HB0159/HEA0078 – Monthly Payment of Ad Valorem Tax on Mineral Production

Effective Immediately

It may take a few years of litigation before we know all of what HB0159 does but here’s a discussion of some of the finer points.

Creates 39-13-113, which governs the collection of ad valorem taxes on all mineral production commencing on January 1, 2020. Although paragraph (b) states that all producers “shall report and pay the ad valorem tax on mineral production for each county on a monthly basis,” the payment schedule is modified in Section 3 of the bill, so while mineral producers do eventually begin to pay production taxes monthly by late 2022, they are still paying on the prior year’s production.

Paragraph (b) dictates that payments are due and payable to the DOR on or before the 25th of the day of the second month following the month of production. Again, due to payment schedule modifications in Section 3, this is never achieved. The closest we get is that the 2026 production taxes begin to be collected by March of 2027.

Paragraph (b) also calculates the amount of the monthly payment as not less than “the amount calculated by the taxpayer by applying the mill levy rate established by the county in the immediately preceding year to the value of the gross product on minerals and mine products produced each month.” Since there is no county “mill levy rate,” that would presumably mean the mill levy rate in the district in which the tax was produced.

Prior to September 20th each year, the county treasurer will apply the mill levy rate set for the production year, calculate the actual tax, compare it to the estimated tax received by the taxpayer, and issue a written notice of tax due or overpayment. If additional taxes are due, the taxpayer is required to pay the amount no later than December 20th. If the taxpayer overpaid, the treasurer will send a refund by December 20, or the taxpayer can choose to have the treasurer keep the overpayment and apply it to other ad valorem taxes due.

Paragraph (c) states the DOR shall collect the monthly tax on behalf of each county and properly account for the payments. The DOR will then distribute the funds to county treasurers “in the course of ordinary business.” Upon receiving the funds, the treasurer is required distribute them “proportionally” to each taxing entity as provided by 39-13-111. This appears to say the treasurer will distribute the funds immediately to all the entities but a new section is added to 39-13-111 — paragraph (d) — which states that “taxes collected pursuant to W.S 39-13-113 shall be distributed as provided in this section following final reconciliation of the taxes under W.S. 39-13-113(b).

In other words, as the DOR begins to distribute monthly taxes to treasurers, the funds are held until the mill levies are set, the correct levies are applied to the production year, and the underpayments or overpayments are calculated.

This section is in conflict with other statutes requiring the treasurer to distribute funds to a school district, city or special district at a certain time each month. While there is a provision in paragraph (a) that allows the new language to supersede any conflicting procedures, that language only applies to contradictory language in the “provisions of this title,” while distribution provisions are in other titles. For example, W.S. 21-13-207 requires treasurers to apportion and distribute “all monies in the county treasury belonging to the county school fund … and immediately pay the amount to each school district” by the second Monday of each month.

Paragraph (d) exempts taxpayers who paid less than $30,000 in severance taxes in the prior year from paying monthly. Instead, those taxpayers will file annually and pay by February 25 of the year following the year of production. The calculation for the annual payment is the same as monthly payments and the annual reconciliation once mill levies are set is the same. While there are no provisions in HB0059 for how to deal with new taxpayers, since the DOR already handles this provision with severance taxes, they would presumably use the same method.

Paragraph (e) states that taxpayers who fail to report or make payments at the time they are due are subject to the lien provisions in 39-13-108. The DOR will value the production using the best information available and file a notice of lien on behalf of the county.

Paragraph (f) authorizes counties to enter into an agreement with a taxpayer to accept payments using the current method instead of the provisions of HB0059, as long as the county establishes eligibility criteria, an application process and conducts a public meeting prior to entering into an agreement. No taxpayer who acquires property after the effective date of the bill can apply for this arrangement on the production from that property.

As discussed previously, the bill adds language to the Distribution section, 39-13-111, requiring taxes collected pursuant to this law to be distributed each year after the mill levies are set and the taxes are reconciled.

The Payment paragraphs (b) of each mineral section are altered to say the current due dates (50% Nov / 50% May) are applicable for the 2019 tax year and all preceding years, and that for tax year 2020 and all years thereafter, the taxes are due pursuant to the new section, 39-13-113.

Section 3 of the bill deals with the transition of payments into the new system. Paragraph (a) sets aside the language in 39-13-113, requiring monthly payments, and specifies a new payment schedule as shown in this spreadsheet. The payment schedule begins in October 2020 and extends through “2026 and each year thereafter.” The legislature would have to alter the statute to continue the transition to where ad valorem taxes were actually paid the month after production, like severance taxes and as specified in the language in the first paragraph of the bill.

Paragraph (b) states that if a taxpayer fails to pay under the schedule, the taxes are subject to penalties and interest, with interest “accruing from the date that payment would have been due and payable under the procedures in place prior to the effective date of this act.” That statement is confusing but apparently means that if the payment schedule requires an October payment, no interest would be due on the payment until November 11th. If a payment is due in January, no interest would be due until May 11th. Maybe there are other ways to interpret paragraph (b).

Section 4 appropriates $500,000 to the DOR for the purpose of administering tax programs. No appropriation is made to offset county costs of administering the new schedule.

Section 5 makes the bill effective immediately.