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Mr. QUINETTE. Mr. Chairman and members of the committee, I wish to thank you for this opportunity to appear before you.

My name is William H. Quinette, a certified public accountant in Denver, Colo., representing the Colorado Mining Association, who, in turn, represent substantially all of the independent producers of uranium in the United States.

Senator FREAR. What do you mean by independent producers of uranium?

Mr. QUINETTE. Well, that is a general term, and perhaps I shouldn't use it.

Senator FREAR. That means not Anaconda, or people of that kind?

The CHAIRMAN. Does it mean the little fellow as opposed to the big fellow?

Mr. QUINETTE. That is correct.
The CHAIRMAN. Not as “opposed,” but contrasted to the big fellow.

The subject of my remarks will be. Need of Income Tax Modification to Stimulate Uranium Production.

Based upon the assumption that the present policy of the Government is to materially increase the domestic production of uranium, I respectfully make the following observation:

In applying the income tax law and regulation to exploration, development and production-mining—or uranium, those versed in the complexities of income taxation become aware of many uncertainties, some of which probably will only be determined after lengthy, timeconsuming and costly controversy, possibly in the courts, during which time the taxpayer should protect himself against the possible eventuality of being required to pay substantial additional income taxes.

This situation may constitute a trap for the many independent and small-operator taxpayers, who, at best, may be considered only generally informed as to the application and impact of income-tax on his operation. To those operator-taxpayers who may be classified as being reasonably informed, such knowledge brings to their attention many income-tax uncertainties, which, if coupled with prudent conservative protective thinking, will result in a cautious and restrictive policy of operation, geared to minimize the possible impact of income taš, all of which will hamper and slow down the taxpayer's operation, which otherwise would be actively producing uranium.

To alleviate, in part, the foregoing and based upon the costs of exploration, costs of development, and costs of production-mining--of uranium, together with the uncertainties of discovery and continued production of commercial ore, it is my opinion that to encourage and assist the development of new sources of domestic uranium production in the interest of the common defense and security, the new domestic uranium industry should be granted 40-percent percentage depletion allowance, the same allowance as granted by the State of Colorado for income-tax purposes.

Further, to aid small and other proclucers of marginal commercial deposits of uranium, the factor of 50-percent limitation of the taxpayer's taxable income should also be modified, that is, eliminated entirely in the case of taxable income up to, say, the first $75,000, and, say, changed to a 75-percent limitation of taxable income in excess of $75,000, and under $150,000, and that in the case of taxable income of $150,000 or more, the 50-percent limitation of taxable income be retained.

And further, that the foregoing proposed changes be limited and available only to taxpayer owners of operating mineral interests, that is only interests in respect of which the costs of production of the mineral are required to be taken into account by the taxpayer for purposes of the 50-percent limitation provided or would be so required if the mine or other natural deposit were in the production stage.

That last clause eliminates royalty and other economic interests which do not bear the cost of the venture or the production.

The CHAIRMAN. Well, they pay for what they get, and when you buy something, you take the risk of business, don't you?

Mr. QUINETTE. What I mean is, Senator, in stepping up the increased percentage which we think should be allowed, it should only be allowed those taxpayers who are operators, who are in the business of spending money in development. We don't think it should be upped in the case of a landowner who may own it free and, just by happenstance, be the owner when some operator comes along and wants to lease his land for production. He does nothing but sign a mineral lease.

The CHAIRMAN. Except he has uranium.
Mr. QUINETTE. That is true.
The CHAIRMAN. That is important, isn't it?

Mr. QUINETTE. It is a natural resource. We are asking that he also get relief. You and your committee wish to grant him relief. We will not debate that. We are just not for it. We are asking for relief for those people who have to put up capital.

The CHAIRMAN. What is the relation of the bonuses and one thing or another that the Government pays in this business?

Mr. QUINETTE. It is of a substantive nature. Due to your whole atomic energy program, various ways and proposals and means are being granted a uranium producer to help him. What we are proposing here, percentagewise, is not the only answer. It is going to take all of these things. It is going to take all kinds of subsidies.

I am presenting here what the State of Colorado has recognized for years. The uranium producer in Colorado gets 40 percent depletion. Now, I might say I am not an owner of any uranium. I have had many opportunities to go in with my friends and take leases, but they are too stiff for me. I put the pencil to them and my money came the hard way; I can't risk it.

And still, some of them hit the jackpot. But most of them will not. It is my observation that the non-Government money spent in the next few years to develop uranium will never be returned compositely to those in the aggregate, in relation to the amount of money spent.

The CHAIRMAN. That is true of the whole mining business, isn't it?

Mr. QUINETTE. That is right. It has been true for many years. There are a few people who hit the jackpot, but most of them spend their money and then go back to farming or business.

The CHAIRMAN. The point is to give them incentives that will continue to get them to take the risk; isn't that it?

Mr. QUINETTE. That is exactly what we are asking for. There is an added incentive. Dollarwise, it may not mean too much, but it sounds good. It is an incentive. And this country was built on incentive, and to a large extent on not being too well informed. Many people have become extremely successful by the fact that they were not informed. If they had known the heartbreak they would have gone through, they would have done something else. The CHAIRMAN. I know

there is some sympathy on this committee to help uranium mining. I don't know whether you have the right formula. It seems to me we are establishing what might be a little bad precedent by going as full-out as you have gone.

Can't you think of some approach that doesn't have such long teeth?

Mr. QUINETTE. Well, Senator, actually, the granting of percentage depletion, regardless, is to a large extent to most of the people who will spend money in the search for uranium, it is purely theoretical and psychological. Very few of them will ever obtain any percentage benefit, or ever receive any income of any consequence. Now, if the need for uranium ore for national defense is as serious as we have : been told, we might well, for the purpose of extending and placing an incentive on this search, do like they do in Canada, and eliminate income tax on production for, say, 3 years. I would say if this Government eliminated income tax entirely on the production of uranium, certainly they would put a big impetus on the search.

There would be a few people hit the jackpot and come out with a pile of money. But you and I know that the average individual who makes a pile of money, whether it is taxable or otherwise, is not going to keep it.

The CHAIRMAN. We will catch up with him in the end.

Mr. QUINETTE. You will catch up with him. It is just a matter of time.

The CHAIRMAN. Well, several members of this committee, Senator Malone-two of us are members of the Joint Committee on Atomic Energy, and we know something about the necessity for getting increasing quantities of uranium. As I say, I think we have a sympathetic interest of making this as attractive as possible, but I am just wondering about your particular approach.

Mr. QUINETTE. I am just offering this. I am not saying it is the only way. You can spend money directly out of the Treasury, or you can create circumstances. I am offering you one of those circumstances. Let the money come directly from private individuals instead of the Treasury Department. You have the option.

The CHAIRMAN. Well, the whole mining business has been built, or was built in a day when, if you hit, you hit big.

Mr. QUINETTE. And in a day, if you made a dollar, you kept a dollar.
The CHAIRMAN. That is what I am talking about.
Mr. QUINETTE. Not 50 cents.

The CHAIRMAN. You hit big because you didn't get it all taxed away from you.

Mr. QUINETTE. That is right.

The CHAIRMAN. So your theory is, we have to put a few more carrots in front of the horse to keep him interested in this business?

Mr. QUINETTE. I believe that is right.
- The CHAIRMAN. I think it is a sound policy.
Mr. QUINETTE. I believe that is right.

The CHAIRMAN. We on this Joint Atomic Energy Committee have-when we are started out, I am not releasing a secret, I am quite sure—we were unduly dependent upon foreign sources for our ore. Those of us who have had any experience with the mining business said the way to get the ore is to hang up a price and you won't get it unless you hang up the price. And every time they hang up

the price a little bit, they get more ore. Giving tax advantage is another way of hanging

up a price. Senator FREAR. What does the State of Colorado allow for depletion on royalties?

Mr. QUINETTE. They allow 40 percent. As I say, I am not asking for that much. I am talking about the people who have to spend the money. If you want to go straight across the board and allow the royalty owner and the horse trader who gets in between the owner and the fellow who finally puts the money up, that is 0. K.

The CHAIRMAN. That fellow who puts the money up starts from many sources, and he isn't always an operator, but he is a participant in something that bears the burden of the operation. The ownership is not clear of that burden.

Senator BUTLER. Mr. Chairman, he is oftentimes just a man with small savings who wants to take a chance to build up and, of course, he is usually a loser, because the percentage is so much against him in recovery, but that is what has made our country, and it is so much better to have it in the way of a depletion than it is by governmental subsidy, because when it is a depletion, it is still in the hands of the individual in question.

And when it is a subsidy, there is just not the same control over it as when it is through the incentive of a depletion. We have to have incentive in our country, and the big taxes that we pay have destroyed a lot of that incentive, so, Mr. Chairinan, I am very much in sympathy-while I don't know anything about the business of procuring uranium, I am very much interested in encouraging the incentive from the citizen's standpoint, rather than the subsidy of the governmental standpoint.

The CHAIRMAN. I wish the staff would give careful consideration to the subject of uranium and maybe you can come up with some formula that will meet the need for uranium that may not fit the exact formula proposed.

best on that. What do you have to say, Bob? ?

Mr. PALMER. Just this, Senator. We have been led to believe this industry is highly essential to the national interests.

The CHAIRMAN. It is.

Mr. PALMER. I might say that it is being found in Pennsylvania, as well as in the West, and we believe that an additional incentive is highly desirable, at this time, if we really are sincere in our desire to encourage production on the plateau.

The CHAIRMAN. We should be.

Mr. PALMER. I would like to reiterate the emphasis that Mr. Quinette has put on the complexities of the present tax situation. I think


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that in consulting with most of the accountants and most of the lawyers who have to deal with this industry, that no clear-cut, concise opinion can be expressed as to their exact tax position, and that does have its effect, in addition to the complexities that you well know about the title situation on the plateau. That does add to the hesitancy on the part of a great many people to go into this vital industry.

The CHAIRMAN. You put your case on the smaller operators and I think that is very wise. The larger operator, what he loses on a peanut, he can make on the banana. But the fellow who is simply taking a flyer in one thing, he either hits or he doeesn't, and if he hits, he loses because by the time we get through with him, he hasn't got much left.

Mr. PALMER. May I have this off the record, Senator, that the price of uranium in Canada is quoted at $7.25 in the form of concentrates!

Senator FREAR. Mr. Chairman, I have a great deal of respect for the Colorado Plateau, as well as the State of Nevada, and I now hear Pennsylvania is coming in on us. Is there any uranium in Delaware?

The CHAIRMAN. It would be a very good thing to have up there. I wish it was all in Colorado, but it is in Utah, New Mexico, Arizona, Colorado.

Senator Malone, do you have anything to say to this?

Senator MALONE. Mr. Chairman, this estimate is very interesting to me, because I know that your Atomic Energy Committee is studying it and we know that the committee of which you are a member, Interior and Insular Affairs, is studying it.

All we know is that it started in two States. There are five States in the hub of production. Pennsylvania, I did not know about, but it seems to be a good deal like other minerals. If there is an incentive to look for them, you find them.

Now, we also have another important mineral. Titanium has developed to be something that you have to have to make planes and other things in national defense, but we have very little of it in production. We have to have 850,000 tons a year, and we are getting 200,000 tons. We are getting certain material from Australia and India, neither of which can be secured in time of war. We are getting, of course, the mineral you are testifying about this morning from the Belgian Congo and many speeches have been made about getting uranium from the Belgian Congo.

None of those things appear to be true in the investigations that.. have now been made. There is more alminite in the United States and Canada than we could use in 100 years, if we become dependent on it. If we are in danger of a war, really, you can't start using this material overnight, so you could be whipped before you get it into use.

Now, we come to your uranium. I will not ask you how much you are producing-all of this is confidential material, but we held 2 days' hearings there to see how our law was working that your committee—the chairman of the subcommittee; you are a member of it, we validated mining claims up to January 1, 1953, located on leases. Oil and gas leases. They have the preference, of course, but there is serious thought about extending that date.

This is something new. We do know one thing about it—and I want to ask this question for the record: The production and actual known deposits of some magnitude is retarded, now, because you get into a bracket in using up your material where the investors cannot

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