Minerals Exploration Tax Credit

In 2022 the Legislature passed SB250, which created an exploration tax credit available for certain non-coal minerals operations. (https://le.utah.gov/~2022/bills/static/SB0250.html)

If you are interested in more information, please contact John Rogers at 801.656.7741 or email him at johnrogers@utah.gov

Important definitions from the Statute are:

“Certified expenditure” means (a) a cost incurred for an activity in direct support of an exploration activity conducted at a specific site, including: (i) the cost of obtaining an approval, a permit, a license, or a certificate for an exploration activity; (ii) a direct labor cost and the cost of benefits for employees directly associated with work described in subsection (a); (iii) the cost of leasing equipment from a third party; (iv) the cost of owning, maintaining, or operating equipment; (v) insurance and bond premiums associated with the activities described in subsections (i) through (iv); (vi) the cost of a consultant or an independent contractor; and (vii) any general expense related to operating the business engaged in the exploration activity to the extent the expense is directly attributable to the work described in subsection (a). (b) “Certified expenditure” does not include: (i) return on investment; or (ii) insurance or bond premiums not described in subsection (a)(v).

“Closed mine” means a mine that: (a) previously operated; (b) does not currently operate; and (c) for which each mining approval, permit, license, or certificate that allowed the mine to operate is no longer in effect.

“Construction commencement date of a new mine” means the earliest date on which each of the following is true: (a) the owner or owner’s agent obtains for the mine each of the following that a reasonable and prudent person would consider adequate to commence construction of a mine: (i) each federal, state, or local government approval, permit, license, and certificate; and (ii) each right in land, including each permit, lease and title; (b) each approval, permit, license, and certificate described in subsection (a)(i) is in effect without any modification that might jeopardize the completion or continued construction of the mine; and (c) the construction, including the continuation of construction, is not temporarily or permanently enjoined by an order or other decision of a court or administrative body.

“Eligible claimant” means a person who: (a) is engaged in the business of mining or extracting minerals; (b) is subject to a severance tax under Title 59, Chapter 5, Part 2, Mining Severance Tax; and (c) makes a certified expenditure during the taxable year.

“Exploration activity” means (a) an activity performed in the state for the purpose of determining the existence, location, extent, or quality of a mineral deposit and includes: (i) a surveying by a geophysical method or by a geochemical method; (ii) drilling one or more exploration holes; (iii) conducting underground exploration; (iv) surface trenching or bulk sampling; (v) taking aerial photographs; (vi) geological and geophysical logging; (vii) sample analysis; (viii) metallurgical testing. (b) “Exploration activity” does not include an activity that occurs: (i) after the construction commencement date of a new mine; or (ii) if the mine is or was a closed mine, after the mine reopening date.

“Geochemical method” means a method of gathering geochemical data, including collecting soil, rock, water, air, vegetation, or another similar item and performing a chemical analysis on the item.

“Geophysical method” means a method of gathering geophysical data that is used in mineral exploration, including seismic, gravity, magnetic, radiometric, radar, electromagnetic, and other remote sensing measurements.

“Mine” means the same as that term defined in Section 59-5-201.

“Mine reopening date” means with respect to a closed mine, the earliest date on which each of the following is true: (a) the owner or owner’s agent obtains for the closed mine each of the following that a reasonable and prudent person would consider adequate to begin operation of a closed mine: (i) each federal, state, or local government approval, permit, license, and certificate; and (ii) each right in land, including each permit, lease, and title; (b) each approval, permit, license, and certificate described in subsection (a)(i) is in effect without modification that might jeopardize resuming operation of the closed mine; and (c) resuming operation of the closed mine is not temporarily or permanently enjoined by an order or other decision of a court or administrative body.

“Mineral” means a metalliferous mineral as defined in Section 59-5-201.

“Tax credit certificate” means a certificate as defined in Section 40-6-24.

The new rules that will guide the process are:

R647-2-117. Mineral Exploration Tax Credit.

• 1. In accordance with Section 40-6-24, each operator desiring to claim a tax credit for mineral exploration must submit by March 1 for the previous calendar year, to the division, the Mineral Exploration Tax Credit form, which:
• a. Lists the eligible claimant's name;
• b. Lists the eligible claimant's contact information, including address, phone number, and email address;
• c. Lists the eligible claimant's taxpayer identification number;
• d. Lists the amount of the eligible claimant's tax credit;
• e. Includes proof of satisfying the certified expenditure definition;
• f. A description of the mine where exploration occurred; and
• g. Proof of each expenditure.


• 2. The eligible claimant shall include in the application for a tax credit certificate the following information for the taxable year in which the person seeks a tax credit certification:
• a. Proof of engaging in business of mining or extracting minerals;
• b. Proof of being subject to a severance tax under Title 59, Chapter 5, Part 2, Mining Severance Tax; and
• c. Proof that a certified expenditure was made during the taxable year.


• 3. After the division receives an application for a tax credit certificate, for each expenditure in the application, the division shall approve the expenditure as a certified expenditure or deny the expenditure as an expenditure that is not certified expenditure. If the division denies an expenditure, the division shall provide the person a written explanation that states each reason the division denied the expenditure and give the person an opportunity to correct deficiencies or provide additional information.


• 4. The tax credit certificate shall state the amount of the tax credit, which is equal to the amount of the eligible claimant's certified expenditures as approved by the division. The division may not issue a tax credit certificate for certified expenditures related to exploration activities at a mine if the aggregate value of tax credit certificates issued for certified expenditures related to exploration activities at the same mine exceeds $20,000,000.


• 5. An eligible claimant may assign a tax credit certificate to another person if the eligible claimant provides written notice to the division in a Mineral Tax Credit Reassignment form that includes:
• a. The eligible claimant's written certification that they irrevocably elect not to claim the tax credit authorized on the tax credit certificate; and
• b. The contact information for the person to whom the eligible credit is assigning the tax credit certificate.


• 6. If the eligible claimant meets the requirements of Subsections R647-2-117(1) and (2), the division shall issue an assigned tax credit certificate to the person identified by the eligible claimant in an amount equal to the eligible claimant's tax credit certificate. A person to whom an eligible claimant assigns a tax credit certificate may claim the tax credit under Section 59-5-216 as if the person met the requirements, if the person files a return under Title 59, Chapter 5, Part 2, Mining Severance Tax.


• 7. An eligible claimant who received a tax credit certificate in accordance with this section shall retain the tax credit certificate for the same time period that a person shall keep books and records under Section 59-1-1406.


• 8. The division shall annually submit by June 30 to the State Tax Commission an electronic list that includes:
• a. The name and identifying information for:
• i. Each eligible claimant to whom the division issues a tax credit certificate; and
• ii. Each person to whom an eligible claimant assigns a tax credit certificate in accordance with Subsections R647-2-117(5) and (6);
• b. For each person described in Subsection R647-2-117(8)(a), the amount of the tax credit stated on the tax credit certificate; and
• c. For each person described in Subsection R647-2-117(8)(a)(ii), information necessary to identify the tax credit certification that the eligible claimant assigned to the person.