Current through Register Vol. 35, No. 18, September 24, 2024
A.
MINERAL PROPERTY - SURFACE VALUE FOR
AGRICULTURAL OR OTHER PURPOSES: The valuation methods to be used in
determining the "surface value for agricultural or other purposes or class one
productive of nonproductive mineral property when the surface interest is held
in the same ownership as the mineral interests" as that phrase is used in
Paragraph (2) of Subsection B of Section
7-36-23
NMSA 1978 are those methods described in Section
7-36-15
NMSA 1978 and regulations thereunder except that, when the surface is used
primarily for agricultural purposes, the land shall be valued in accordance
with Section
7-36-20
NMSA 1978 and regulations thereunder. Subsection E of Section
7-36-23
NMSA 1978 applies only as a valuation method for the mineral in place in
mineral property determined to be class one nonproductive mineral
property.
B.
MINERAL PROPERTY
- IMPROVEMENTS, ETC., HELD OR USED IN CONNECTION WITH ALL CLASSES OF MINERAL
PROPERTY:
(1) The valuation methods to
be used in valuing "improvements, equipment, materials, supplies and other
personal property held or used in connection with all classes of mineral
property" as those terms are used in Paragraph (1) of Subsection B of Section
7-36-23
NMSA 1978 are those methods described in Section
7-36-33
NMSA 1978 and regulations thereunder. Equipment and other personal property
used in "construction" as that term is defined in Paragraph (3) of Subsection C
of Section
7-36-2
NMSA 1978 shall be valued pursuant to Section
7-36-33
NMSA 1978 and regulations thereunder.
(2) "Improvements,...held or used in
connection with all classes of mineral property", as that phrase is used in
Paragraph (1) of Subsection B of Section
7-36-23
NMSA 1978 includes, but is not limited to, improvements constructed on property
other than mineral property as defined in Section
7-36-22
NMSA 1978 when those improvements are held or used in connection with any class
of mineral property. The value of the land upon which such improvements are
constructed is to be a part of the value of the improvements. Therefore,
property such as office buildings, company houses and processing facilities
affixed to the land which is held or used in connection with any class of
mineral property is to be valued by the division either when such improvements
are on mineral property or when such improvements are not on mineral property.
The methods for valuation of these improvements are those methods described in
Section
7-36-33
NMSA 1978 and regulations thereunder. The methods for valuation of the land
upon which these improvements are located are those methods described in
Section
7-36-15
NMSA 1978 and regulations thereunder.
(3) The valuation of construction work in
progress for uncompleted improvements on mineral property subject to valuation
under Section
7-36-23
or
7-36-25
NMSA 1978 is fifty percent of the actual amount expended for the uncompleted
improvements as of January 1 of the tax year.
C.
MINERAL PROPERTY - SAND, GRAVEL AND
CALICHE - ANNUAL NET PRODUCTION VALUE: The "annual net production
value", as that phrase is used in Subsection F of Section
7-36-23
NMSA 1978, for sand, gravel and caliche may be reported at a value of fifty
cents ($.50) per ton, without any deductions, at the election of the person
reporting this mineral property to the division. If the division determines
that a value of fifty cents ($.50) per ton for this mineral property is less
than the annual net production value calculated under Subsection F of Section
7-36-23
NMSA 1978, the division may disallow the election and require reporting of
market values, royalties, direct costs, depreciation and other information
determined necessary by the division.
D.
MINERAL PRODUCT - SCORIA, PUMICE AND
CINDERS - ANNUAL NET PRODUCTION VALUE:
(1) The "annual net production value", as
that phrase is used in Subsection F of Section
7-36-23
NMSA 1978, for "construction grade" scoria, pumice and cinders may be reported
at a value representing twenty five percent (25%) of the gross selling price,
without any deductions, at the election of the person reporting this mineral
property to the division. If the division determines that a value represented
by twenty five percent (25%) of the gross selling price for this mineral
property is less than the annual net production value calculated under
Subsection F of Section
7-36-23
NMSA 1978, the division may disallow the election and require reporting of
market values, royalties, direct costs, depreciation and other information
determined necessary by the division.
(2) The "annual net production value", as
that phrase is used in Subsection F of Section
7-36-23
NMSA 1978, for "landscape" scoria, pumice and cinders may be reported at a
value representing thirty five percent (35%) of the gross selling price,
without any deductions, at the election of the person reporting this mineral
property to the division. If the division determines that a value represented
by thirty five percent (35%) of the gross selling price for this mineral
property is less than the annual net production value calculated under
Subsection F of Section
7-36-23
NMSA 1978, the division may disallow the election and require reporting of
market values, royalties, direct costs, depreciation and other information
determined necessary by the division.
(3) For purposes of Section 3.6.5.30 NMAC ,
the term "construction grade" means all material sold for or used as concrete
aggregate and similar purposes. The term "landscape" means all material sold
for or used as a decorative material. The terms "scoria" and "cinders", as used
in Section 3.6.5.30 NMAC, do not include "fines" which are the result of
sorting certain mineral products.
E.
MINERAL PROPERTY - MARKET
VALUE:
(1) The phrase "market value" as
used in Paragraphs (1) and (2) of Subsection F of Section
7-36-23
NMSA 1978 means the amount for which all mineral production was sold during the
year in which net production value is being determined provided, the sale or
sales were between willing buyers and willing sellers in the open market in the
usual and ordinary course of trade and competition and both sellers and buyers
were equally free to bargain. The phrase "market value" includes bonus or
subsidiary payments in whatever form they may be received.
(2) If the market value of all or a part of
the mineral production, during the year in which net production value is being
determined, cannot be determined under the preceding paragraph because the
mineral production is not sold, is used or consumed or is not sold under the
conditions described in the preceding paragraph, then the market value of the
mineral production is that reflected by sales of comparable mineral production
and the application of generally accepted appraisal techniques. In using the
method of valuation described in this paragraph, the division considers and
makes appropriate adjustments to the value reflected by sales of comparable
mineral production to account for the existence of a demand for, and the
accessibility of a market for, the mineral production. In determining market
value under this method, the division also compares the "gross income from the
property" determined for federal income tax purposes under Section 613 of the
United States Internal Revenue Code of 1986, as amended or renumbered. Section
3.6.5.30 NMAC, however, does not adopt the valuation methods described in
United States treasury regulations for Section 613, unless specifically
indicated herein.
(3) If the market
value of all or a part of the mineral production, during the year in which net
production value is being determined, cannot be determined under the methods
set forth in the preceding two paragraphs, then market value shall be
determined through the use of the "proportionate profits method" as that phrase
is described in United States treasury regulations, as amended or
renumbered.
F.
MINERAL PROPERTY - "PRODUCTION OF ALL MINERALS" AND "TREATING"
DEFINED:
(1) The phrase "production of
all minerals" as used in Paragraphs (1) and (2) of Subsection F of Section
7-36-23
NMSA 1978 means the mineral when and during the last extraction, milling,
treating or reducing on it is performed by or for the account of the owner or
operator, irrespective of when the mineral or the mineral in other material may
have been mined or when the mineral or mineral in other material may be sold,
exchanged, consumed or further processed by or for the account of the owner or
operator.
(2) The term "treating"
as used in Subparagraph (b) of Paragraph (1) and Subparagraph (b) of Paragraph
(2) of Subsection F of Section
7-36-23
NMSA 1978 and Section 3.6.5.30 NMAC means a process which changes a mineral
substance removed from the earth by making it easier to handle and eliminating
unwanted fractions by any method, whether manipulative, thermal, chemical or
electrolytic. "Treating" is not manufacturing. Therefore, activities such as
making copper tubing, making steel (but not reducing ore to metallic iron) and
manufacturing automobiles are not "treating".
G.
MINERAL PROPERTY - DIRECT COSTS -
DEDUCTION GUIDELINES:
(1) The phrase
"direct costs" as used in Subparagraph (b) of Paragraph (1) and Subparagraph
(b) of Paragraph (2) of Subsection F of Section
7-36-23
NMSA 1978, means the immediate or proximate costs of the activities described
in the subsection as opposed to collateral or indirect costs. Evidence that the
costs were actually incurred does not, without additional evidence, establish
that the costs are direct costs.
(2) "Direct costs...determined under
generally accepted accounting principles..." also means variable costs or costs
that vary directly with the volume of production, as opposed to indirect costs
which means fixed or period costs which are incurred regardless of the volume
of production.
(3) Direct costs are
required to have been actually incurred during the year in which they are
claimed. Direct costs are required to be determined under generally accepted
accounting principles and if this test is not met, the consistent application
by the taxpayer of accounting principles which are not generally accepted does
not qualify the cost as a deduction.
(4) Under generally accepted accounting
principles, "direct costs" do not usually include:
(a) salaries of any persons not actually
engaged in the extracting, milling, treating, reducing, transporting and
selling of the minerals or in the immediate management or superintendence of
these activities;
(b) any amounts
paid for improvements or the purchase of machinery, equipment, appliances or
for construction of mills, reduction works, transportation facilities or other
buildings or structures;
(c) any
amounts which, under generally accepted accounting principles consistently
applied by taxpayer, are capitalized;
(d) property taxes;
(e) income taxes, both state and
federal;
(f) sales or gross
receipts taxes included in the cost of items which are not deductible as direct
costs;
(g) insurance premiums for
public liability and property damage insurance, except when this insurance is
required by law, such as when taxpayer's trucks are using public
highways;
(h) life insurance on
executives;
(i) interest on
borrowed monies;
(j) depletion of
reserves;
(k) mine and mill
development costs;
(l) mine and
mill "startup" costs, such as calibration of plant and equipment;
(m) exploration costs;
(n) fire and extended coverage
insurance;
(o) administrative costs
incurred outside New Mexico;
(p)
contract costs which are not incurred as "direct costs" for activities
described in Subparagraph (b) of Paragraph (1) and Subparagraph (b) of
Paragraph (2) of Subsection F of Section
7-36-23
NMSA 1978;
(q) royalties, other
than those described in Subparagraph (a) of Paragraph (1) and Subparagraph (a)
of Paragraph (2) of Subsection F of Section
7-36-23
NMSA 1978, and Subparagraph (a) of Paragraph (5) of Subsection G of Section
3.6.5.30 NMAC;
(r) franchise
taxes;
(s) legal and accounting
costs;
(t) dues and
contributions;
(u) institutional
advertising costs, which are not directly related to selling the mineral but
are for the purpose of establishing goodwill; and
(v) other indirect costs.
(5) Under generally accepted
accounting principles, "direct costs" do usually include:
(a) royalties paid to labor unions
representing employees of the taxpayer if the royalties are direct costs of the
activities described in Subparagraphs (b) of Paragraph (1) and Subparagraph (b)
of Paragraph (2) of Subsection F of Section
7-36-23
NMSA 1978;
(b) severance and
resources excise taxes;
(c) sales
or gross receipts taxes included in the cost of items which are deductible as
direct costs;
(d) payroll taxes and
unemployment taxes, both federal and state, if the payroll services upon which
these taxes are imposed are deductible as direct costs;
(e) workman's compensation insurance and
employees health and accident insurance for the taxpayer's employees, the costs
of whose services are direct costs;
(f) assaying and sampling; and
(g) other direct costs.
H.
MINERAL PROPERTY - COSTS
OF DEPRECIATION - DEDUCTION GUIDELINES: The phrase "costs of
depreciation" as used in Subparagraphs (c) of Paragraph (1) and Subparagraph
(c) of Paragraph (2) of Subsection F of Section
7-36-23
NMSA 1978 means a reasonable allowance for the exhaustion, wear and tear and
obsolescence of property actually used in the activities described in those
subsections. Property which is not actually used, such as property which is
stored or held for future use, is not entitled to the deduction for costs of
depreciation.
I.
MINERAL
PROPERTY - MICA - ANNUAL NET PRODUCTION VALUE: The "annual net
production value", as that phrase is used in Subsection F of Section
7-36-23
NMSA 1978, for mica may be reported at a value of eight dollars ($8) per cubic
yard, without any deductions, at the election of any person reporting this
mineral property to the division. If the division determines that a value of
eight dollars ($8) per cubic yard for this mineral property is less than the
annual net production value calculated under Subsection F of Section
7-36-23
NMSA 1978, the division may disallow the election and require reporting of
market values, royalties, direct costs, depreciation and other information
determined necessary by the division.
