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4 hours ago, GotAU? said:

I believe unpatented claims are federal land, so why are they considered as private property and taxable by the counties in any state, including here in California?  Is it a property tax or assessment  for something like a buiness tax?  I’m new to claims and am not sure what the typical county tax fees are that I would be facing if I wanted to stake one here in So Cal on BLM land.  Also, how do the counties assess the value for determining the fees for the taxes?

I know this is a long answer, but it is critically important because of the difference between Federal Land and Federal Domain. Long story short is that once a lawful claim has been made, it is no longer Federal Land, but Federal Domain and private property. My copy and paste of the law clarifies better than I can.

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The mechanics of what happens to the “public land” once found to be mineral in character is expressly evidenced in the Organic Act of 1897, that “any public lands embraced within the limits of any forest reservation which. . . .” “...shall be found better adapted for mining or for agricultural purposes than for forest usage, may be restored to the public domain.” By private settlement under various land disposal laws of the United States, such as the Mining Law of 1872, “public land” is restored to the public domain. The federal agencies have management authority only over “public land”, not privately settled public domain. The act of location restores the land to public domain and the mining law provides the locator of such segregation “shall have the exclusive right of possession and enjoyment of all the surface included within the lines of their locations,

-R.S. § 2322 derived from act May 10, 1872, ch. 152, § 3, 17 Stat. 91.”

 

Federal mining claims are "private property"

Freese v. United States, 639 F.2d 754, 757, 226 Ct.Cl.  252 cert. denied, 454 U.S. 827, 102 S.Ct. 119, 70 L.Ed.2d 103 (1981); Oil Shale Corp. v. Morton, 370 F. Supp. 108, 124 (D.Colo. 1973).

 

but so long as he complies with the provisions of the mining laws his possessory right, for all practical purposes of ownership, is as good as though secured by patent."

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1 hour ago, Jim_Alaska said:

I know this is a long answer, but it is critically important because of the difference between Federal Land and Federal Domain. Long story short is that once a lawful claim has been made, it is no longer Federal Land, but Federal Domain and private property. My copy and paste of the law clarifies better than I can.

*********************************

The mechanics of what happens to the “public land” once found to be mineral in character is expressly evidenced in the Organic Act of 1897, that “any public lands embraced within the limits of any forest reservation which. . . .” “...shall be found better adapted for mining or for agricultural purposes than for forest usage, may be restored to the public domain.” By private settlement under various land disposal laws of the United States, such as the Mining Law of 1872, “public land” is restored to the public domain. The federal agencies have management authority only over “public land”, not privately settled public domain. The act of location restores the land to public domain and the mining law provides the locator of such segregation “shall have the exclusive right of possession and enjoyment of all the surface included within the lines of their locations,

-R.S. § 2322 derived from act May 10, 1872, ch. 152, § 3, 17 Stat. 91.”

 

Federal mining claims are "private property"

Freese v. United States, 639 F.2d 754, 757, 226 Ct.Cl.  252 cert. denied, 454 U.S. 827, 102 S.Ct. 119, 70 L.Ed.2d 103 (1981); Oil Shale Corp. v. Morton, 370 F. Supp. 108, 124 (D.Colo. 1973).

 

but so long as he complies with the provisions of the mining laws his possessory right, for all practical purposes of ownership, is as good as though secured by patent."

Hey Jim, I think I figured it out. Based on the California board of equalization, and this is different for various states,  unpatented mine claims are included as “Taxable possessory interests”, and are based on the market value of the claim.   It’s interesting that in Oregon there’s a public law that prohibits taxation of unpatented claims, but not so in California.

This describes California taxable possessory interest:

https://www.boe.ca.gov/proptaxes/pdf/ah510.pdf

This is a letter from the board of equalization answering a question regarding taxable possessory interest status of his unpatented claims that he sold:

https://www.boe.ca.gov/proptaxes/pdf/590_0018.pdf

 

Anyways, so maybe people shouldn’t read this, as it may be a common thing to go unreported...  I’m not sure what to expect of the tax fees that I might incur if I do ever file a claim in California.

 

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I don't know how each state deals with this situation, but on the Federal level, claims are private property, whether patented or not. The Feds do not address the issue of taxation specifically, so I guess the states get to do what each one thinks is correct for them.

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The simplest answer to the principle behind mining claim taxes in California is that your possessory interest in the minerals on your mining claim is private real property. Private real property in California is taxable.

Not surprisingly California is relying on the same court decisions Jim is pointing out. Once you have perfected your claim on the minerals on public lands open to location your claim on the minerals become private property as long as you maintain your possession of the claim.

Where all this gets interesting is the simple fact that in 1976 the federal government adopted a policy of no longer granting public lands to the citizens. This was the Federal Land Policy Management Act (FLPMA). No longer could a person establish themselves, according to law, on a claimed portion of the public lands and earn the right to purchase the land. Patents for land were no longer a possibility for ordinary U.S. citizens with one exception - mining claims.

Once these claims and patents on public land were abolished the states were no longer gaining new (taxable) private property as citizens were granted patents. Virtually all the private property in the western states was at one time public land until it was claimed and patented. Without the ability to expand their property tax base the states were faced with the burden of providing services to the federal lands but were prohibited by law to tax those lands. The federal lands which were once the prime source of growth and wealth became a net burden on the states.

The FLPMA that changed this policy from the people being able to claim federal lands to no new conversions of public lands to private ownership would never have passed Congress if the state and local governments weren't compensated for their ongoing loss of revenue. So at the same time in 1976 when the FLPMA was passed Congress also passed the Payments in Lieu of Taxes Act of 1976.

The Payments in Lieu of Taxes Act pays money to the counties every year since 1976 for every acre of federal lands located within the county. Every year. Billions of dollars given to the counties in place of taxes they would have collected if the lands had been claimed and converted to private (taxable) property. Some of the smaller more rural counties with large tracts of public lands could not survive without these annual federal payments.

The Payments in Lieu of Taxes Act of 1976 is the reason most states abolished the taxing of mining claims. Their counties were already receiving federal payments every year as a replacement for taxes. California stopped taxing too - for a while. Now they don't just tax your possessory interest in the minerals but also tax the transfer of a possessory interest in a mining claim. This is on top of the income taxes on the minerals you mine and sell from your possessory interest.

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Clay, this is an excellent and very well written description of how claims are taxed and the background behind the process. You could use what you've written here for an informative piece on the MLM site as well. Thank you for the description, even a newby like me understands a lot more about it now.

One question if you don’t mind, you mentioned that possessory interest is based on the minerals, is that based on reported annual mineral recovery records or by a standard estimate based on the in situ minerals on the claim?

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8 hours ago, Clay Diggins said:

Where all this gets interesting is the simple fact that in 1976 the federal government adopted a policy of no longer granting public lands to the citizens. This was the Federal Land Policy Management Act (FLPMA). No longer could a person establish themselves, according to law, on a claimed portion of the public lands and earn the right to purchase the land. Patents for land were no longer a possibility for ordinary U.S. citizens with one exception - mining claims.

 

The following copy and paste does not have anything to do with taxes as such; but it does clarify the possessory interest you have of a mining claim as the claimant. It also clarifies what Clay was writing about when he wrote about FLPMA and the "exception" stated in it.

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The distinction between “public land” and “public domain”

Any interpretation of mining law requires that it be read “para materia”, interpreted all together. The definition given to distinguish the difference between “public land” and “public domain”, citing the Congressional Record of October 2000, page 1885-1866, states, “2. The true nature of ‘‘public lands.’’ ‘‘Public Lands’’ are ‘‘lands open to sale or other dispositions under general laws, lands to which no claim or rights of others have attached.’’ “The United States Supreme Court has stated: It is well settled that all land to which any claim or rights of others has attached does not fall within the designation of public lands.’’ In additional support we add from the same record, “The courts have repeatedly held that when a lawful possession of the public lands has been taken, these lands are no longer available to the public and are therefore no longer public lands. Possession of the mineral estate in public lands is lawfully taken under the mining acts. Where a valid mining claim exist, that land is no longer public land.”  The “public land” that is disposed by claims under the act of 1872 is public domain as stated in that Act, reference “USC 30 § 26. Locators’ rights of possession and enjoyment: The locators of all mining locations made on any mineral vein, lode, or ledge, situated on the public domain. . .”

The “public land” has many potential uses, until disposed. The FLPMA, conveniently recognizes two general Uses, “Specific Use” and “Special Use”. A valuable mineral deposit location is a specific use on public domain, not a special use of “public land” such as is regulated by 43 CFR 3809. Reference the Act of May 10, 1872, amending the Act of 1870 and the 1866 mining law clause 1, after “granting” or 30 USC 22, locatable minerals are not mining claims on “public land” but mineral deposits, 30 USC 22, on public domain, 30 USC 26.

30 USC § 22. Lands open to purchase by citizens

Except as otherwise provided, all valuable mineral deposits in lands belonging to the United States, both surveyed and unsurveyed, shall be free and open to exploration and purchase, and the lands in which they are found to occupation and purchase, by citizens of the United States and those who have declared their intention to become such, under regulations prescribed by law, and according to the local customs or rules of miners in the several mining districts, so far as the same are applicable and not inconsistent with the laws of the United States.

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6 hours ago, GotAU? said:

Clay, this is an excellent and very well written description of how claims are taxed and the background behind the process. You could use what you've written here for an informative piece on the MLM site as well. Thank you for the description, even a newby like me understands a lot more about it now.

One question if you don’t mind, you mentioned that possessory interest is based on the minerals, is that based on reported annual mineral recovery records or by a standard estimate based on the in situ minerals on the claim?

You are welcome. I'm glad it helped your understanding GotAU. :smile:

The possessory interest value is established when you locate a mining claim. The act of claiming the minerals is based solely on your claim of a "discovery of valuable minerals" on lands open to location. Without a discovery of valuable minerals no mining claim is valid or possible under the law. The claimant is the one asserting their right to the mineral possession is valuable - not the taxing authority.

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50 minutes ago, Clay Diggins said:

You are welcome. I'm glad it helped your understanding GotAU. :smile:

The possessory interest value is established when you locate a mining claim. The act of claiming the minerals is based solely on your claim of a "discovery of valuable minerals" on lands open to location. Without a discovery of valuable minerals no mining claim is valid or possible under the law. The claimant is the one asserting their right to the mineral possession is valuable - not the taxing authority.

Just found this explaining different ways in California that the possessory interest value can be determined depending on the commodity:

https://assessor.lacounty.gov/wp-content/uploads/2015/02/E-291.pdf

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For those that forgot to bring their topographic maps and want to try to find a position written in PLSS using Lat Long, this is a useful website with several geographic tools:

https://libguides.lib.msu.edu/c.php?g=95495&p=623951

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