Cite as: 506 U. S. 546 (1993)
Opinion of the Court
tions,2 "[n]o further deductions for cost depletion shall be allowed." Treas. Reg. § 1.611-2(b)(2). The second method, "percentage depletion," has no such ties. It generously allows the taxpayer extracting minerals from a deposit to deduct a specified percentage of his gross income, even when his prior depletion deductions have exceeded his investment in the deposit. See 26 U. S. C. § 613 (1976 ed. and Supp. V); Treas. Reg. § 1.613-1. For the tax years at issue, percentage depletion produced the larger deduction for the Hills, and they accordingly calculated their depletion allowance according to that method.
For those tax years, however, percentage depletion's gleam is dimmed by the minimum tax.3 Section 57(a)(8) of
2 Allowable capital additions include intangible drilling and development costs that are "not represented by physical property," such as expenditures for clearing ground, draining, road making, surveying, geological work, grading, and the drilling, shooting, and cleaning of wells, to the extent that the taxpayer opts to capitalize these costs rather than deducting them as expenses. Treas. Reg. § 1.612-4(b)(1). For further discussion of these costs, see infra, at 563-564.
3 The Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248, § 201, 96 Stat. 411, repealed the "minimum tax" for noncorporate taxpayers for tax years beginning after December 31, 1982. See §§ 201(c)(1), 201(e)(1). At the same time, however, the Act also included items of tax preference, such as excess percentage depletion under § 57(a)(8), in the calculation of a taxpayer's "alternative minimum taxable income." § 201(a). While the "minimum tax" was simply added to the amount of income tax due under the normal provisions, the "alternative minimum tax" provision, 26 U. S. C. § 55 (1982 ed.), requires the recalculation of a taxpayer's income under a different set of rules. A tax is then imposed at a graduated rate on the taxpayer's "alternative minimum taxable income"; if the amount of alternative minimum tax so calculated is greater than the income tax calculated under the ordinary provisions, the taxpayer must pay both the normal tax and the amount by which his alternative minimum tax liability exceeds his ordinary tax liability. Because items of tax preference were added to "alternative minimum taxable income," the issue in this case continued to be relevant for tax years beginning after December 31, 1982. For the subsequent history of § 57(a)(8), see n. 1, supra.
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