To the best of our knowledge, the gypsum industry is the only mining industry so completely engaged in a program of urban development. Members of the gypsum industry hope to continue this program not only to stimulate use of their products but as part of their responsibilities as corporate citizens. The industry hopes to participate in "Operation Breakthrough" and other new programs for urban and residential construction. It is estimated the reduction in percentage depletion rates proposed by the House would cost the gypsum industry approximately $825,000 per year in increased taxes. This coupled with reduction of revenues resulting from the government tight money anti-inflation policy and a cutback in federally financed construction programs is a triple blow on this one industry which will reduce the cash funds available to the gypsum companies. Such reduction, of course, comes at a time when it is most desirable to increase expenditures to help residential housing in general and to attack the revolutionary problems which confront the inner city. For all of these reasons, if the Congress decides to reduce percentage depletion rates generally, the gypsum industry requests that it be exempted. Such an exemption would be similar to the exemption granted residential construction from the general cutback on accelerated depreciation rates in the House passed Bill. policy which dictated no change in depreciation for residential housing should also dictate no change in the depletion granted to the industry whose output is most heavily committed to such construction. The same Specifically, the gypsum industry requests the words "gypsum" and "anhydrite" be added after the word "copper" in Section 501(a)(3)(A) We thank you for the opportunity to present our views. 201 N. Wells Street 33-758 - 69 -- No. 14-16 STATEMENT OF EXPANDED SHALE, On Section 501 (a) of H.R. 13270 Filed with the Senate Finance Committee (1) The Expanded Shale, Clay and Slate Institute is an industry association representing approximately 80 percent of the production of sintered lightweight aggregate in the United States. Sintered lightweight aggregate is produced by burning or sintering shales, clays and slates to expand and stabilize them and is sold as concrete aggregate to make lightweight concrete. It is competitive with gravel, sand and crushed stone and replaces an equal volume of these other concrete aggregates. (2) The percentage depletion rate for shales, clays and slates used as lightweight aggregate was raised from 5 to 7 1/2 percent in 1966 by conference action in lieu of a provision approved by the Senate Finance Committee and the Senate which would have treated as a mining process the burning or sintering of shale, clay and slate used for lightweight aggregate. (3) The House bill as part of a general reduction in percentage depletion allowances would cut the rate applicable to lightweight aggregate from 7 1/2 percent to 5 percent. (4) The proposed rate reductions under the House bill, if enacted, will signal a change in the National minerals policy which provided percentage depletion as a stimulus to encourage people to go into the mining business. If such encouragement is no longer considered by Congress to be as important to the public interest, this change in policy will be reflected in diminished growth of the mining industries. (5) The proposed rate reductions under the House bill were not based upon any study of either the lightweight aggregate industry or the mining industry generally. They should be more carefully considered. For example, the recognition given iron ore in the House bill, under which no deduction is proposed in its 15 percent depletion rate, should also be given to lightweight aggregates because their use in construction effects substantial savings in reinforcing and structural steel. (6) Lightweight aggregate is a small industry, and the one-third cutback of its percentage depletion deduction amounts to no more than $400,000 and cannot have a significant impact on National revenues. Individual producers, on the other hand, will be substantially affected by a one-third cutback in their already modest percentage depletion allowances. (7) Lightweight aggregate producers need percentage depletion to undertake the difficult and expensive project of discovery and development of deposits of suitable raw material for lightweight aggregate. The depletion allowance under the House bill of 5 percent based on a pre-kiln cutoff does not offer a satisfactory incentive to make deposits suitable for lightweight aggregate available to the public with the consequent benefits in quality and cost of construction materials. (8) The Expanded Shale, Clay and Slate Institute opposes the proposed reduction of the percentage depletion rate applicable to lightweight aggregate and urges in the following order of preference: (a) Enactment at this time of the Senate amendment in 1966 to treat as a mining process sintering or burning of shale, clay and slate used for lightweight aggregate. Other competitive industries such as sand, gravel and crushed stone get percentage depletion on the selling price of their depletable mineral product, and lightweight aggregate producers believe they should receive similar treatment. The maximum tax benefit from a depletion allowance of 5 percent on the selling price of lightweight aggregate is probably no more than $800,000. (b) Continuation of the 7 1/2 percent rate for lightweight aggregate. (c) If no other changes are made in the proposed rate reduction, fairness among competitors demands that shale, clay and slate used as lightweight aggregate be allowed a 6 percent rate, a cutback of one-fifth from the present rate. The rates applicable to other concrete aggregates competitive with lightweight aggregate are reduced under the House bill by only 20 percent compared with the one-third reduction in the lightweight aggregate rate. |