# § 616. Development expenditures
**(a)** **In general** Except as provided in subsections (b) and (d), there shall be allowed as a deduction in computing taxable income all expenditures paid or incurred during the taxable year for the development of a mine or other natural deposit (other than an oil or gas well) if paid or incurred after the existence of ores or minerals in commercially marketable quantities has been disclosed. This section shall not apply to expenditures for the acquisition or improvement of property of a character which is subject to the allowance for depreciation provided in section 167, but allowances for depreciation shall be considered, for purposes of this section, as expenditures.
**(b)** **Election of taxpayer** At the election of the taxpayer, made in accordance with regulations prescribed by the Secretary, expenditures described in subsection (a) paid or incurred during the taxable year shall be treated as deferred expenses and shall be deductible on a ratable basis as the units of produced ores or minerals benefited by such expenditures are sold. In the case of such expenditures paid or incurred during the development stage of the mine or deposit, the election shall apply only with respect to the excess of such expenditures during the taxable year over the net receipts during the taxable year from the ores or minerals produced from such mine or deposit. The election under this subsection, if made, must be for the total amount of such expenditures, or the total amount of such excess, as the case may be, with respect to the mine or deposit, and shall be binding for such taxable year.
**(c)** **Adjusted basis of mine or deposit** The amount of expenditures which are treated under subsection (b) as deferred expenses shall be taken into account in computing the adjusted basis of the mine or deposit, except that such amount, and the adjustments to basis provided in section 1016(a)(9), shall be disregarded in determining the adjusted basis of the property for the purpose of computing a deduction for depletion under section 611.
**(d)** **Special rules for foreign development** In the case of any expenditures paid or incurred with respect to the development of a mine or other natural deposit (other than an oil, gas, or geothermal well) located outside of the United States—
**(1)** subsections (a) and (b) shall not apply, and
**(2)** such expenditures shall—
**(A)** at the election of the taxpayer, be included in adjusted basis for purposes of computing the amount of any deduction allowable under section 611 (without regard to section 613), or
**(B)** if subparagraph (A) does not apply, be allowed as a deduction ratably over the 10-taxable year period beginning with the taxable year in which such expenditures were paid or incurred.
**(e)** **Cross reference** For election of 10-year amortization of expenditures allowable as a deduction under subsection (a), see section 59(e).
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**Source Credit**: (Aug. 16, 1954, ch. 736, 68A Stat. 212; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97–248, title II, § 201(d)(9)(C), formerly § 201(c)(9)(C), Sept. 3, 1982, 96 Stat. 420, renumbered § 201(d)(9)(C), Pub. L. 97–448, title III, § 306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; Pub. L. 99–514, title IV, § 411(b)(2)(A), (C)(i), Oct. 22, 1986, 100 Stat. 2226; Pub. L. 100–647, title I, § 1007(g)(7), Nov. 10, 1988, 102 Stat. 3435.)
## Editorial Notes
### Amendments
1988—Subsec. (e). substituted “section 59(e)” for “section 58(i)”.
1986—Subsec. (a). , inserted reference to subsec. (d).
Subsecs. (d), (e). , added subsec. (d) and redesignated former subsec. (d) as (e).
1982—Subsec. (d). added subsec. (d).
1976—Subsec. (b). struck out “or his delegate” after “Secretary”.
## Statutory Notes and Related Subsidiaries
### Effective Date of 1988 Amendment
Amendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .
### Effective Date of 1986 Amendment
Amendment by applicable to costs paid or incurred after , in taxable years ending after such date, with transition rule, see set out as a note under .
### Effective Date of 1982 Amendment
Amendment by applicable to taxable years beginning after , see , set out as a note under .