GILLETTE — Mineral producers in Wyoming will have to pay their ad valorem taxes owed to counties on the same schedule as their state severance taxes if Gov. Mark Gordon signs a bill that cleared its final hurdle in the Legislature on Wednesday.
House Bill 159 calls for monthly payments of county production taxes, a significant change from the current schedule that allows oil, gas, coal and uranium producers to pay up to 18 months after the minerals were sold. That has led to several high-profile bankruptcies that has seen tens of millions of dollars unpaid to counties along with other companies that went out of business left owing back taxes at least 18 months in arrears.
The final version of HB 159 that was approved by the House on a vote of 51-9 Wednesday, minerals producers must begin paying their ad valorem taxes monthly beginning Jan. 1, 2023. They also can choose to start paying monthly earlier than that deadline beginning Jan. 1, 2021, or Jan. 1, 2022.
One big change that takes a lot of the teeth out of the bill is that while production taxes eventually will be paid on a monthly schedule, they're still a year behind, said state Sen. Michael Von Flatern, R-Campbell. Instead of being 18 months behind, collections are about 12 months. That means a company starting Jan. 1, 2021, would be collecting monthly taxes generated by production starting Jan. 1, 2020.
"They pay monthly, which is a good thing, but they only pay a portion of what they owe," he said. "It's always a year behind and never gets to the point of paying 45-60 days out."
Making such a fundamental change to how taxes are collected in Wyoming isn't easy, Von Flatern said. One obstacle is reconciling a desire to collect taxes monthly, but the assessed valuation for counties is a year behind, which makes it difficult to set accurate rates for companies to pay.
The monthly rate will be estimated by counties based on a low average of assessed valuation and paid to the state Treasurer’s Office. The state will then disperse the money collected to counties on June 1 of the calendar year following the production year. For example, monthly ad valorem taxes collected in 2020 would be paid out June 1, 2021.
The counties then reconcile any differences, with any amounts still owing or refunds of overpayments to be made by Dec. 20 of that year.
This version of HB 159 "is the best we could do with the assessment dates always being a year behind," Von Flatern said, adding he'd like to seen an interim committee take it up this summer to refine the law.
"It's a first step," he said. "It starts the conversation and gets (companies) to pay monthly at some point, but I think somebody has to clean it up. It may be changing the assessment date so that money can't be clawed back (through bankruptcy proceedings), and that would be really tough to do."
The bill also allows for companies to make up ad valorem taxes owed that overlap the new schedule on a sliding scale that provides financial incentives to pay the overlap more quickly.
After the state Senate and House presidents sign the bill, it will move on to Gordon, who has expressed support for monthly ad valorem taxes leading up to this legislative session.