(a) General rule
In the case of the mines, wells, and other natural deposits listed in subsection (b), the allowance for depletion under section 611 shall be the percentage, specified in subsection (b), of the gross income from the property excluding from such gross income an amount equal to any rents or royalties paid or incurred by the taxpayer in respect of the property. Such allowance shall not exceed 50 percent (100 percent in the case of oil and gas properties) of the taxpayer's taxable income from the property (computed without allowance for depletion and without any deduction under section 199A). For purposes of the preceding sentence, the allowable deductions taken into account with respect to expenses of mining in computing the taxable income from the property shall be decreased by an amount equal to so much of any gain which (1) is treated under section 1245 (relating to gain from disposition of certain depreciable property) as ordinary income, and (2) is properly allocable to the property. In no case shall the allowance for depletion under section 611 be less than it would be if computed without reference to this section.
(b) Percentage depletion rates
The mines, wells, and other natural deposits, and the percentages, referred to in subsection (a) are as follows:
(1) 22 percent
(A) sulphur and uranium; and
(B) if from deposits in the United States—anorthosite, clay, laterite, and nephelite syenite (to the extent that alumina and aluminum compounds are extracted therefrom), asbestos, bauxite, celestite, chromite, corundum, fluorspar, graphite, ilmenite, kyanite, mica, olivine, quartz crystals (radio grade), rutile, block steatite talc, and zircon, and ores of the following metals: antimony, beryllium, bismuth, cadmium, cobalt, columbium, lead, lithium, manganese, mercury, molybdenum, nickel, platinum and platinum group metals, tantalum, thorium, tin, titanium, tungsten, vanadium, and zinc.
(2) 15 percent
If from deposits in the United States—
(A) gold, silver, copper, and iron ore, and
(B) oil shale (except shale described in paragraph (5)).
(3) 14 percent
(A) metal mines (if paragraph (1)(B) or (2)(A) does not apply), rock asphalt, and vermiculite; and
(B) if paragraph (1)(B), (5), or (6)(B) does not apply, ball clay, bentonite, china clay, sagger clay, and clay used or sold for use for purposes dependent on its refractory properties.
(4) 10 percent
Asbestos (if paragraph (1)(B) does not apply), brucite, coal, lignite, perlite, sodium chloride, and wollastonite.
(5) 7½ percent
Clay and shale used or sold for use in the manufacture of sewer pipe or brick, and clay, shale, and slate used or sold for use as sintered or burned lightweight aggregates.
(6) 5 percent
(A) gravel, peat, pumice, sand, scoria, shale (except shale described in paragraph (2)(B) or (5)), and stone (except stone described in paragraph (7));
(B) clay used, or sold for use, in the manufacture of drainage and roofing tile, flower pots, and kindred products; and
(C) if from brine wells—bromine, calcium chloride, and magnesium chloride.
(7) 14 percent
All other minerals, including, but not limited to, aplite, barite, borax, calcium carbonates, diatomaceous earth, dolomite, feldspar, fullers earth, garnet, gilsonite, granite, limestone, magnesite, magnesium carbonates, marble, mollusk shells (including clam shells and oyster shells), phosphate rock, potash, quartzite, slate, soapstone, stone (used or sold for use by the mine owner or operator as dimension stone or ornamental stone), thenardite, tripoli, trona, and (if paragraph (1)(B) does not apply) bauxite, flake graphite, fluorspar, lepidolite, mica, spodumene, and talc (including pyrophyllite), except that, unless sold on bid in direct competition with a bona fide bid to sell a mineral listed in paragraph (3), the percentage shall be 5 percent for any such other mineral (other than slate to which paragraph (5) applies) when used, or sold for use, by the mine owner or operator as rip rap, ballast, road material, rubble, concrete aggregates, or for similar purposes. For purposes of this paragraph, the term "all other minerals" does not include—
(A) soil, sod, dirt, turf, water, or mosses;
(B) minerals from sea water, the air, or similar inexhaustible sources; or
(C) oil and gas wells.
For the purposes of this subsection, minerals (other than sodium chloride) extracted from brines pumped from a saline perennial lake within the United States shall not be considered minerals from an inexhaustible source.
(c) Definition of gross income from property
For purposes of this section—
(1) Gross income from the property
The term "gross income from the property" means, in the case of a property other than an oil or gas well and other than a geothermal deposit, the gross income from mining.
(2) Mining
The term "mining" includes not merely the extraction of the ores or minerals from the ground but also the treatment processes considered as mining described in paragraph (4) (and the treatment processes necessary or incidental thereto), and so much of the transportation of ores or minerals (whether or not by common carrier) from the point of extraction from the ground to the plants or mills in which such treatment processes are applied thereto as is not in excess of 50 miles unless the Secretary finds that the physical and other requirements are such that the ore or mineral must be transported a greater distance to such plants or mills.
(3) Extraction of the ores or minerals from the ground
The term "extraction of the ores or minerals from the ground" includes the extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining. The preceding sentence shall not apply to any such extraction of the mineral or ore by a purchaser of such waste or residue or of the rights to extract ores or minerals therefrom.
(4) Treatment processes considered as mining
The following treatment processes where applied by the mine owner or operator shall be considered as mining to the extent they are applied to the ore or mineral in respect of which he is entitled to a deduction for depletion under section 611:
(A) In the case of coal—cleaning, breaking, sizing, dust allaying, treating to prevent freezing, and loading for shipment;
(B) in the case of sulfur recovered by the Frasch process—cleaning, pumping to vats, cooling, breaking, and loading for shipment;
(C) in the case of iron ore, bauxite, ball and sagger clay, rock asphalt, and ores or minerals which are customarily sold in the form of a crude mineral product—sorting, concentrating, sintering, and substantially equivalent processes to bring to shipping grade and form, and loading for shipment;
(D) in the case of lead, zinc, copper, gold, silver, uranium, or fluorspar ores, potash, and ores or minerals which are not customarily sold in the form of the crude mineral product—crushing, grinding, and beneficiation by concentration (gravity, flotation, amalgamation, electrostatic, or magnetic), cyanidation, leaching, crystallization, precipitation (but not including electrolytic deposition, roasting, thermal or electric smelting, or refining), or by substantially equivalent processes or combination of processes used in the separation or extraction of the product or products from the ore or the mineral or minerals from other material from the mine or other natural deposit;
(E) the pulverization of talc, the burning of magnesite, the sintering and nodulizing of phosphate rock, the decarbonation of trona, and the furnacing of quicksilver ores;
(F) in the case of calcium carbonates and other minerals when used in making cement—all processes (other than preheating of the kiln feed) applied prior to the introduction of the kiln feed into the kiln, but not including any subsequent process;
(G) in the case of clay to which paragraph (5) or (6)(B) of subsection (b) applies—crushing, grinding, and separating the mineral from waste, but not including any subsequent process;
(H) in the case of oil shale—extraction from the ground, crushing, loading into the retort, and retorting (including in situ retorting), but not hydrogenation, refining, or any other process subsequent to retorting; and
(I) any other treatment process provided for by regulations prescribed by the Secretary which, with respect to the particular ore or mineral, is not inconsistent with the preceding provisions of this paragraph.
(5) Treatment processes not considered as mining
Unless such processes are otherwise provided for in paragraph (4) (or are necessary or incidental to processes so provided for), the following treatment processes shall not be considered as "mining": electrolytic deposition, roasting, calcining, thermal or electric smelting, refining, polishing, fine pulverization, blending with other materials, treatment effecting a chemical change, thermal action, and molding or shaping.
(d) Denial of percentage depletion in case of oil and gas wells
Except as provided in section 613A, in the case of any oil or gas well, the allowance for depletion shall be computed without reference to this section.
(e) Percentage depletion for geothermal deposits
(1) In general
In the case of geothermal deposits located in the United States or in a possession of the United States, for purposes of subsection (a)—
(A) such deposits shall be treated as listed in subsection (b), and
(B) 15 percent shall be deemed to be the percentage specified in subsection (b).
(2) Geothermal deposit defined
For purposes of paragraph (1), the term "geothermal deposit" means a geothermal reservoir consisting of natural heat which is stored in rocks or in an aqueous liquid or vapor (whether or not under pressure). Such a deposit shall in no case be treated as a gas well for purposes of this section or section 613A, and this section shall not apply to a geothermal deposit which is located outside the United States or its possessions.
(3) Percentage depletion not to include lease bonuses, etc.
In the case of any geothermal deposit, the term "gross income from the property" shall, for purposes of this section, not include any amount described in section 613A(d)(5).
Amendments
2018—Subsec. (a). Pub. L. 115–141 substituted "any deduction under section 199A" for "the deduction under section 199A".
2017—Subsec. (a). Pub. L. 115–97, §13305(b)(4), struck out "and without the deduction under section 199" after "without allowance for depletion".
Pub. L. 115–97, §11011(d)(3), inserted "and without the deduction under section 199A" after "without the deduction under section 199".
2005—Subsec. (c)(4)(H). Pub. L. 109–135 inserted "(including in situ retorting)" after "and retorting".
2004—Subsec. (a). Pub. L. 108–357, which directed the insertion of "and without the deduction under section 199" after "without allowances for depletion", was executed by making the insertion after "without allowance for depletion", to reflect the probable intent of Congress.
1996—Subsec. (e)(1)(B). Pub. L. 104–188 substituted "subsection (b)." for "subsection (b),".
1990—Subsec. (a). Pub. L. 101–508, §11522(a), inserted "(100 percent in the case of oil and gas properties)" after "50 percent".
Subsec. (e)(1)(B). Pub. L. 101–508, §11815(b)(2), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "the applicable percentage (determined under the table contained in paragraph (2)) shall be deemed to be the percentage specified in subsection (b)."
Subsec. (e)(2) to (4). Pub. L. 101–508, §11815(b)(1), redesignated pars. (3) and (4) as (2) and (3), respectively, and struck out former par. (2) which related to the applicable percentage depletion for geothermal deposits.
1986—Subsec. (e)(4). Pub. L. 99–514 added par. (4).
1978—Subsec. (c)(1). Pub. L. 95–618, §403(a)(2)(A), inserted "and other than a geothermal deposit" after "oil or gas well".
Subsec. (e). Pub. L. 95–618, §403(a)(1), added subsec. (e).
1976—Subsec. (a). Pub. L. 94–455, §1901(b)(3)(K), substituted "ordinary income" for "gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231".
Subsec. (c)(2), (4)(I). Pub. L. 94–455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary".
1975—Subsec. (b)(1). Pub. L. 94–12, §501(b)(2)(A), struck out subpar. (A) "oil and gas wells" and redesignated former subpars. (B) and (C) as (A) and (B), respectively.
Subsec. (b)(3), (4). Pub. L. 94–12, §501(b)(2)(B), substituted "(1)(B)" for "(1)(C)" wherever appearing.
Subsec. (b)(7). Pub. L. 94–12, §501(b)(2) (B), (C), substituted "(1)(B)" for "(1)(C)" in provisions preceding subpar. (A) and added subpar. (C).
Subsec. (d). Pub. L. 94–12, §501(b)(1), substituted provisions denying the percentage depletion allowance in the case of oil and gas wells except as provided in section 613A for provisions governing the application of percentage depletion rates to certain taxable years ending in 1954.
1974—Subsec. (c)(4)(E). Pub. L. 93–499 inserted reference to decarbonation of trona.
1969—Subsec. (b). Pub. L. 91–172, §501(a), reduced the percentage depletion rate on oil and gas wells from 27½ percent to 22 percent, reduced to 22 percent other minerals formerly receiving percentage depletion at a rate of 23 percent, added molybdenum in the category of minerals subject to the 22 percent depletion rate, reduced to 14 percent the rate on minerals formerly receiving depletion at a 15 percent rate except in the case of domestic gold, silver, oil shale, copper, and iron ore, and inserted provision that for percentage depletion purposes, minerals other than sodium chloride, extracted from brine pumped from a saline perennial lake within the United States are not to be considered minerals from an inexhaustible source.
Subsec. (c)(4)(H), (I). Pub. L. 91–172, §502(a), added subpar. (H) and redesignated former subpar. (H) as (I).
1966—Subsec. (b)(2)(B). Pub. L. 89–809, §207(a)(1), inserted "clay, laterite, and nephelite syenite" after "anorthosite".
Subsec. (b)(3)(B). Pub. L. 89–809, §§207(a)(2), 209(a)(2), substituted "if neither paragraph (2)(B), (5), or (6)(B) applies" for "if paragraph (5)(B) does not apply".
Subsec. (b)(5). Pub. L. 89–809, §209(a)(1), added par. (5). Former par. (5) redesignated (6).
Subsec. (b)(6). Pub. L. 89–809, §§208(a)(1), 209(a)(1), (3), (4), redesignated par. (5) as (6), struck out "mollusk shells (including clam shells and oyster shells),", substituted "shale (except shale described in paragraph (5)), and stone (except stone described in paragraph (7))" for "shale, and stone, except stone described in paragraph (6)" in subpar. (A), and struck out "building or paving brick," and "sewer pipe," in subpar. (B). Former par. (6) redesignated (7).
Subsec. (b)(7). Pub. L. 89–809, §§208(a)(2), 209(a)(1), (5), redesignated par. (6) as (7) and inserted "mollusk shells (including clam shells and oyster shells)," after "marble," and "(other than slate to which paragraph (5) applies)" after "any other such mineral".
Subsec. (c)(4)(G). Pub. L. 89–809, §209(b), substituted "paragraph (5) or (6)(B)" for "paragraph (5)(B)".
1964—Subsec. (b)(2)(B), (6). Pub. L. 88–571 inserted "beryllium" after "antimony" in par. (2)(B), and deleted "beryl" after "bauxite" in pars. (2)(B) and (6).
1962—Subsec. (a). Pub. L. 87–834 inserted provisions requiring the allowable deductions taken into account with respect to expenses of mining in computing the taxable income from the property to be decreased by an amount equal to so much of any gain which is treated under section 1245 as gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231, and is properly allocable to the property.
1960—Subsec. (b)(3). Pub. L. 86–564, §302(a)(1), limited the 15 percent allowance for ball clay, bentonite, china clay, and sagger clay to cases where paragraph (5)(B) does not apply, and authorized a 15 percent allowance, if paragraph (5)(B) does not apply, for clay used or sold for use for purposes dependent on its refractory properties.
Subsec. (b)(5). Pub. L. 86–564, §302(a)(2), substituted provisions authorizing a 5 percent allowance for clay used, or sold for use, in the manufacture of building or paving brick, drainage and roofing tile, sewer pipe, flower pots, and kindred products for provisions which authorized a 5 percent allowance for brick and tile clay.
Subsec. (b)(6). Pub. L. 86–564, §302(a)(3), struck out provisions which authorized a 15 percent allowance for refractory and fire clay. See subsec. (b)(3) of this section.
Subsec. (c)(2). Pub. L. 86–564, §302(b)(1), substituted "the treatment processes considered as mining described in paragraph (4) (and the treatment processes necessary or incidental thereto)" for "the ordinary treatment processes normally applied by mine owners or operators in order to obtain the commercially marketable mineral product or products", and "such treatment processes" for "the ordinary treatment processes".
Subsec. (c)(4). Pub. L. 86–564, §302(b)(2), substituted "The following treatment processes where applied by the mine owner or operator shall be considered as mining to the extent they are applied to the ore or mineral in respect of which he is entitled to a deduction for depletion under section 611" for "The term 'ordinary treatment processes' includes the following" in opening provisions, included cleaning in subpar. (B), substituted "ores or minerals which" for "minerals which" and included substantially equivalent processes in subpar. (C), included uranium and minerals which are not customarily sold in the form of the crude mineral product and substituted "from the ore or the mineral or minerals from other material from the mine or other natural deposit" for "from the ore, including the furnacing of quicksilver ores" in subpar. (D), included the furnacing of quicksilver ores in subpar. (E), and added subpars. (F) to (H).
Subsec. (c)(5). Pub. L. 86–564, §302(b)(2), added par. (5).
1958—Subsec. (d). Pub. L. 85–866 added subsec. (d).
Effective Date of 2018 Amendment
Amendment by Pub. L. 115–141 effective as if included in section 11011 of Pub. L. 115–97, see section 101(d)(1) of Pub. L. 115–141, set out as a note under section 62 of this title.
Effective Date of 2017 Amendment
Amendment by section 11011(d)(3) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11011(e) of Pub. L. 115–97, set out as a note under section 62 of this title.
Amendment by section 13305(b)(4) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, except as provided by transition rule, see section 13305(c) of Pub. L. 115–97, set out as a note under section 74 of this title.
Effective Date of 2004 Amendment
Amendment by Pub. L. 108–357 applicable to taxable years beginning after Dec. 31, 2004, see section 102(e) of Pub. L. 108–357, set out as a note under section 56 of this title.
Effective Date of 1990 Amendment
Pub. L. 101–508, title XI, §11522(c), Nov. 5, 1990, 104 Stat. 1388–486, provided that: "The amendments made by this section [amending this section and sections 613A and 614 of this title] shall apply to taxable years beginning after December 31, 1990."
Effective Date of 1986 Amendment
Pub. L. 99–514, title IV, §412(a)(3), Oct. 22, 1986, 100 Stat. 2227, provided that: "The amendment made by this subsection [amending this section and section 613A of this title] shall apply to amounts received or accrued after August 16, 1986, in taxable years ending after such date."
Effective Date of 1978 Amendment
Pub. L. 95–618, title IV, §403(c), Nov. 9, 1978, 92 Stat. 3204, provided that: "The amendments made by this section [amending this section and sections 613A and 614 of this title] shall take effect on October 1, 1978, and shall apply to taxable years ending on or after such date."
Effective Date of 1976 Amendment
Amendment by section 1901(b)(3)(K) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.
Effective Date of 1975 Amendment
Amendment by Pub. L. 94–12 effective Jan. 1, 1975, applicable to taxable years ending after Dec. 31, 1974, see section 501(c) of Pub. L. 94–12, set out as an Effective Note under section 613A of this title.
Effective Date of 1974 Amendment
Pub. L. 93–499, §2(b), Oct. 29, 1974, 88 Stat. 1550, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 1970."
Effective Date of 1969 Amendment
Pub. L. 91–172, title V, §501(b), Dec. 30, 1969, 83 Stat. 630, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after October 9, 1969."
Pub. L. 91–172, title V, §502(b), Dec. 30, 1969, 83 Stat. 630, provided that: "The amendments made by subsection (a) [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Dec. 30, 1969]."
Effective Date of 1966 Amendment
Pub. L. 89–809, title II, §207(b), Nov. 13, 1966, 80 Stat. 1579, provided that: "The amendments made by subsection (a) [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Nov. 13, 1966]."
Pub. L. 89–809, title II, §208(b), Nov. 13, 1966, 80 Stat. 1579, provided that: "The amendments made by subsection (a) [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Nov. 13, 1966]."
Pub. L. 89–809, title II, §209(c), Nov. 13, 1966, 80 Stat. 1580, provided that: "The amendments made by subsections (a) and (b) [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Nov. 13, 1966]."
Effective Date of 1964 Amendment
Pub. L. 88–571, §6(b), Sept. 2, 1964, 78 Stat. 860, provided that: "The amendments made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1963."
Effective Date of 1962 Amendment
Amendment by Pub. L. 87–834 applicable to taxable years beginning after Dec. 31, 1962, see section 13(g) of Pub. L. 87–834, set out as an Effective Date note under section 1245 of this title.
Effective Date of 1960 Amendment
Pub. L. 86–564, title III, §302(c), June 30, 1960, 74 Stat. 293, as amended by Pub. L. 86–781, §4, Sept. 14, 1960, 74 Stat. 1018; Pub. L. 99–514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(c)
"(1)
"(2)
"(A)
"(i) the amendments made by subsection (b) [amending this section] shall apply to taxable years with respect to which such election is effective and
"(ii) provisions having the same effect as the amendments made by subsection (b) [amending this section] shall be deemed to be included in the Internal Revenue Code of 1939 and shall apply to taxable years with respect to which such election is effective in lieu of the corresponding provisions of such Code.
"(B)
"(i) the assessment of a deficiency,
"(ii) the refund or credit of an overpayment, or
"(iii) the commencement of a suit for recovery of a refund under section 7405 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] [section 7405 of this title],
is not prevented on the date of the enactment of this paragraph [Sept. 14, 1960] by the operation of any law or rule of law. Such election shall also be effective for any taxable year beginning before January 1, 1961, in respect of which an assessment of a deficiency has been made but not collected on or before the date of the enactment of this paragraph.
"(C)
"(D)
"(E)
"(F)
Effective Date of 1958 Amendment
Amendment by Pub. L. 85–866 applicable to taxable years beginning after Dec. 31, 1953, and ending after Aug. 16, 1954, see section 1(c)(1) of Pub. L. 85–866, set out as a note under section 165 of this title.
Savings Provision
For provisions that nothing in amendment by section 11815(b)(1), (2) of Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
Election for Clay and Shale Used in Manufacture of Clay Products
Pub. L. 87–312, Sept. 26, 1961, 75 Stat. 674, provided for the election of, and procedure for, a differing rate of depletion for clay and shale used in the manufacture of clay products, such election to be effective for all taxable years beginning before Jan. 1, 1961, in respect of which the assessment of a deficiency, a refund or credit of overpayment, or the commencement of a suit for recovery is not prevented on Sept. 26, 1961, by operation of any law or rule of law, and also effective for any taxable year beginning before Jan. 1961, in respect of which an assessment of a deficiency has been made but not collected on or before Sept. 26, 1961.
Election for Quartzite and Clay Used in Production of Refractory Products
Pub. L. 87–321, §2, Sept. 26, 1961, 75 Stat. 683, provided for an election of, and procedures for, a differing rate of depletion for quartzite and clay used in production of refractory products, such election to be effective on and after Jan. 1, 1951, for all taxable years beginning before Jan. 1, 1961, in respect of which the assessment of a deficiency, the refund or credit of an overpayment, or the commencement of a suit for recovery is not prevented on Sept. 26, 1961, by the operation of any law or rule of law, and also effective on and after Jan. 1, 1951, for any taxable year beginning before Jan. 1, 1961, in respect of which an assessment of a deficiency has been made but not collected on or before Sept. 26, 1961.
Refund or Credit of Overpayments; Limitations; Interest
Pub. L. 85–866, title I, §36(b), Sept. 2, 1958, 72 Stat. 1633, provided for the filing of a claim within 6 months of Sept. 2, 1958, and for the refund or credit of any overpayment, without interest, if such refund or credit, resulting from the addition of subsec. (d) of this section, was prevented on Sept. 2, 1958, or within 6 months thereof, by the operation of any law or rule of law other than certain specified sections of the Internal Revenue Codes of 1939 and 1954.
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