Section 263(c) of the Internal Revenue Code (the "Code") allows taxpayers to elect to deduct certain costs incurred in developing mineral deposits the year the costs are incurred. Costs that are not deducted in this manner must be capitalized and deducted over a period of years. As per Code §§ 193, 616 and 617, the recovery period depends on the nature of the costs and the type of mineral deposit that is developed. Eligible costs generally include expenses incurred in bringing known mineral deposits into production. These expenses include items such as labor, fuel, repairs, hauling and supplies that do not
have a salvage value. The deduction applies to domestic oil, natural gas, and geothermic energy sources. Treas. Reg. §1.612-4(a)
Massachusetts conforms to the Code for purposes of determining corporate excise net income tax and personal income tax business expense deductions. Accordingly, Massachusetts conforms to this accelerated deduction. This conformity results in a deferral of Massachusetts tax and therefore constitutes a state tax expenditure.
Origin: IRC §§193, 263(c), 616, 617; M.G.L. c. 63, §30.4
Corporate Excise Tax
Accelerated Deductions from Gross Income
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Expensing Exploration and Development Costs
Section 263(c) of the Internal Revenue Code (the "Code") allows taxpayers to elect to deduct certain costs incurred in developing mineral deposits the year the costs are incurred. Costs that are not deducted in this manner must be capitalized and deducted over a period of years. As per Code §§ <a href="https://www.law.cornell.edu/uscode/text/26/193" target="_blank">193</a>, <a href="https://www.law.cornell.edu/uscode/text/26/616" target="_blank">616</a> and <a href="https://www.law.cornell.edu/uscode/text/26/617" target="_blank">617</a>, the recovery period depends on the nature of the costs and the type of mineral deposit that is developed. Eligible costs generally include expenses incurred in bringing known mineral deposits into production. These expenses include items such as labor, fuel, repairs, hauling and supplies that do not <BR>have a salvage value. The deduction applies to domestic oil, natural gas, and geothermic energy sources. Treas. Reg. §1.612-4(a)<BR><BR>Massachusetts conforms to the Code for purposes of determining corporate excise net income tax and personal income tax business expense deductions. Accordingly, Massachusetts conforms to this accelerated deduction. This conformity results in a deferral of Massachusetts tax and therefore constitutes a state tax expenditure.
<a href="https://www.law.cornell.edu/uscode/text/26/193" target="_blank">IRC §§193</a>, <a href="https://www.law.cornell.edu/uscode/text/26/263" target="_blank">263(c)</a>, <a href="https://www.law.cornell.edu/uscode/text/26/616" target="_blank">616</a>, <a href="https://www.law.cornell.edu/uscode/text/26/617" target="_blank">617</a>; M.G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter63/Section30" target="_blank">c. 63, §30.4</a>
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