§ 40-6-24 — Tax credit for mining exploration -- Division to issue certificates.

(1) As used in this section:
(1)(a) "Activity" means:
(1)(a)(i) surveying by a geophysical method or by a geochemical method;
(1)(a)(ii) drilling one or more exploration holes;
(1)(a)(iii) conducting underground exploration;
(1)(a)(iv) surface trenching or bulk sampling;
(1)(a)(v) taking aerial photographs;
(1)(a)(vi) geological and geophysical logging;
(1)(a)(vii) sample analysis; or
(1)(a)(viii) metallurgical testing.
(1)(b) "Assigned tax credit certificate" means a tax credit certificate the division issues to a person to which a claimant assigns the claimant's tax credit.
(1)(c) (1)(c)(i) "Certified expenditure" means a cost incurred for an activity in direct support of an eligible exploration activity conducted at a specific site.
(1)(c)(ii) "Certified expenditure" includes:
(1)(c)(ii)(A) the cost of obtaining an approval, a permit, a license, or a certificate for an eligible exploration activity;
(1)(c)(ii)(B) a direct labor cost and the cost of benefits for employees directly associated with work described in Subsection (1)(c)(i);
(1)(c)(ii)(C) the cost of leasing equipment from a third party;
(1)(c)(ii)(D) the cost of owning, maintaining, or operating equipment;
(1)(c)(ii)(E) insurance and bond premiums associated with the activities described in Subsections (1)(c)(ii)(A) through (D);
(1)(c)(ii)(F) the cost of a consultant or an independent contractor; and
(1)(c)(ii)(G) any general expense related to operating the business engaged in the eligible exploration activity to the extent the expense is directly attributable to the work described in Subsection (1)(c)(i).
(1)(c)(iii) "Certified expenditure" does not include:
(1)(c)(iii)(A) return on investment; or
(1)(c)(iii)(B) insurance or bond premiums not described in Subsection (1)(c)(ii)(E).
(1)(d) (1)(d)(i) "Claimant" means a person that:
(1)(d)(i)(A) is engaged in the business of mining or extracting minerals;
(1)(d)(i)(B) is subject to a severance tax, for the taxable year in which the person applies for a tax credit certificate, under Title 59, Chapter 5, Part 2, Mining Severance Tax, as a direct result of minerals produced from eligible exploration activities; and
(1)(d)(i)(C) makes a certified expenditure.
(1)(d)(ii) "Claimant" does not include a person in the business of mining or extracting minerals on the Great Salt Lake from:
(1)(d)(ii)(A) the brines of the Great Salt Lake, except for a person using a nonevaporative mining or extraction method; or
(1)(d)(ii)(B) a material or secondary source, including tails, slag, waste dumps, or another similar secondary source, derived from the brines of the Great Salt Lake.
(1)(e) "Eligible claimant" means a claimant or a person to which a claimant assigns a tax credit in accordance with Subsections (4)(a)(vi) and (7).
(1)(f) "Eligible exploration activity" means an activity performed in the state that is associated with:
(1)(f)(i) producing a mineral from a natural deposit that is not part of a mine that exists at the time the activity begins;
(1)(f)(ii) producing a mineral not under production within a mine that exists at the time the activity begins;
(1)(f)(iii) recovering a mineral not under production from a secondary source at the time the activity begins, including tails, slag, waste dumps, or another similar secondary source, whether in solution or otherwise;
(1)(f)(iv) expanding production of a mineral using a mining method not used within a mine that exists at the time the activity begins; or
(1)(f)(v) expanding existing production of a mineral that requires a new exploration or mining permit or the modification of a permit issued before the activity begins.
(1)(g) "Geochemical method" means a method of gathering geochemical data, including collecting soil, rock, water, air, vegetation, or any other similar item and performing a chemical analysis on the item.
(1)(h) "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.
(1)(i) "Mine" means the same as that term is defined in Section 59-5-201.
(1)(j) "Mineral" means:
(1)(j)(i) a metalliferous mineral as defined in Section 59-5-201; or
(1)(j)(ii) a metalliferous compound as defined in Section 59-5-202.
(1)(k) "Tax credit certificate" means a certificate the division issues that:
(1)(k)(i) lists the claimant's name and taxpayer identification number;
(1)(k)(ii) lists the amount of the claimant's tax credit authorized under this section for a taxable year; and
(1)(k)(iii) includes other information as determined by the division.
(2) Before claiming a tax credit under Section 59-5-304, a person shall apply to the division to enter an agreement and, upon becoming an eligible claimant, to receive a tax credit certificate.
(3) (3)(a) Except as provided in Subsection (3)(b), a person shall enter an agreement with the division before beginning eligible exploration activities.
(3)(b) A person that has certified expenditures from an eligible exploration activity for a taxable year beginning on or after January 1, 2025, and beginning before January 1, 2026, shall enter an agreement with the division as provided by rule.
(4) (4)(a) The agreement shall provide:
(4)(a)(i) the eligible exploration activities for which the person may incur certified expenditures eligible to receive a tax credit certificate, which may include certified expenditures from a taxable year beginning on or after January 1, 2025, and beginning before January 1, 2027;
(4)(a)(ii) the type of mineral the person intends to produce;
(4)(a)(iii) the maximum number of years a person has between the beginning of eligible exploration activities and the production of minerals as a direct result of the eligible exploration activities;
(4)(a)(iv) the maximum number of years, which may not exceed 20 years, that a person may receive a tax credit certificate;
(4)(a)(v) the requirements for reporting certified expenditures and production of minerals as a direct result of eligible exploration activity, including:
(4)(a)(v)(A) a description of the mine where the eligible exploration activity occurred;
(4)(a)(v)(B) evidence that the certified expenditure occurred and the amount of the certified expenditure; and
(4)(a)(v)(C) the means for verifying that severance tax liability occurs as a direct result of an eligible exploration activity; and
(4)(a)(vi) a requirement that, if a claimant intends to assign a tax credit, the claimant shall provide to the division a written notice of intent to assign the tax credit to another person, in a form the division approves, that includes:
(4)(a)(vi)(A) written certification or other proof that the claimant irrevocably elects not to claim the tax credit authorized by the tax credit certificate; and
(4)(a)(vi)(B) contact information for the person to which the claimant is assigning the tax credit.
(4)(b) The parties to the agreement may modify the terms of the agreement.
(4)(c) (4)(c)(i) The division shall approve certified expenditures upon receiving a report of a certified expenditure unless the division determines that the expenditure does not meet the definition of certified expenditure.
(4)(c)(ii) If the division determines that an expenditure does not meet the definition of certified 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 any deficiency or provide additional information.
(5) (5)(a) A person with an agreement may apply for a tax credit certificate:
(5)(a)(i) upon becoming an eligible claimant; and
(5)(a)(ii) for a taxable year beginning on or after January 1, 2027.
(5)(b) The person 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 certificate:
(5)(b)(i) proof that the person is an eligible claimant;
(5)(b)(ii) a description of the mineral that the eligible claimant produced and evidence to support that the mineral is produced from an eligible exploration activity;
(5)(b)(iii) the amount of severance tax liability as a direct result of minerals produced from an eligible exploration activity that the eligible claimant incurred for the taxable year; and
(5)(b)(iv) any other information the division requests.
(6) (6)(a) After the division receives an application for a tax credit certificate, the division shall:
(6)(a)(i) verify that the person is an eligible claimant; and
(6)(a)(ii) determine whether the eligible claimant has approved certified expenditures.
(6)(b) Subject to Subsection (6)(c), the division shall issue a tax credit certificate in an amount equal to the lesser of:
(6)(b)(i) the amount of certified expenditures minus any certified expenditures for which the division previously issued a tax credit certificate; or
(6)(b)(ii) the claimant's severance tax liability as a direct result of minerals produced from an eligible exploration activity for the taxable year.
(6)(c) (6)(c)(i) The division may not issue a tax credit certificate if the aggregate value of tax credit certificates issued for certified expenditures related to eligible exploration activities at the same mine exceeds $20,000,000.
(6)(c)(ii) Notwithstanding Subsection (6)(c)(i), the division may issue a tax credit certificate up to an aggregate value of $30,000,000 for certified expenditures related to eligible exploration activities at the same mine if the certified expenditures that exceed $20,000,000 are for eligible exploration activities undertaken to produce a mineral for which the United States is greater than 50% net import reliant, as provided in the Mineral Commodity Summaries published by the United States Geological Survey, in the calendar year in which an eligible exploration activity commences.
(7) (7)(a) If the claimant meets the requirements of Subsection (4)(a)(vi), the division shall issue an assigned tax credit certificate to the person identified by the claimant in an amount equal to the lesser of:
(7)(a)(i) the amount of the claimant's certified expenditures minus any certified expenditures for which the division previously issued a tax credit certificate; or
(7)(a)(ii) the person's severance tax liability as a direct result of minerals produced from an eligible exploration activity for the taxable year.
(7)(b) A person that receives an assigned tax credit certificate may claim the tax credit under Section 59-5-304 as if the person met the requirements of Section 59-5-304, if the person files a return under Title 59, Chapter 5, Part 2, Mining Severance Tax.
(8) An eligible claimant that receives a tax credit certificate or assigned tax credit certificate in accordance with this section shall retain the tax credit certificate or assigned tax credit certificate for the same time period that a person is required to keep books and records under Section 59-1-1406.
(9) The division shall submit annually to the State Tax Commission an electronic list that includes:
(9)(a) the name and identifying information for:
(9)(a)(i) each claimant to which the division issues a tax credit certificate; and
(9)(a)(ii) each person to which the division issues an assigned tax credit certificate in accordance with Subsection (7);
(9)(b) for each person described in Subsection (9)(a), the amount of tax credit stated on the tax credit certificate or assigned tax credit certificate; and
(9)(c) for each person described in Subsection (9)(a)(ii), information necessary to identify the original tax credit certificate and the assigned tax credit certificate.
(10) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the division may make rules governing the administration of the agreement and tax credit certificate process described in this section.

Legislative History

Repealed and Re-enacted by Chapter 159, 2025 General Session