Question

Is this true or false? The U.S. government supports exploration efforts to find more mineral ores because many minerals are extremely important to the U.S. economy.

Answer 1

Not that I know of. Sometimes people claim that tax deductions for exploratory activities are a form of "government support," because in these silly times having the government tax you less is somehow considered fully equivalent to government giving you money.

The tax deductions for exploratory activities recognize the fact that mineral exploration (which also includes gas and oil exploration) are activities where the expense and the income often occur in widely-separated years.

See, ordinarily when you file a tax return, you take what you earned, subtract what it costs you to earn it, and pay tax on the difference (your profit). But what if you earn money in 2012 (through selling copper, say) but the costs you incurred to earn it (exploring for copper) occured in 1992? How do you make that all come out right? You can't wait 10 years to file your taxes for 1992. The solution is to give you a tax credit in 1992, based on some complicated accounting rules that hope to make it roughly equivalent, as far as you and the government are concerned, to somebody whose expense for looking for copper occured in the same year he sold it.