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Natural Resources & Energy

Committee Agrees To Consider A Quicker Schedule For Ad Valorem Tax Collection

Delinquent mineral production taxes by county updated in July of this year
Powder River Basin Resource Council

Last Friday, legislators spent three and half hours hearing testimony and discussing improvements to the ad valorem tax system, one-time severance taxes paid to counties to fund local services and the state school system. 

Policy disadvantages have caused counties to miss out on about $55 million between 2006 and 2016, according to a report from the Powder River Basin Resource Council. That’s due to counties being on a delayed collection schedule, a lack of debt reporting from companies at key intervals, missing out on debt collections during bankruptcies, and more.

The Joint Interim Revenue Committee agreed to further discuss a bill that would change the tax collection from 18 months to one month, aligning it with state severance tax collection which has not experienced notable levels of delinquency. That’s a big win for counties and environmental advocates long seeking the synchronization with bills being discussed in 2015 and 2016 that failed.

Gillette Representative Eric Barlow, who worked on a successful bill this past session helping counties pay off attorney fees in ad valorem lawsuits, said that it's the state's responsibility to navigate unpaid mineral taxes.

"I think it’s a matter of quote-unquote fairness. The state has actually designed that whole system,” Barlow said. "If we want to make the transition, I think we are in the place to help smooth all the waters for both the producers and for county governments and special districts.”

Barlow said it’s about fixing the bigger system and closing loopholes. Several other issues were discussed that would close loopholes like creating a perpetual lien that would give counties a seat at the table during bankruptcy proceedings. The committee decided the collection schedule was the most important solution at the moment and side-stepped other considerations.

Mineral advocates argued the vast majority of ad valorem taxes are paid on time and this new schedule would be punishing the industry for a few bad apples. Wyoming Mining Association’s Travis Deti said there are many other classes of property taxes on the same schedule that aren’t as targeted as minerals. Campbell County Commissioner Mark Christensen countered it’s different with something like property taxes which can actually be investments through tax sales.

Bruce Hinchey, head of the Petroleum Association of Wyoming, said coal is more of the problem here, but that the 18 to 1-month collection schedule change would affect oil and gas too.

“We want to make sure that as we go into that process that we don’t harm the companies that are doing business and growing as well as the existing companies and make sure that we don’t have any additional bankruptcies that might occur from anybody,” he said.

The collection schedule could cause issues for coal, oil and gas companies during the transition to a shorter schedule, when they would have to make double payments. The terms of that transition haven’t been set. Industry advocates felt that could cause companies to go out of business.

But Jill Morrison, executive director of the Powder River Basin Resource Council, said, if that’s true, there’s a larger problem with the company.

“If something like paying your taxes is going put you out of business, there’s something wrong. This will only put people out of business who really shouldn’t be in business in the first place,” she said.

Legislators agreed to talk about a discount on taxes during the double payment transition period and when the bill would be implemented for mineral companies in the November hearing. Hinchey said it would be difficult to get the bill ready in time for the full legislative session in January since there’s much work still ahead.

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