Rev. Rul. 62-5

The Internal Revenue Service has been asked to reconsider its position with respect to the ordinary treatment processes allowable for taxable years beginning before the year 1961 in the case of the minerals described in Revenue Ruling 56-405, C.B. 1956-2, 332, namely chemical grade limestone, crushed rock for road ballast, and agricultural limestone, and in the case of granite and other stone sold as broken or crushed stone products.

In determining gross income from the property for purposes of computing percentage depletion, section 39.23(m)-1(f)(2) of Regulations 118 (and corresponding provisions of Regulations 111), made applicable to the Internal Revenue Code of 1954 by T.D. 6091, C.B. 1954-2, 47, provides that `fine pulverization' is not an `ordinary treatment process' unless necessary or incidental to a mining process otherwise provided for in such regulations.

Referring to the production of chemical grade limestone, crushed rock for road ballast, and agricultural limestone, Revenue Ruling 56-405 states that in crushing rock for chemical grade limestone and crushed rock products, the production of pulverized limestone as a by-product from the primary and secondary crushing will not exclude such processes from treatment as ordinary treatment processes within the meaning of section 613 of the Internal Revenue Code of 1954. That Revenue Ruling also provides that the pulverization of limestone for the purpose of making agricultural limestone is excluded from such ordinary treatment processes. Revenue Ruling 61-17, C.B. 1961-1, 193, modified Revenue Ruling 56-405 to the extent that the latter permits any process subsequent to primary crushing to be treated as an ordinary treatment process.

There are substantial differences in the physical structure of rock and it is difficult to distinguish between the wide variety of types and methods of size reduction processes used in producing broken and crushed stone. Because of the foregoing considerations, and in the interests of uniform administrative application of the statute, processes, other than fine pulverization, applied for size reduction purposes will be treated as ordinary treatment processes in the case of the minerals described in Revenue Ruling 56-405 (chemical grade limestone, crushed rock for road ballast, and agricultural limestone) and in the case of granite and other stone sold as broken or crushed rock or stone products. For this purpose, and as under Revenue Ruling 56-405, the term `fine pulverization' does not include the coincidental production of fines as a by-product of allowable size reduction processes.

In addition, the term `fine pulverization' does not include any process applied to reduce the product in size so that it will pass a No. 20 screen (U.S. Standard Sieve Series) provided five percent or more of the product of such process will remain on a No. 45 screen (U.S. Standard Sieve Series). U.S. Standard Sieve Series is the same as ASTM designation E-11-61. Separating or screening the material for size prior to fine pulverization will be considered an allowable process.

This Revenue Ruling has no application to processes or minerals in respect of which specific provision is otherwise made by statute or regulations, such as the pulverization of talc and the breaking or sizing of coal. Furthermore, it has no application to calcium carbonates or other minerals when used in making cement, or quartzite when used in making refractory products, since the same considerations are not applicable to these minerals and because of the enactment of P.L. 86-781, C.B. 1960-2, 726 and P.L. 87-321, C.B. 1961-2, 341, concerning these minerals.

Revenue Rulings 61-17 and 56-405 are hereby modified so that any size reduction process, other than five pulverization, applied in the case of chemical grade limestone, agricultural limestone, granite and other stone sold as broken or crushed rock or stone will be considered as a mining process.

This Revenue Ruling applies only to taxable years beginning before January 1, 1961. For taxable years beginning after December 31, 1960, the treatment processes considered as mining must be determined under section 613(c) of the Internal Revenue Code of 1954 as amended by P.L. 86-564, C.B. 1960-2, 681, and the regulations thereunder.

¹ Also released as Technical Information Release 355, dated December 28, 1961.