowners within the Taconite Tax Relief Area. St. Louis County is the designated fiscal agent for the account and is responsible for distributing the money to eligible recipients.
Production Tax Rate
The Production Tax rate is indexed annually based on changes in the Gross Domestic Product Implicit Price Deflator (GDPIPD), unless the rate is frozen or changed by the Minnesota Legislature. The GDPIPD is published by the U. S. Department of Commerce.