Title 26 — Internal Revenue Code
Part I · Chapter 1 — Normal Taxes and Surtaxes
§ 616. Development expenditures
Statutory text
In general
Except as provided in subsections (b) and (d), there shall be allowed as a deduction in computing taxable income all expenditures paid or incurred during the taxable year for the development of a mine or other natural deposit (other than an oil or gas well) if paid or incurred after the existence of ores or minerals in commercially marketable quantities has been disclosed. This section shall not apply to expenditures for the acquisition or improvement of property of a character which is subject to the allowance for depreciation provided in section 167, but allowances for depreciation shall be considered, for purposes of this section, as expenditures.
Election of taxpayer
At the election of the taxpayer, made in accordance with regulations prescribed by the Secretary, expenditures described in subsection (a) paid or incurred during the taxable year shall be treated as deferred expenses and shall be deductible on a ratable basis as the units of produced ores or minerals benefited by such expenditures are sold. In the case of such expenditures paid or incurred during the development stage of the mine or deposit, the election shall apply only with respect to the excess of such expenditures during the taxable year over the net receipts during the taxable year from the ores or minerals produced from such mine or deposit. The election under this subsection, if made, must be for the total amount of such expenditures, or the total amount of such excess, as the case may be, with respect to the mine or deposit, and shall be binding for such taxable year.
Adjusted basis of mine or deposit
The amount of expenditures which are treated under subsection (b) as deferred expenses shall be taken into account in computing the adjusted basis of the mine or deposit, except that such amount, and the adjustments to basis provided in section 1016(a)(9), shall be disregarded in determining the adjusted basis of the property for the purpose of computing a deduction for depletion under section 611.
Special rules for foreign development
In the case of any expenditures paid or incurred with respect to the development of a mine or other natural deposit (other than an oil, gas, or geothermal well) located outside of the United States—
subsections (a) and (b) shall not apply, and
such expenditures shall—
at the election of the taxpayer, be included in adjusted basis for purposes of computing the amount of any deduction allowable under section 611 (without regard to section 613), or
if subparagraph (A) does not apply, be allowed as a deduction ratably over the 10-taxable year period beginning with the taxable year in which such expenditures were paid or incurred.
Cross reference
For election of 10-year amortization of expenditures allowable as a deduction under subsection (a), see section 59(e).
Legislative history
Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.
Aug. 16, 1954, ch. 736, 68A Stat. 212 · 68A Stat. 212
Enacted · 26 U.S.C. § 616
Aug. 16, 1954, ch. 736, 68A Stat. 212
Source evidence
Code source credit
Aug. 16, 1954, ch. 736, 68A Stat. 212Pub. L. 94–455 title XIX § 1906(b)(13)(A) · 90 Stat. 1520
Struck · 26 U.S.C. § 616(b)
Pub. L. 94–455 struck out “or his delegate” after “Secretary”
Source evidence
Code amendment note
Subsec. (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.Enacted provision · exact public law section
(A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.Pub. L. 97–248 title II § 201(d)(9)(C) · 96 Stat. 324
Added · 26 U.S.C. § 616(d)
Pub. L. 97–248 added subsec. (d)
Source evidence
Code amendment note
Subsec. (d). Pub. L. 97–248 added subsec. (d).Enacted provision · exact public law section
“(d) Cross Reference.— “For election of 10-year amortization of expenditures allowable as a deduction under subsection (a), see section 58(i).” (D) Section 617 (relating to deduction of certain mining exploration 26 USC 617. expenditures) is amended by adding at the end thereof the following new subsection:Tax Reform Act of 1986
Pub. L. 99–514 § 411(b)(2)(C)(i) · 100 Stat. 2085
Inserted · 26 U.S.C. § 616(a)
Pub. L. 99–514, § 411(b)(2)(C)(i), inserted reference to subsec. (d)
Source evidence
Code amendment note
Subsec. (a). Pub. L. 99–514, § 411(b)(2)(C)(i), inserted reference to subsec. (d).Enacted provision · exact public law section
(i) Subsection (a) of section 616 is amended by striking out “subsection (b)” and inserting in lieu thereof “subsections (b) and (d)”.Effective date note
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.Tax Reform Act of 1986
Pub. L. 99–514 § 411(b)(2)(A) · 100 Stat. 2085
Added · 26 U.S.C. § 616(d); 26 U.S.C. § 616(e)
Pub. L. 99–514, § 411(b)(2)(A), added subsec. (d)
Redesignated · 26 U.S.C. § 616(d); 26 U.S.C. § 616(e)
Pub. L. 99–514, § 411(b)(2)(A), redesignated former subsec. (d) as (e)
Source evidence
Code amendment note
Subsecs. (d), (e). Pub. L. 99–514, § 411(b)(2)(A), added subsec. (d) and redesignated former subsec. (d) as (e).Enacted provision · exact public law section
(A) In general.— Section 616 (relating to development expenditures) is amended by redesignating subsection (d) as subsection (e), and inserting after subsection (c) the following new subsection: “(d) Special Rules for Foreign Development.— In the case of any expenditures paid or incurred with respect to the development of a mine or other natural deposit (other than an oil, gas, or geothermal well) located outside of the United States— “(1) subsections (a) and (b) shall not apply, and “(2) such expenditures shall— “(A) at the election of the taxpayer, be included in adjusted basis for purposes of computing the amount of any deduction allowable under section 611 (without regard to section 613), or “(B) if subparagraph (A) does not apply, be allowed as a deduction ratably over the 10-taxable year period beginning with the taxable year in which such expenditures were paid or incurred.”Effective date note
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 title I § 1007(g)(7) · 102 Stat. 3342
Substituted · 26 U.S.C. § 616(e)
Pub. L. 100–647 substituted “section 59(e)” for “section 58(i)”
Source evidence
Code amendment note
Subsec. (e). Pub. L. 100–647 substituted “section 59(e)” for “section 58(i)”.Enacted provision · exact public law section
(7) Sections 616(e) and 617(j) of the 1986 Code are each amended by striking out “section 58(i)” and inserting in lieu thereof “section 59(e)”.Effective date note
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
6 of 7 references resolved to an enrolled provision · 1 partial
Editorial Notes
Amendments1976–1988 · 4 rounds
1988
Subsec. (e). Pub. L. 100–647 substituted “section 59(e)” for “section 58(i)”.
1986
Subsec. (a). Pub. L. 99–514, § 411(b)(2)(C)(i), inserted reference to subsec. (d).
Subsecs. (d), (e). Pub. L. 99–514, § 411(b)(2)(A), added subsec. (d) and redesignated former subsec. (d) as (e).
1982
Subsec. (d). Pub. L. 97–248 added subsec. (d).
1976
Subsec. (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
Statutory Notes and Related Subsidiaries
Effective Date of 1988 Amendment
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Effective Date of 1986 Amendment
Amendment by Pub. L. 99–514 applicable to costs paid or incurred after , in taxable years ending after such date, with transition rule, see section 411(c) of Pub. L. 99–514 set out as a note under section 263 of this title.
Effective Date of 1982 Amendment
Amendment by Pub. L. 97–248 applicable to taxable years beginning after , see section 201(e)(1) of Pub. L. 97–248, set out as a note under section 5 of this title.
Credits
1954–1988 · 5 acts
- 1954Aug. 16, 1954, ch. 736, 68A Stat. 212
- 1976Pub. L. 94–455, title XIX, § 1906(b)(13)(A), , 90 Stat. 1834
- 1982Pub. L. 97–248, title II, § 201(d)(9)(C), formerly § 201(c)(9)(C), , 96 Stat. 420, renumbered § 201(d)(9)(C), Pub. L. 97–448, title III, § 306(a)(1)(A)(i), , 96 Stat. 2400
- 1986Pub. L. 99–514, title IV, § 411(b)(2)(A), (C)(i), , 100 Stat. 2226
- 1988Pub. L. 100–647, title I, § 1007(g)(7), , 102 Stat. 3435.
Show as published
(Aug. 16, 1954, ch. 736, 68A Stat. 212; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), , 90 Stat. 1834; Pub. L. 97–248, title II, § 201(d)(9)(C), formerly § 201(c)(9)(C), , 96 Stat. 420, renumbered § 201(d)(9)(C), Pub. L. 97–448, title III, § 306(a)(1)(A)(i), , 96 Stat. 2400; Pub. L. 99–514, title IV, § 411(b)(2)(A), (C)(i), , 100 Stat. 2226; Pub. L. 100–647, title I, § 1007(g)(7), , 102 Stat. 3435.)