How mining operations and processing plants can capture overlooked tax incentives

Mines are home to the kind of applied research that the federal R&D tax credit was designed to incentivize, from developing new extraction plans and optimizing processing circuits, to engineering solutions to manage water, ground stability, or environmental compliance.

Yet many mining companies overlook these credits, assuming the incentive applies only to companies with formal laboratories or dedicated R&D departments.

In reality, the credit under Internal Revenue Code (IRC) Section 41 is available to any taxpayer that incurs costs while attempting to develop or improve a product, process, technique, formula, or invention through a process of experimentation grounded in the physical or biological sciences, engineering, or computer science.

For mining and mineral processing companies, that definition means that a wide range of everyday activities may be eligible for this tax credit.

Understanding the four-part test for R&D tax credit eligibility

To qualify for the research credit, an activity must satisfy a four-part test created by the IRS. Each element is relevant to the work mining companies perform daily.

1. Permitted purpose. The research must relate to developing or improving a product, process, technique, formula, or invention. In mining, this includes efforts to improve extraction efficiency, recovery rates, throughput, safety, or environmental performance.
2. Technological in nature. The work must rely fundamentally on tenets of engineering, physical science, biological science, or computer science. Mining operations are inherently rooted in geology, geotechnical engineering, metallurgy, chemical engineering, and increasingly in data science and automation.
3. Technological uncertainty. At the outset of the research, there must be unresolved questions related to whether the product or process can be successfully developed, how it should be developed, or what design approach will achieve the desired result. Ore bodies are variable, geotechnical conditions are unpredictable, and processing chemistries differ from deposit to deposit. Mining engineers rarely have certainty about whether or how a given approach will work until they test it.