2 Or. Tax 389 | Or. T.C. | 1966
Submitted on briefs. Decision for plaintiff June 13, 1966.
*390 Plaintiff as a sublessee is engaged in mining nickel ore deposits near Riddle, Oregon, under a lease from a California mining corporation, the owner of the fee interest in the mine. Plaintiff's deduction of a percentage depletion for the years 1957, 1958 and 1959 was disallowed by defendant.Affirmed 84 Adv Sh 1075 (1967).
The parties have stipulated that the issue is whether a sublessee of a metal mine is entitled to a deduction for percentage depletion under ORS
ORS
"Depletion. (1) In computing net income there shall be allowed as a deduction, in the case of mines, oil and gas wells, and other natural deposits, except in the case of metal mines as provided in subsection (3) of this section, a reasonable allowance for depletion according to the peculiar conditions in each case. * * *
"* * * * *
"(3) In the case of metal mines, a taxpayer may deduct an amount equal to 15 percent of the gross income from the property during the taxable year * * *."
1. It would appear that the statute itself clearly allows the deduction to the plaintiff. The statute does not restrict the deduction to an "owner;" it allows the deduction to the "taxpayer." Plaintiff is a corporate taxpayer, is engaged in the operation of a metal mine and has a gross income from such operation. There *391 is nothing in the statute making the plaintiff ineligible for the depletion allowance.
The defendant contends that the corporation excise tax regulations prohibit a corporate lessee from receiving the depletion deduction.
2. The statutory allowance of a deduction for percentage depletion for metal mines was first enacted in the Corporation Excise Tax Law by Or L 1939, ch
The Reg 316.335(4) for ORS
The 1965 corporate excise tax regulations do not mention depletion.
Thus, from 1940 to 1953 the defendant's own regulation, Art 308-g, 1940 corporation excise tax regulations, specifically provided for a depletion deduction by a corporate lessee. From 1953 to 1964 the corporation excise tax regulations on depletion refer to the *392
Personal Income Tax statute on depletion, ORS
This court cannot agree with the defendant's argument that this change in the corporation excise tax regulations was intended to deny the depletion allowance to a corporate lessee.
3, 4. Lynch v. Alworth-Stephens Co.,
The court also stated:
"The general provision in § 12 (a), second, is that the deduction from gross income shall include a reasonable allowance for the 'exhaustion . . . of property.' There is nothing to suggest that the word 'property' is used in any restricted sense. In the case of mines, a specific kind of property, the exhaustion is described as depletion, and is limited to an amount not exceeding the market value in the mine of the product mined and sold during the year. The interest of respondent under its leases in the mines being property, its right to deduct a reasonable allowance for exhaustion of such property, *393 if there be any, during the taxable year, results from the plain terms of the statute, such deduction, since the property is an interest in mines, to be limited to the amount of the exhaustion of respondent's interest caused by the depletion of the mines during the taxable year. We agree with the circuit court of appeals (294 Fed. 194) that 'the plain, clear, and reasonable meaning of the statute seems to be that the reasonable allowance for depletion in case of a mine is to be made to everyone whose property right and interest therein have been depleted by the extraction and disposition "of the product thereof which has been mined and sold during the year for which the return and computation are made." And the plain, obvious, and rational meaning of a statute is always to be preferred to any curious, narrow, hidden sense that nothing but the exigency of a hard case and the ingenuity and study of an acute and powerful intellect would discover.' " (Emphasis supplied.)
69 L ed at 662 .
The plaintiff is entitled to the percentage depletion deduction.
The parties have stipulated that the prevailing party will recover costs. *394