The oil and gas boom in the Ohio Valley has many people cashing in on royalties for their mineral rights, but now some of those people are receiving costly taxes on revenue they never received.
Marshall County resident Slim Lehart has been receiving royalties for mineral rights on his land since 2012, but a few months ago, he received a property tax bill for estimated revenue that was way over what he actually received.
“The bill was like $800 and some odd dollars. They taxed me on the revenue that the gas company gave to the tax department in Charleston and they estimated it at like $64,000 dollars,” Lehart said.
The main issue people are running into is receiving these tax bills on royalties for their mineral rights that they received two years ago.
“You know, there is that lag time, according to this evaluation methodology and so, he has received payment already,” said Marshall County Assessor Chris Kessler.
Slim said he did not receive $64,000 in revenue two years ago, he said he received $2,500. However, the state of West Virginia bases their property taxes for their first year of production on what could be produced the entire year.
“They annualize the income, over a 365 day period. Even though he was only paid for 15 days of production, the state estimates what he will have received if it produced 365 days, a full year,” Kessler said.
The state only takes the annual estimate for the first year of production, and during the second year, they just use actual production.
Slim is not the only person who has run into the problem, especially when the property tax bill doesn’t arrive for two years. Unfortunately, the assessors office has no control on these estimates.
“I wish there could be a more fair way, obviously because the local assessors really have no control on these mineral assessments. It’s all done through the state tax department,” Kessler said.
Kessler added while this is happening in West Virginia, he is not sure how property tax assessments on royalties for mineral rights work in other states. He said he recommends looking into it before you sell.