An Act to relating to the income tax treatment of exploration expenditures in the case of mining
PL 89-570 (H.R.4665), enacted 09/12/1966

80 STAT. ] 
PUBLIC LAW 89-570-SEPT. 12, 1966 
759 
Public Law 89-570 
A N A C T 
September 12, 1966 
Relating to the income tax treatment of exploration expenditures in the case 
[H. R. 466 5]— 
of niiiiini?. 
Income taxes. 
Mining explora-
Be it enacted hy the Senate mid Iloin^e of Repf-eHeniat'iveH of the 
Vruted States of America m (Umgress aa-semhled^ That (a) part I 
of subchapter I of chapter 1 of the Internal Revenue Code of 195-i tio'n exp^endUurTs 
(relating to natural resources) is amended by adding at the end ^l^,,V'^^i^?l\^ 
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p 
-, 
P ii 
• 
• 
^O U s e 6 11-616 
thereof the follov.ing nevr section: 
"SEC. 617. ADDITIONAL EXPLORATION EXPENDITURES IN THE CASE 
OF DOMESTIC MINING. 
•'(a) ALLOWANCE or DEDUCTION.— 
"(1) GENERAL RULE.—At the election of the taxpayer, expendi-
tures paid or incurred during the taxable year for the purpose of 
ascertaining the existence, location, extent, or quality of any 
deposit of ore or other mineral in the United States or on the 
Outer Continental Shelf (within the meaning of section 2 of the 
Outer Continental Shelf Lands Act, as amended and sui)ple-
mented; 43 U.S.C. 1331), and paid or incurred before the begin- 
^^ ^tat. 462. 
ning of the development stage of the mine, shall be allowed as ;i 
deduction in computing taxable income. This subsection shall 
apply only with respect to the amount of such expenditures which, 
but for this subsection, would not be allowable as a deduction for 
the taxable year. 
This subsection 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, 
^^^ ^
*
^
*
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for purposes of this subsection, as expenditures paid or incurred. 
In no case shall this subsection apply with respect to amounts 
paid or incurred for tlie purpose of ascertaining the existence, 
location, extent, or quality of any deposit of oil or gas or of any 
mineral with respect to which a deduction for percentage deple-
tion is not allowable under section 613. 
^^^ ^^^*- 2°^-
"(2) ELECTIONS.— 
"(A) METHOD.—Any election under this subsection shall 
Regulations. 
be made in such manner as the Secretary or his delegate 
may by regulations prescribe. 
"(B) TIME AND SCOPE.—The election provided by para-
graph (1) for the taxable year may be made at any time 
before the expiration of the period prescribed for making 
a claim for credit or refund of the tax imposed by this chapter 
for the taxable year. 
Such an election for the taxable year 
shall apply to all expenditures described in paragraph (1) 
paid or incurred by the taxpayer during the taxable year or 
during any subsequent taxable year. 
Such an election may 
not be revoked after the last day of the third month follow-
ing the month in which the final regulat'ons issued under 
the authority of this subsection are published in the Federal 
Register, unless the Secretary or his delegate con::ents to 
such revocation. 
"(C) DEFICIENCIES.—The statutory period for the assess-
ment of any deficiency for any taxable year, to the extent 
such deficiency is attributaWe to an election or revocation of 
an election under this subsection, shall not expire before the 
last day of the 2-year period beginning on the day after 
the date on which such election or revocation of election is 
Publication in 
Federal Register. 
760 
PUBLIC LAW 89.570-SEPT. 12, 1966 
[80 STAT. 
made; and such deficiency may be assessed at any time before 
the expiration of such 2-year period, notwithstandino- any 
law or rule of law which would otherwise prevent such 
assessment. 
"(b) RECAPTURE ON REACHING PRODUCING STAGE.— 
"(1) RECAPTURE,—If, in any taxable year, any mine with 
respect to which expenditures were deducted pursuant to subsec-
tion (a) reaches the producing stage, then— 
"(A) If the taxpayer so elects with respect to all such 
mines reaching the producing stage during the taxable year, 
he shall include in gross income for the taxable year an 
amount equal to the adjusted exploration expenditures with 
respect to such mines, and the amount so included in income 
shall be treated for purposes of this subtitle as expenditures 
which (i) are paid or incurred on the respective dates on 
which the mines reach the producing stage, and (ii) are 
properly chargeable to capital account. 
"(B) If subparagraph (A) does not apply with respect 
to any such mine, then the deduction for depletion under 
68A Stat. 207. 
sectlou 611 wdtli respect to the property shall be disallowed 
until the amount of depletion which would be allowable but 
for this subparagraph equals the amount of the adjusted 
exploration expenditures with respect to such mine. 
"(2) ELECTIONS.— 
"(A) METHOD.—Any election under this subsection shall be 
made in such manner as the Secretary or his delegate may by 
regulations prescribe. 
"(B) TIME AND SCOPE.—The election provided by para-
graph (1) for any taxable year may be made or changed not 
later than the time prescribed by law for filing the return 
(including extensions thereof) for such taxable year. 
"(c) RECAPTURE IN CASE or BONUS OR ROYALTY.—If an election has 
been made under subsection (a) with respect to expenditures relating 
to a mining property and the taxpayer receives or accrues a bonus 
or a royalty with respect to such property, then the deduction for 
depletion under section 611 with respect to the bonus or royalty shall 
be disallowed until the amount of depletion which would be allowable 
but for this subsection equals the amount of the adjusted exploration 
expenditures with respect to the property to which the bonus or royalty 
relates. 
"(d) GAIN FROM DISPOSITIONS OF CERTAIN MINING PROPERTY.— 
"(1) GENERAL RULE.—Except as otherwise provided in this sub-
section, if mining property is disposed of the lower of— 
"(A) the adjusted exploration expenditures w^ith respect to 
such property, or 
"(B) the excess of— 
"(i) the amount realized (in the case of a sale, ex-
change, or involuntary conversion), or the fair market 
value (in the case of any other disposition), over 
"(ii) the adjusted basis of such property, 
shall be treated as gain from the sale or exchange of property 
which is neither a capital asset nor property described in section 
68A Stat. 325. 
1231. Such gain shall be recognized notwithstanding any other 
provision of this subtitle. 
"(2) DISPOSITION OF PORTION or PROPERTY.—For purposes of 
paragraph (1) — 
"(A) In the case of the disposition of a portion of a min-
ing property (other than an undivided interest), the entire 
amount of the adjusted exploration expenditures with respect 
80 STAT. 1 
PUBLIC LAW 89-570-^SEPT. 12, 1966 
761 
to such property shall be treated as attributable to such por-
tion to the extent of the amount of the gain to which para-
graph (1) applies. 
"(B) In the case of the disposition of an undivided interest 
in a mining property (or a portion thereof), a proportionate 
part of the adjusted exploration expenditures with respect 
to such property shall be treated as attributable to such 
undivided interest to the extent of the amount of the gain 
to which paragraph (1) applies. 
This paragraph shall not apply to any expenditure to the extent 
the taxpayer establishes to the satisfaction of the Secretary or his 
delegate that such expenditure relates neither to the portion (or 
interest therein) disposed of nor to any mine, in the property 
held by the taxpayer before the disposition, which has reached 
the producing stage. 
"(3) EXCEPTIONS A
N
D LIMITATIONS.—Paragraphs (1), (2), and 
(3) of section 1245(b) (relating to exceptions and limitations 
76 stat. 1032. 
with respect to gain from disposition of certain depreciable prop-
erty) shall .apply in respect of this subsection in the same man-
ner and with the same effect as if references in section 1245(b) 
to section 1245 or any provision thereof were references to this 
subsection or the corresponding provisions of this subsection and 
as if references to section 1245 property were references to mining 
property. 
"(4) APPLICATION or SUBSECTION.—This subsection shall apply 
notwithstanding any other provision of this subtitle. 
"(e) BASIS or PROPERTY.— 
"(1) BASIS.—The basis of any property shall not be reduced by 
the amount of any depletion which would be allowable but for 
the application of this section. 
"(2) ADJUSTMENTS.—The Secretary or his delegate shall pre-
scribe such regulations as he may deem necessary to provide for 
adjustments to the basis of property to reflect gain recognized 
under subsection (d) (1). 
"(f) DEFINITIONS.—For purposes of this section— 
"(1) 
ADJUSTED EXPLORATION EXPENDITURES.—The tenn 'ad-
justed exploration expenditures' means, with respect to any 
property or mine— 
"(A) the amount of the expenditures allowed for the tax-
able year and all preceding taxable years as deductions under 
subsection (a) to the taxpayer or any other person which are 
properly chargeable to such property or mine and which (but 
for the election under subsection (a)) would be reflected in 
the adjusted basis of such property or mine, reduced by 
"(B) for the taxable year and for each preceding taxable 
year, the amount (if any) by which (i) the amount which 
would have l)een allowable for percentage depletion under 
section 613 but for the deduction of such expenditures, 
^SA stat. 208. 
exceeds (ii) the amount allowable for depletion under sec-
tion 611, 
6
8
A stat. 207. 
properly adjusted for any amounts included in gross income 
under subsection (b) or (c) and for any amounts of gain to which 
subsection (d) applied. 
"(2) MINING PROPERTY.—The term 'mining property' means 
any property (within the meaning of section 614 after the appli- 
SSA stat. 210; 
cation of subsections (c) and (e) thereof) with respect to which ''^stat. 1634. 
any expenditures allowed as a deduction under subsection (a) (1) 
are properly chargeable. 
68A Stat. 213; 
78 Stat. 97. 
68A Stat. 250. 
762 
PUBLIC LAW 89.570-SEPT. 12, 1966 
[80 STAT. 
"(3) 
DISPOSAL OF COAL OR DOMESTIC IRON ORE W I T H A RETAINED 
ECONOMIC INTEREST.—A transaction which constitutes a disposal 
of coal or iron ore under section 631 (c) shall be treated as a dis-
position. 
In such a case, the excess referred to in subsection 
(d) (1) (B) shall be treated as equal to the gain (if any) referred 
to in section 631(c). 
(g) 
SPECIAL RULES RELATING TO PARTNERSHIP PROPERTY.— 
"(1) PROPERTY DISTRIBUTED TO PARTNER.—In the case of any 
property or mine received by the taxpayer in a distribution with 
respect to part or all of his interest in a partnership, the adjusted 
exploration expenditures with respect to such property or mine 
include the adjusted exploration expenditures (not otherwise 
included under subsection (f) (1)) with respect to such property 
or mine immediately prior to such distribution, but the adjusted 
exploration expenditures with respect to any such property or 
mine shall be reduced by the amount of gain to which section 751 
(b) applied realized by the partnership (as constituted after the 
distribution) on the distribution of such property or mine. 
"(2) PROPERTY RETAINED BY PARTNERSHIP.—In the case of any 
property or mine held by a partnership after a distribution to a 
partner to which section 751(b) applied, the adjusted exploration 
expenditures with respect to such property or mine shall, under 
regulations prescribed by the Secretary or his delegate, be reduced 
by the amount of gain to which section 751 (b) applied realized by 
such partner with respect to such distribution on account of such 
property or mine. 
"(h) 
CROSS REFERENCE.— 
"For additional rules applicable for purposes of this section, see 
subsections (f) and (g) of section 615." 
(b) The following provisions of the Internal Revenue Code of 1954 
are each amended by striking out "section 1245(a)" and inserting in 
lieu thereof "section 617 (d)(1), 1245 (a),": 
76 Stat. 1034. 
(^i^ Sectiou 170(e) (relating to charitable contributions). 
76 Stat. 1035. 
(£) Subsectious (b) (1) (B) (ii) and (d) (2) (B) of section 301 
(relating to amount distributed). 
(3) Paragraph (3) of section 312(c) (relating to adjustments 
of earnings and profits). 
(4) Paragraph (12) of section 341(e) (relating to collapsible 
corporations). 
(5) Subparagraphs (A) and (B) of section 453(d) (4) (re-
lating to distribution of installment obligations in certain corpo-
rate liquidations). 
(c) The last sentence of section 751(c) of such Code (relating to 
definition of "unrealized receivables" for purposes of subchapter K) 
is amended— 
(1) by striking out "section 1245 property (as defined in section 
1245(a) (3))" and inserting in lieu thereof "mining property (as 
defined in section 617(f)(2)), section 1245 property (as defined 
in section 1245(a) (3)),", and 
(2) by striking out "section 1245(a)" and inserting in lieu 
thereof "section 617(d) (1), 1245(a),". 
(d) The table of sections for part I of subchapter I of chapter 1 of 
616^ "^^ ^"' 
s^^^ Code is amended by adding after the item relating to section 616 
the following new item: 
"SEC. 617. Additional exploration expenditures in the case of domestic mining." 
80 STAT. ] 
PUBLIC LAW 89.570-SEPT. 12, 1966 
763 
SEC. 2. (a) Section 615 of the Internal Kevenue Code of 1954 7 4ltf.'^333^^^' 
(relating to exploration expenditures) is amended by adding at the 
end thereof the following new subsections: 
" (e) ELECTION To HAVE SECTION APPLY.—This section (other than 
subsections (f) and (g)) shall apply only if the taxpayer so elects in 
such manner as the Secretary or his delegate may by regulations 
prescribe. Such election shall be made before the expiration of 3 years 
after the time prescribed by law (determined without any extension 
thereof) for filing the return for the first taxable year ending after 
the date of the enactment of this subsection in which expenditures 
described in subsection (a) are paid or incurred after such date. Such 
election may not be revoked after the expiration of such 3 years. 
"(f) 
SECTION 615 AND SECTION 617 ELECTIONS To B E MUTUALLY 
EXCLUSIVE.—A taxpayer who has made an election under subsection 
(e) (which he has not revoked) may not make an election under sec-
tion 617(a). A taxpayer w^ho has made an election under section 617 
(a) (which he has not revoked) may not make an election under sub-
section (e) of this section. 
"(g) 
EFFECT OF TRANSFER OF MINERAL PROPERTY.— 
"(1) 
TRANSFER BEFORE ELECTION.—If— 
"(A) any person transfers any mineral property to an-
other person in a transaction as a result of which the basis of 
such property in the hands of the transferee is determined by 
reference to the basis in the hands of the transferor, and 
"(B) the transferor has not, at the time of the transfer, 
made an election under either subsection (a) of section 617 
^'®' P- ''S^-
or subsection (e) of this section, 
then no election by the transferor under either such subsection 
shall apply with respect to expenditures which are made by the 
transferor after the date of the enactment of this subsection and 
before the date of the transfer and which are properly chargeable 
to such property. 
For purposes of the preceding sentence, a 
transferor of mineral property who made an election under sub-
section (a) of section 617 or subsection (e) of.this section before 
the transfer but w^ho revokes such election after the transfer shall 
be treated with respect to such property as not having made an 
election under either such subsection. 
"(2) 
EFFECT OF ELECTION BY TRANSFEREE UNDER SECTION 6IT.— 
If— 
"(A) the taxpayer receives mineral property in a transac-
tion described in paragraph (1) (A), 
"(B) an election made by the transferor under subsection 
(e) applies with respect to expenditures which are made by 
him after the date of the enactment of this subsection and 
before the date of the transfer and which are properly 
chargeable to such property, and 
"(C) the taxpayer has made or makes an election iinder 
section 617(a), 
then in applying section 617 with respect to the transferee, the 
amounts alloAved as deductions under this section to the transferor, 
which (but for the transferor's election) would be reflected in 
the adjusted basis of such property in the hands of the transferee, 
shall be treated as expenditures allowed as deductions under sec-
tion 617(a) to the transferor. 
Notwithstanding subsections (b) 
and (d) of this section (and section 381(c) (10)), any deferred 
^^^ ^*^'- ^^4. 
expenses described in subsection (b) which are not allowed as 
deductions to the transferor for a period before the transfer may 
not be deducted by the transferee and in his hands shall be 
charged to capital account." 
764 
PUBLIC LAW 89-571-SEPT. 12, 1966 
[80 STAT. 
68A Stat. 240. 
Effective date. 
(b) Section T03^b) of such Code (relating to elections of partner-
ships) is amended by inserting after "United States," the following: 
'"and any election under section 615 (relating to exploration expendi-
tures^ or under section 617 (relating to additional exploration ex-
penditures in the case of domestic mining),". 
SEC. 3. The amendments made by this Act shall apply to taxable 
years ending after the date of the enactment of this Act but only in 
respect of expenditures paid or incurred after such date. 
Approved September 12, 1966. 
September 12, 1966 
[H. R. 3999] 
Public Law 89-571 
AN ACT 
To provide the same life tenure and retirement rights for judges hereafter 
appointed to the United States District Court for the District of Puerto Rico 
as the judges of all other United States district courts now have. 
Puerto Rico. 
Tenure of 
judges. 
68 Stat. 12. 
73 Stat. 10. 
7 3 Stat. 9. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of ATnerica in Congress asseinhled, That subsection (a) 
of section 134 of title 28, United States Code, is amended to read as 
follows: 
"(a) The district judges shall hold office during good behavior." 
SEC. 2. The first paragraph of section 373 of title 28, United States 
Code, is amended by striking out the words "the United States District 
Court for the District of Puerto Rico,". 
SEC. 3. The second paragraph of section 451 of title 28, United States 
Code, is amended by striking out the words "the United States District 
Court for the District of Puerto Rico,". 
SEC. 4. The amendments made by this section to sections 134 and 
373 of title 28, United States Code, shall not affect the tenure of office 
or right to continue to receive salary after resignation, retirement, or 
failure of reappointment of any district judge for the district of 
Puerto Rico who is in office on the date of enactment of this Act. 
Approved September 12, 1966. 
Public Law 89-572 
September 13, 1966 
A N A C T 
[s. 3418] 
TQ amend the Peace Corps Act (75 Stat. 612), as amended, and for other purposes. 
Peace Corps 
Act, amendment. 
Appropriation. 
78 Stat. 166; 
79 Stat. 549. 
22 u s e 2502. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled^ That section 3(b) of 
the Peace Corps Act, as amended, which authorizes appropriations to 
carry out the purposes of that Act, is amended as follows: 
(a) Strike out "1966" and "$115,000,000" and insert in lieu thereof 
"1967" and "$110,000,000", respectively. 
(b) Strike out ", of which not to exceed $500,000 shall be available 
for carrying out research" and insert in lieu thereof " : Provided^ how-
ever^ That not to exceed $500,000 of funds made available hereunder 
for fiscal year 1967 shall be obligated under contracts or agreements to 
carry out research: Provided further^ That no such contracts or agree-
ments shall be executed unless the research in question relates to the 
basic responsibilities of the Peace Corps."