Arizona Administrative Code › Title 15 - REVENUE › Chapter 4 - Department of Revenue - Property Tax › Article 2 - VALUATION OF MINES › Section R15-4-204 - Cost Approach Procedures for Mines

Current through Register Vol. 30, No. 28, July 12, 2024
A. The cost approach estimate for mine
				property shall include a value for land, supplies inventory, ore reserves,
				construction work in progress, improvements and personal property. This value
				shall be based on the theory of reproduction cost new, less all applicable
				forms of depreciation for the property.
B. Ore reserve value is based on a
				representative value factor multiplied by units of recoverable metal or mineral
				that can be expected to be mined during the life of the mine. The value factors
				are based on an analysis of sales of comparable mineralized bodies in the
				United States and Canada. Values for land included within the producing unit
				are based on land values supplied by the county assessor and approved by the
				Department. Changes in ore reserve factors shall be made available, upon
				request, by the Department by March 1 of the tax year.
C. Supplies inventory for the mine shall be
				valued at cost less any appropriate depreciation. Shrinkage shall be considered
				if the taxpayer supplies quantitative data related to the amount warranted.
				Physical depreciation for supplies shall be limited to shelf life deterioration
				and shall not include wear and tear. Functional and/or economic obsolescence
				shall be considered where the amount of obsolescence was computed on the
				overall performance of the mine unit or utilizing the "unit concept". Residual
				or salvage factors shall be applied to nonliquid supplies when residual or
				salvage values are determinative. Liquid supplies shall be valued at cost in
				every case except when the taxpayer can show cause for spoilage. Supplies which
				are totally obsolete shall be valued at salvage. The inventory amounts shall
				not include any value attributable to metals inventory or other production
				inventory held for sale.
D.
				Construction work in progress shall be discounted at the mine's discount rate
				if completion is expected to be in excess of 1 year. Functional and/or economic
				obsolescence shall be considered where the amount of obsolescence was computed
				on the overall performance of the mine unit or utilizing the "unit concept".
				Residual and salvage factors shall be applied if the residual and salvage
				values are determinative. Physical depreciation shall not be
				considered.
E. Improvements and
				personal property as reflected in the financial statements of the taxpayer
				shall be valued on a reproduction cost new less depreciation basis. The cost
				index for valuing mine property shall be derived from the Department's manual
				unless actual market values are ascertainable. The basis for physical
				depreciation shall be straight line.
F. Depreciation schedules shall be included
				in the Department's appraisal manual for mines. Residual value factors shall be
				applied to equipment still in service after the expiration of its depreciable
				life. Residual value factors shall be based on resale values for equipment
				where resale values are available. Appropriate obsolescence shall be applied to
				residual value. Salvage values for all improvements and personal property shall
				be derived by applying the Department's factor to the original cost of the
				improvement or personal property unless actual salvage values are
				ascertainable. A summary of equipment lives, salvage factors, and an itemized
				listing of equipment categories shall be included in the manual. For purposes
				of this cost approach procedure there shall be at least 8 major classes of
				equipment and improvements:
1. Mining, small
				scale;
2. Mining, large
				scale;
3. Milling and
				leaching;
4. Smelting;
5. Office;
6. Environmental;
7. Shovels and drag lines; and
8. Buildings and improvements.