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Elimination of the Mineral Percentage Depletion Allowance

The Industrial Minerals Association – North America (IMA-NA) opposes “The Elimination of Double Subsidies for the Hardrock Mining Industry Act of 2011” (S.26) introduced on January 25, 2011, by Senator Jeanne Shaheen (D-NH).  

Currently, the U.S. tax laws allow deductions from gross income for investors in exhaustible commodities (such as minerals) for the depletion of the deposits.  The taxpayer calculates a fixed percentage of gross income and deducts that amount from gross income annually for as long as the property generates income.  The percentage depletion allowance is intended as an incentive to stimulate investment in capital-intensive, high-risk, extractive industries, recognizing that the commodities depleted are not renewable resources.  IMA-NA supports the underlying philosophy of the depletion allowance as originally formulated.

This legislation would impose an additional tax burden on the mining industry and send shock waves through an already fragile U.S. economy.  It would raise the costs of domestic companies engaged in the production of minerals and thereby raise costs for the millions of consumers whose standard of living depends on these minerals.  It also would allow foreign producers to increase their exports to the U.S., resulting in a loss of U.S. jobs, an increased dependence on foreign mineral production and an increased trade deficit. 

Natural resource extraction is a fundamental underpinning of our Nation's economy.  Clearly, strong domestic natural resource industries are essential to our long-term economic health and security.  These industries are noted for their capital-intensive, generally low-margin, and highly cyclical characteristics.  They employ tens of thousands of workers in good, productive and well-paying jobs to make natural resource extraction possible.  A reliable and consistent tax policy is necessary to maintain this critical economic asset.

It is clear that the majority of the U.S. Senate does not support this new tax, as the legislation has been introduced several years in a row without serious momentum.  Very few Senators even have lent their name to this flawed legislation.
 
IMA-NA is a trade association created to advance the interests of North American companies that extract or process industrial minerals used throughout the manufacturing and agricultural industries.  IMA-NA stands ready to participate constructively in this important discussion regarding the importance of the minerals depletion allowance.