California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 17 - Allocation of Income › Article 2.5 - Uniform Division of Income for Tax Purposes Act › Section 25128-1 - Extractive Business Activity

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Subdivision (c) of section
					 25128
					 of the Revenue and Taxation Code provides that "extractive business activity"
					 is a "qualified business activity." This regulation defines an "extractive
					 business activity" and what constitutes gross business receipts from such
					 activity.
(b) Subdivision (d)(3) of
					 section
					 25128
					 of the Revenue and Taxation Code defines extractive business activity as
					 "activities relating to the production, refining, or processing of oil, natural
					 gas, or mineral ore." In order to qualify as an extractive business, the
					 apportioning trade or business need not conduct all of these
					 activities.
(c) Production. For
					 purposes of subdivision (d)(3) of section
					 25128
					 of the Revenue and Taxation Code, "production" means the location, extraction,
					 and initial processing of oil, natural gas, or mineral ore ("crude substance").
					 "Extraction" means to remove a crude substance from the place where it
					 naturally occurs (e.g., a surface mine, an underground mine, a well, oil shale
					 or oil sand). Extraction of naturally occurring minerals is "mining."
(1) Production of "metallic" and
					 "nonmetallic" minerals, as defined in subsection (f) of this regulation,
					 includes exploration, extraction, and all other activities customarily
					 performed at the mine site or as part of the mining activity. Examples of
					 mineral production include: development of mineral properties; preparation of
					 the site; quarrying; well operations; milling (e.g., crushing, screening,
					 washing, and flotation); leaching; precipitation; sintering; ore dressing
					 (e.g., crushing, grinding, gravity concentration, and froth flotation);
					 amalgamation; cyanidation; production of bullion; production of metallic
					 mercury by furnacing or retorting; production of dimension stone, or crushed or
					 broken stone (including boulder, ganister, grits and riprap); production of
					 slabs or rough cuts of stone; and grinding and pulverizing of crude
					 borax.
(2) Production of "coal," as
					 defined in subsection (f)(3) of this regulation, includes exploration,
					 extraction, and all other activities customarily performed at the mine site or
					 as part of the mining activity. Examples of coal production include:
					 development of surface mines; auger mining, strip mining, culm bank mining, and
					 other surface mining; development of underground mines; production from
					 underground mines; cleaning, crushing, screening or sizing; and production of
					 hydrocarbon liquids and the gasification, liquefaction, and pyrolysis of
					 coal.
(3) Production of oil or
					 natural gas includes exploration, extraction, and all other activities
					 customarily performed at the site of extraction or as part of the extraction
					 activity. Examples of oil and natural gas production include: drilling and
					 equipping wells; secondary and tertiary recovery; oil and gas well operation
					 and maintenance; purification and dewatering of the oil, natural gas, or
					 hydrocarbon liquids; operation of field gathering lines for crude oil and
					 natural gas; and production of hydrocarbon liquids (e.g., butane, propane, and
					 natural gasoline).