Cyprus Mines Corp. v. Madison County

• Decision Date: 07 March 1977
• Docket Number: No. 13524,13524
• Citation: 560 P.2d 1342,172 Mont. 116
• Parties: CYPRUS MINES CORPORATION, a corporation, Plaintiff and Respondent, v. MADISON COUNTY, a political subdivision of the State of Montana, et al., Defendants and Appellants.
• Court: Montana Supreme Court

Page 1342

560 P.2d 1342

172 Mont. 116

CYPRUS MINES CORPORATION, a corporation, Plaintiff and Respondent, v. MADISON COUNTY, a political subdivision of the State of Montana, et al., Defendants and Appellants.

No. 13524.

Supreme Court of Montana.

Submitted Jan. 17, 1977.

Decided March 7, 1977.

R. Bruce McGinnis argued, Helena, for defendants and appellants.

Kline & Niklas, John R. Kline argued, Helena, for plaintiff and respondent.

DALY, Justice.

The Department of Revenue of the State of Montana (Department) appeals from the judgment of the district court, Madison County. At issue is respondent's net proceeds of mines tax, a tax in lieu of 'ad valorem' property tax on net proceeds of its mines. Pfizer v. Madison County, 161 Mont. 261, 505 P.2d 399. The court, sitting without a jury, found plaintiff taxpayer was compelled to pay excess taxes when certain deductions on its net proceeds of mines statement were disallowed. The court ordered the treasurer of Madison County to refund the excess taxes.

Plaintiff is Cyprus Mines Corporation (Taxpayer), an international corporation which owns and operates the Yellowstone and Beaverhead Mines, tale mines located in Madison County; a storage facility and wash plant located at Alder, Montana; and a grining mill located at Three Forks, Montana. Taxpayer operates these three Montana facilities through Cyprus Industrial Minerals Company, which also has operations in Nebraska, California, Texas, Maryland, South Carolina, Georgia, Tennessee, Nevada and Ghent, Belgium.

Taxpayer mines talc at its Yellowstone and Beaverhead Mines. It transports the talc to its other facilities for processing by a grinding or upgrading procedure known as beneficiation. The beneficiated talc is either sold or further milled to various fine sizes. Talc is used in the manufacture of paper, paint, caramics, catalytic converters, spark plugs, vinyl flooring, rubber, plastics, cosmetics and pharmaceuticals.

The present action stems from Taxpayer's filing its 1974 net proceeds of mines statement. The department disallowed Taxpayer's deductions for net proceeds of mines tax and other taxes paid in 1973 marketing expenses, and cost of conversion into money. Taxpayer paid under protest that portion of the property tax relating to the disallowed deductions. It brought an action in the district court to recover $91,418.54 in purported excess taxes. The district court entered judgment for Taxpayer.

The Department of Revenue appeals and presents two issues for review:

1. Whether Taxpayer is entitled to deduct net proceeds of mines taxes and other taxes paid on the Yellowstone and Beaverhead Mines in 1973, in determining its net proceeds of mines tax for 1974?

2. Whether Taxpayer is entitled to deduct marketing expenses and cost of conversion into money in computing its net proceeds of mines tax when the expenses are incurred after the beneficiation stage or are not directly related to the cost of extracting talc?

Taxpayer contends the Department's first issue should be resolved in Taxpayer's behalf since it has consistently deducted taxes as a miscellaneous deduction in determining the net proceeds of its mines. Further, Taxpayer argues taxes are expenses actually required and necessary in mining and should be a deductible item as there is no specific legislative provision characterizing taxes as a nondeductible item.

A general rule of taxation is that an item may serve as a deduction only when the legislature specifically establishes the deduction. Anaconda Copper Mining Co. v. Junod, 71 Mont. 132, 227 P. 1001. A revenue statute allowing a deduction should be construed with specificity, as opposed to the rule of liberal construction which generally applies to revenue laws. State ex rel. Whitlock v. State Board of Equalization, 100 Mont. 72, 45 P.2d 684.

Title 84, Chapter 54, Mines-General Property and Net Proceeds Tax, R.C.M.1947, section 84-5403 sets forth those items which the taxpayer may deduct from the gross yield of a mine in arriving at the net proceeds upon which the tax is calculated. There is not provision in section 84-5403 which would characterize taxes as a deductible item. Absent such specific language, we fail to find Taxpayer entitled to a deduction for taxes paid in 1973 in determining its net proceeds of mines tax for 1974.

The Department's...