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MINERALS TAX
Direct reduced iron tax incentives and
mining occupation tax apportionment
March 27, 2015
Yes
DOR Administrative
Cost/Savings
No
X
Department of Revenue
Analysis of H.F. 0416 (Anzelc) 1st engrossment
FY2016
General Fund
Special Revenue Fund
Total All Funds
($500)
$500
$0
Fund Impact
FY2017
FY2018
(000's)
($480)
($470)
$480
$470
$0
$0
FY2019
($460)
$460
$0
Effective for taxes based on concentrate produced in 2015 and thereafter.
EXPLANATION OF THE BILL
The bill would make modifications to various minerals provisions.
Under current law, mining occupation tax revenues apportioned to the state general fund are
appropriated to various funds, including an amount equal to 2.5¢ per taxable ton appropriated to the
mining environmental and regulatory account in the special revenue fund. The proposal would create
a minimum floor of $1.5 million, or 2.5¢ per taxable ton, whichever is greater.
The bill would also make the following changes related to the production of direct reduced iron (DRI):
 Modify the definition of direct reduced iron ore from a product that has iron content of at least
75% down to 67% percent and silica plus alumina content of no greater than 3%.
 Allow new producers of direct reduced iron to be eligible for the phase in production tax
incentive by eliminating the July 1, 2008 deadline for obtaining all environmental permits and
commencing construction.
 Exempt from production tax the taconite or iron sulphides consumed in the noncommercial
production of direct reduced ore.
REVENUE ANALYSIS DETAIL
Mining Occupation Tax
 The estimates are based on the February 2015 forecast.
 Based on projected mining occupation tax revenues, the amount apportioned from the state
general fund to the mining environmental and regulatory account in the special revenue fund
would increase from approximately $1.0 million to $1.5 million beginning in FY 2016.
Direct Reduced Iron Ore
 The proposed changes related to direct reduced iron ore are assumed to have no impact on the
state general fund.
 Under current law there is no direct reduced iron production anticipated from new producers
during the current forecast period, but modifying the definition of direct reduced iron to 67%
1 | Department of Revenue | Analysis of H.F. 0416 (Anzelc) 1st engrossment


iron content instead of 75% could allow some companies to qualify sooner as DRI producers.
Allowing new producers of direct reduced iron to phase in production tax paid would reduce
the amount of production tax collected during the first five years for a new producer.
Exempting taconite consumed in noncommercial production of direct reduced iron from
the production tax could also reduce production tax collections.
Lower production tax collections would result in less revenue distributed to the Taconite
Environmental Protection Fund and the Douglas J. Johnson Economic Protection Fund.
Source: Minnesota Department of Revenue
Property Tax Division - Research Unit
www.revenue.state.mn.us/research_stats/
pages/revenue-analyses.aspx
hf0416(sf0677)_pt_2/nrg
2 | Department of Revenue | Analysis of H.F. 0416 (Anzelc) 1st engrossment