Are the Idaho State Tax Commission's rules that multiply a mine's net profits by five (then tax that multiplied figure as the property's value) actually authorized by statute?
Plain-English summary
Benewah County Assessor Susan Renfro asked the AG whether two Idaho State Tax Commission property-tax rules (IDAPA 35.01.03.585.04 and 585.05) properly implemented Idaho's net-profits-of-mines tax. The rules required assessors to multiply a mine's net profits by five and treat that multiplied figure as the assessed value for property-tax purposes. A similar provision in Rule 580 applied a similar multiplier to the price of patented mining claims. The question was whether the multiplier had any basis in the underlying statute.
The AG (writing for AG Larry EchoHawk) said no. Idaho Code § 63-2801 directs the county assessor to value mining property in a specific way: mines and mining claims are taxed at the price paid the United States for them, plus net profits. The statute does not mention a multiplier of five, or any multiplier at all. The Tax Commission's authority to make rules is bounded by the statute it implements (§ 63-2801 itself, plus the general rulemaking authority in § 63-513(25)). A rule that adds a tax burden the statute does not impose conflicts with the statute and is invalid.
The AG's recommendation: assessors should apply § 63-2801 on its face. The "factor of five" required by Rules 585 and 580 should be ignored. Mining-property assessments should follow the statutory text directly, valuing mines and mining claims at the price paid to the United States plus net profits, without any multiplier.
The opinion is a textbook administrative-law ruling on the principle that an agency cannot, by rule, expand the substance of a tax statute beyond what the legislature wrote. Even when the statute leaves implementation details to the agency, the agency cannot rewrite the substantive rule.
Currency note
This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Common questions
Where did the multiplier-of-five come from?
The opinion does not say in the excerpts read, but the multiplier appears to have been a long-standing administrative interpretation that may have been rooted in older valuation theory (perhaps capitalizing net profits at a 20% rate, which is mathematically equivalent to multiplying by five). Whatever its origin, the AG concluded that without statutory authorization, the multiplier did not survive review. Tax statutes are construed strictly, and agency interpretations that increase tax burdens beyond statutory text are vulnerable.
What did this mean for mine owners and counties?
For mine owners, it meant their property tax bills should have been calculated without the 5x multiplier, which probably meant a lower assessment than they had been paying under the rule. For counties, it meant a likely reduction in mining-property tax revenue, with possible refund claims from mines that had been overassessed in past years. The opinion does not address refund procedures or limitation periods.
Could the legislature have authorized the multiplier?
Yes. The legislature could have amended § 63-2801 to include a multiplier or to delegate clear authority to the Tax Commission to set one. It just hadn't. The AG's opinion was about whether the existing statute authorized the existing rule, not about what the legislature could do going forward.
What is the scope of Tax Commission rulemaking authority generally?
Tax Commission rulemaking is governed by both the specific statutes the Commission implements (like § 63-2801 for mining property) and Idaho's general administrative procedure act. Rules must be within the scope of statutory authority, must be consistent with the underlying statute, and must be adopted through the Idaho APA's notice-and-comment procedures. Rules that conflict with the statute, exceed the Commission's authority, or were not properly adopted are invalid.
How does this opinion fit with later developments?
The principle, that an agency cannot expand a tax statute by rule, is a recurring one and is not specific to mining. Idaho courts have applied this principle in many other contexts. Specific developments in Idaho mining tax since 1993 would require separate research; the legislature has periodically revisited mining taxation in response to changes in industry economics.
Background and statutory framework
Idaho's net-profits-of-mines tax in Title 63, Chapter 28 is a specialized property-tax framework for mining property, which presents unusual valuation challenges (mines often have variable production, finite reserves, and large cyclical earnings). Idaho Code § 63-2801 is the central valuation rule: mines are taxed at the price paid the United States for them, plus net profits. § 63-513(25) provides general rulemaking authority for the Tax Commission's property-tax rules.
The Tax Commission's IDAPA 35.01.03.585 and IDAPA 35.01.03.580 are administrative rules that purport to provide guidance on calculating mining-property assessments. The 5x multiplier in subsections .04 and .05 of Rule 585 was the specific provision the AG flagged as inconsistent with the statute. Rule 580, applying a similar multiplier to patented mining claim prices, fell under the same analysis.
Citations
- Idaho Code §§ 63-2801, 63-513(25)
- Idaho Code title 63, chapter 28
- IDAPA 35.01.03.585; IDAPA 35.01.03.580
Source
- Landing page: https://www.ag.idaho.gov/office-resources/opinions/
- Original PDF: https://ag.idaho.gov/content/uploads/2018/04/OP93-13.pdf
Original opinion text
ATTORNEY GENERAL OPINION NO. 93-13
To:
Ms. Susan Renfro
Benewah County Assessor
County Courthouse
St. Maries, ID 83861
Per Request for Attorney General's Opinion
QUESTIONS PRESENTED
1.
Are the Idaho State Tax Commission's property tax rules IDAPA 35.01.03.585.04
and 585.05, which require applying a multiplier of five to the net profits of mines
when valuing mining property under chapter 28, title 63, Idaho Code, valid?
2.
If Rules 585.04 and 585.05 are not valid what is the proper method of assessing
the net profits of mines?
CONCLUSION
1.
Paragraphs .04 and .05 of Rule 585 are invalid because they conflict with the clear
language of the statute they purport to implement. So, too, is the similar provision
of IDAPA 35.01.03.580 requiring a similar multiplier to the price of patented
mining claims.
2.
The proper method of assessing net profits of mines is to apply Idaho Code § 632801 on its face. The "factor of five" required by rules 585 and 580 should be
ignored.
ANALYSIS
1.
Is the Rule Valid?
Chapter 28, title 63, Idaho Code, provides special rules for applying Idaho's
property tax to mining property. It is commonly referred to as the "net profits of mines
tax." The Idaho State Tax Commission's administrative rules relating to property taxes
provide in IDAPA 35.01.03.585 (hereafter "Rule 585") administrative guidance and
construction to be followed by county officers who administer and collect the net profits
of mines tax. The Commission's rulemaking authority is found in Idaho Code §§ 632801 and 63-513(25).
Idaho Code § 63-2801 directs how the county assessor determines the value of
mining property. It provides:
Valuation of mines for taxation.--All mines and mining claims, both
placer and rock in place, containing or bearing gold, silver, copper, lead,
coal or other valuable mineral or metal deposits, after purchase thereof
from the United States, shall be taxed at the price paid the United States
therefor, unless the surface ground, or some part thereof, of said mine or
mining claim is used for other than mining purposes, and has a separate and
independent value for such other purposes, in which case said surface
ground or any part thereof so used for other than mining purposes, shall be
taxed at its value for such other purposes, and all machinery used in
mining, and all property and surface improvements upon mines or mining
claims, which have a value separate and independent of such mines or
mining claims and the net annual proceeds of all mines and mining claims
shall be taxed: provided, that nothing in this chapter contained must be
construed so as to be exempt from taxation improvements, buildings,
erections, structures or machinery placed upon any mining claims, or used
in connection therewith: provided that all mineral rights reserved to any
grantor, except the United States or the state of Idaho, by the terms of any
conveyance of lands other than lands acquired under the mining laws of the
United States [shall] be assessed for taxation purposes at the rate of not less
than five dollars ($5.00) per acre of the mineral rights so reserved, to be
assessed against the recorded owner thereof. When, in the opinion of the
county assessor, the value of reserved mineral rights does not warrant the
expenditure to appraise and assess such value, such de minimis values need
not be appraised or assessed, but the failure to assess such values does not
constitute a failure to pay such taxes on the part of the owner, and does not
constitute a delinquency on the part of the owner.
The case law interpreting this statute recognizes the legislature's intent and the
effect of this statute:
Instead of directly assessing the ore bodies, which usually constitute the
chief actual value of the property, the statute contemplates the assessment
only of the net output, and this is its most distinctive feature.
Hanley v. Federal Mining & Smelting Co., 235 F. 769 (D.C. Idaho 1916). Thus, this
section provides for different ways to value different kinds of mining property. These
properties and their method of valuation can be summarized as follows:
Property
1. Patented mining claims
2. Patented claims not used
for mining
3. Equipment and improvements
4. Ore bodies
5. Reserved mineral rights
Valuation Method
Price paid the United States
Market value of the property
Market value
Net profits 1 from mining
Not less than $5.00 per acre
The total value determined under Idaho Code § 63-2801 is multiplied by the
property tax levies that apply where the mining property is located to compute the
property tax payable by the mining property.
The Tax Commission's Rule 585.04 provides:
Since net profits of mines were set by statute so as to represent
assessed value rather than market value, and since it was consequently at a
level less than market value, an acceptable multiplier is necessary to
convert these values to market value representative of the statutory base
date.
Rule 585.05 provides:
The Commission hereby sets as the proper multiplier, five (5).
Therefore, the net profits as reported shall be multiplied by five (5) to
convert reported profits to market value for assessment purposes.
The statute sets the value of mining property by including the annual net profits as
part of the value. Rule 585 requires the value of mining property to include five times
the annual net proceeds. The issue presented by the request for an opinion is whether the
rule, by requiring the net profits be multiplied by five, is consistent with the statute. In
our opinion, it is not.
Rule 585 is an attempt to amend the statute by applying a factor of five to the
statutory rate of taxation for patented mining claims and net profits of mines. Where
conflict exists between a rule and a statute the rule must give way. Curtis v. Canyon
1 Idaho Code § 63-2801, quoted supra, says the value includes the "net annual proceeds" from mining.
The next section, § 63-2802, provides a definition of "'net profits', as employed in this chapter." It is clear from the
rules, the case law and from practice that the term "net annual proceeds" has been understood to mean "net profits."
Highway Dist. No. 4, 122 Idaho 73, 831 P.2d 541 (1992) ("In order for an administrative
regulation to be valid, it must be adopted pursuant to authority granted to the adopting
body."). See also Pumice Products v. Robinson, 79 Idaho 144, 312 P.2d 1026 (1957).
That is because rules may be given the force and effect of law but they do not rise to the
level of statutory law and are not equal in dignity or status with statutory law. Mead v.
Arnell, 117 Idaho 660, 791 P.2d 410 (1990). A rule conflicting with any statute must
fall. K-Mart Corporation v. Idaho State Tax Commission, 111 Idaho 719, 727 P.2d 1147
(1986). Therefore, Rules 585.04 and 585.05 are invalid because they conflict with the
statutes they interpret and must give way to the statute.
Although the request for an opinion asks only about the multiplier found in Rule
585, the Commission's rules contain a similar requirement as to the value of patented
mining claims. See IDAPA 35.01.03.580 (hereafter "Rule 580"). That rule states:
580. VALUATION OF MINES FOR TAXATION. The prices
referred to for patented lode and placer claims are five dollars ($5) and two
dollars fifty cents ($2.50), per acre, respectively. These prices are to be
multiplied by five (5); per acre market values for assessment purposes are
then twenty-five dollars ($25) for patented lode claims and twelve dollars
fifty cents ($12.50) for patented placer claims.
For the reasons expressed above, the multiplier required by Rule 580 is also
invalid.
2.
What is the Proper Method of Assessing the Net Profits of Mines?
The proper method of valuing mining property according to the statute is to
include net profits of mines computed in accord with Idaho Code § 63-2802 and to value
patented mining claims at the price paid the United States. This amount is determined by
Rule 580 to be five dollars for lode claims and two dollars and fifty cents for placer
claims.
AUTHORITIES CONSIDERED
1.
Idaho Code:
§ 63-2801.
§ 63-2802.
2.
Idaho Cases:
Curtis v. Canyon Highway Dist. No. 4, 122 Idaho 73, 831 P.2d 541 (1992).
Hanley v. Federal Mining & Smelting Co., 235 F. 769 (D.C. Idaho 1916).
K-Mart Corporation v. Idaho State Tax Commission, 111 Idaho 719, 727 P.2d
1147 (1986).
Mead v. Arnell, 117 Idaho 660, 791 P.2d 410 (1990).
Pumice Products v. Robinson, 79 Idaho 144, 312 P.2d 1026 (1957).
3.
Idaho Administrative Procedure Act:
35.01.03.580.
35.01.03.585.
DATED this 3rd day of December, 1993.
LARRY ECHOHAWK
Attorney General
Analysis by:
LAWRENCE G. WASDEN
THEODORE V. SPANGLER, JR.
Deputy Attorneys General