On October 9, 2020 WV State Tax Commissioner Dale Steager informed the Independent Oil and Gas Association (IOGA) that it formally withdrew the Tax Department’s June 30, 2020 “Notice to Producers of Natural Gas and Oil for Property Tax Year 2021”. That 2021 TY Notice “…purported to allow such producers to adjust the gross receipts reported in their upcoming ad valorem property tax returns to approximate the gross receipts the producers would have incurred if they sold oil and gas at the field line point of sale.” Steager goes on to state in the current notice that “…the 2021 TY Notice was issued without legal authority, was void, and is ineffective. It is also my determination that it must be withdrawn.” Click here to read.
During a phone conversation with IOGA’s Don Nestor on October 20, Mr. Steager confirmed that the June Notice was not in compliance with current law concerning valuation of producing oil and natural gas. He said the WV Attorney General’s office had contacted him and stated that current law provides that all allowed operating costs for a well to be used in the ad valorem process are to be included in the “average annual industry operating expense” deduction and that this annual operating expense amount is to be deducted from the sales revenue for oil and natural gas wells. Mr. Steager went on to state the law does not allow for any reduction of that sales revenue for other costs such as “gathering, compressing, processing, and transportation expenses” since all allowable costs are already included in the average annual industry operating expense amount. Steager concluded that the June notice appeared to allow an additional deduction of operating costs which was not consistent with current ad valorem tax valuation rules.
Mr. Steager was very clear and cordial in discussing this issue and was also very confident that this position was “agreed to” by the WV Tax Department and the WV Attorney General, and that it was correct and consistent with current law.
Should you any questions concerning this position taken by the WV Tax Department, please contact either Marc Monteleone, IOGA’s Tax Committee Chairman (mmonteleone@bowlesrice.com , Don Nestor (DonNestor67@gmail.com, Tax Committee Member, or Charlie Burd at the IOGA Office (cburd@iogawv.com).
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