§468 Special Rules for Mining and Solid Waste Reclamation and Closing Costs

Summary

Allows a taxpayer who chooses these rules for a mine or a solid waste site to set up special reserves and use them to figure deductions for reclamation and closing costs. The first year the reserve starts at zero. Each year the reserve grows by the interest that would have been earned on the opening balance using the Federal short-term rate (per section 1274) compounded semiannually, plus the amount the taxpayer is allowed to deduct that year. When the taxpayer actually pays qualified reclamation or closing costs, those payments are charged against the reserve at year end. If payments made in a year are more than the reserve’s closing balance (before counting those payments), the taxpayer can deduct the excess that year. If the reserve’s closing balance ever exceeds the current amount needed to do the work, the extra must be included in taxable income. Income must also be reported if the taxpayer revokes the election (a revocation that cannot be undone), finishes closing, or sells part of the property. If the election was not in effect for some years, allocations follow rules the IRS will give. A taxpayer must keep two separate reserves: one for reclamation and one for closing costs. Definitions (one line each): current reclamation costs — what it would cost now to do the reclamation; current closing costs — what it would cost now to close, using unit-of-production for mines or unit-of-capacity for disposal sites; qualified reclamation or closing costs — costs required under approved mining or solid-waste permits or similar laws (excluding parts disturbed after listing under the national contingency plan for hazardous sites); property — as defined in section 614; reserve property — property covered by the reserve.