As we are all aware, energy can mean big revenue. But that big revenue can mean potentially huge tax liabilities. Whether you’re an owner of one, some or all of the components involving minerals, there are multiple tax implications to consider. And to help you avoid paying more than your fair share of taxes, we offer a suite of comprehensive Mineral Tax Services to make sure every possible option for savings is identified and captured.
There are two factors at work in the realm of real property when it comes to minerals. Because each of these is classified as real property, the taxes are based upon fair market value appraisals.
Surface – The land that contains the minerals is taxed as real property. And you’re most likely overpaying for your property along with an estimated 90% of commercial property owners — whether you’re a big corporation, an investor or a small business owner. The sheer volume of properties in any given jurisdiction prevents the assessor’s office from looking at every asset individually which means that individual property characteristics are not factored into the tax value assessment. It also means that over-assessment of commercial property is common.
Minerals – The minerals resting under the surface are considered real property and are taxed as such. It is important to know that this is not an income tax on the prior year’s revenue. When in production, the market value is based on the value of the discounted cash flow estimated from future production.
Although the approach may seem simple, mineral rights valuations can be quite complex and there is risk of over-assessment of property. Taxes vary depending on whether the minerals are being produced or not.
Machinery and equipment either used to get minerals out of the ground or to process and transport those minerals to market is taxed as personal property. Determining the fairness and accuracy of the property tax values is no easy task. It requires a thorough comprehension of issues around inspecting and appraising property as well as collecting and analyzing relevant data. Knowing the basis of your assessment and its relation to market value is imperative.
JJC’s experts have decades of experience handling the unique issues and complexities surrounding property tax in the energy and industrial fields. Combining appraisal, accounting and engineering disciplines we conduct an exhaustive analysis of your equipment.
Operators must report the volume of minerals being removed from the ground (or severed), which is then taxed at various rates. And Texas has one of the largest severance taxes in the nation. There are different ways to approach reducing the tax burden and they vary by state.
Reviewing for applicable exemptions and deductions as well as identifying errors in the tax rate application are a few methods in which JJC’s minerals experts help you put money back on the right side of the ledger.
Valuation and valuation reviews for (both producing and non-producing)
Development of valuation models for mineral properties
Valuation and valuation review of operational assets for
Informal and formal valuation protests and litigation support
Development of valuation models for severance taxes
Severance tax filings, reviews and audits
Tax planning based on valuation modeling and protests