Statement by the President Upon Signing Bill Relating to Determining Gross Income From Mining in the Brick and Tile Industry

I HAVE TODAY approved H.R. 7057 entitled "An Act Relating to the determination of gross income from the property for taxable years prior to 1961 in the case of certain clays and shale which were used in the manufacture of certain clay products."

To determine the percentage depletion allowance, it is necessary to apply the percentage rate, determined by Congress, against the gross income from the mining property. H.R. 7057 provides, in the case of brick and tile clay, and shale used in making certain clay products, that the gross income from mining shall, at the election of the taxpayer, be equal to 50 percent of the total amount for which the manufactured products are sold during the year but not more than $12.50 per ton of clay or shale used in such manufactured products. This provision would apply retroactively to all taxable years beginning before January 1, 1961, which are not barred by the statute of limitations on the date of enactment of the bill. It has no application to taxable years beginning after December 31, 1960.

There is a basic policy against retroactive amendments to the tax laws. However, there may be circumstances in specific cases which justify departure from this well rounded policy. The question of how gross income from mining is to be determined in the brick and tile industry has had a complex and involved history dating back to 1951 and culminating in 1960 when the Supreme Court decided in the Cannelton case that gross income from mining means the gross income attributable to the raw materials rather than the manufactured products. This history contains factors which, taken together, justify some measure of retroactive relief for the brick and tile industry from the full application of the principles set forth by the Cannelton decision. Although other methods of providing relief would have been appropriate, the particular relief provided by the bill is not so questionable as to warrant withholding my approval.

I do not understand that the use in this bill of an arbitrary percentage of the sales price of the end product as gross income from mining constitutes acceptance by Congress of a principle that mineral depletion in general should be based on the value of the manufactured product. Moreover, the factors present in the record serve to distinguish the brick and tile industry from the various other mineral industries. Therefore, my approval of this bill should not be viewed as establishing a precedent for the enactment of similar legislation for other mineral industries. Nor does my decision indicate any willingness to approve retroactive legislation which is applicable to any particular industry unless very unusual circumstances exist. There are always pending before Congress a large number of retroactive measures which would create substantial administrative problems, loss of revenue, and discrimination between taxpayers. Therefore, approval of any one of these measures must be premised upon peculiar circumstances justifying departure from the fundamental policy against this special type of legislation.