Can I be taxed on my mineral rights in two counties inTexas?

General Mineral Rights Discussion
1

I actually have two questions :slight_smile:

But here’s some basic info: I have about 2.5 acres and have a lease for my mineral rights to XTO. I get checks monthly, although not in great amounts. Now I have received my tax bills from the county. It is incredible how much the county is taxing each well for! Altogether, my taxes will be over $1,000! Just for my mineral rights! Trust me, I don’t get that much in a month (or two or three even) from the royalties!

  1. Has anyone protested their mineral rights tax amounts with Tarrant County? And if so, were you successful? What type of information did you use?

  2. Can I be taxed in two counties for a well? I am part of a large group/pool. Without looking it up, I think it’s about 200 acres or so. I am in very southern Tarrant County, so it wouldn’t surprise me if part of the land contained in this group is in Johnson County. However, I’ve now received a tax bill for two of the wells from Johnson County. I went through my Tarrant County bills and found tax bills for the SAME EXACT wells! Is that possible? To be doubly taxed?? It seems unfair to me! For example, one line on the tax bill is for Mansfield school taxes. Why do I have to pay Mansfield school taxes TWICE on the same well???

(I also found it interesting how great the “appraised value” varied from county to county — over $4,000 difference per well!!)

I hope someone can help me.

Or direct me to someone who can.

2

Well I do think you can be taxed for 2 counties because my sister is on her lease, which is in your area. I wonder if the lease is on both county lines. It certainly seems unfair though, especially the Mansfield school taxes.

She is still making quite a profit after taxes so she is counting her blessings.

That said, someone should at least consult an attorney to see if it is worth fighting in my opinion.

I’m in Burleson myself and waiting for production to start near Walmart.

3

Dear Yvonne,

If that is happening to you, it is also happening to XTO, whose interest and therefore tax burden is much higher than yours. Perhaps if you contacted XTO’s tax department, they could give you some help, because they have a larger investment and the professionals to deal with matters such as this.

Having said that, I do think that you are only taxed on the lands physically located in the county. I would pay a visit to the Johnson CAD and find out their rationale.

4

Hope I’m not hijacking this thread, but my question is also about taxes.

I understand that payments from lessees/operators are generally followed up with a 1099 at the end of any given tax year and that it’s the responsibility of the lessor to meet those tax obligations. However, how does any of this affect Property Taxes?

I used to have a pipeline compressor site on my property and the issue of Property Taxes was never addressed in my lease. Needless to say, this quickly became an unpleasant situation. I admit that I was at least partially to blame for this misunderstanding, though.

So my question is, how do oil royalty payments affect Property Taxes? After all, the property is suddenly worth much more. Does the county come in and raise property taxes as a result? Furthermore, who’s responsible for the tax increase, if any?

In a related question, how do above ground appurtenances affect Property Taxes? Even though they’re income-producing, in reality they actually serve to decrease your surface value because any realtor or prospective purchaser of the surface (without the mineral rights) would not consider any equipment such as this to add to the property value.

Thanks.

5

Dear Mr. Irving,

Don’t confuse 1099’s distributed as a result of royalty income with ad valorem taxes.

The State of Texas charges (by statute) the County Appraisal District with the responsibility of determining the value of all real property in the county. Clearly, after production is established, the value of the mineral estate increases. I believe that the oil companies are required to provide the name and interest of each owner in every well that they operate. The answer to your first question is that the taxing authority does not suddenly come in and raise your taxes. The taxing authority assesses your tax burden based on the value of your assets, which value can change quite quickly.

CADs typically hire consultants to determine the value of the mineral estate post production. The consulting mineral appraisers estimate total reserves, use a combination of futures prices for the short term and the EIA pricing forecast for the longer term and some discount rate to bring everything back to present value dollars.

Actually, you could be taxed on the value of non-producing minerals based on their fair market value, but I know of no Texas counties that employ this practice, inasmuch as the process of determining mineral rights in an ever-changing environment would be essentially insurmountable.

As to surface facilities and pipeline facilities, the more intelligent and sophisticated landowners will state in the surface use agreement that the lessee/operator will be responsible for any increase in value to the surface estate as a result of their operations.

Washington Irving said:

Hope I’m not hijacking this thread, but my question is also about taxes.

I understand that payments from lessees/operators are generally followed up with a 1099 at the end of any given tax year and that it’s the responsibility of the lessor to meet those tax obligations. However, how does any of this affect Property Taxes?

I used to have a pipeline compressor site on my property and the issue of Property Taxes was never addressed in my lease. Needless to say, this quickly became an unpleasant situation. I admit that I was at least partially to blame for this misunderstanding, though.

So my question is, how do oil royalty payments affect Property Taxes? After all, the property is suddenly worth much more. Does the county come in and raise property taxes as a result? Furthermore, who’s responsible for the tax increase, if any?

In a related question, how do above ground appurtenances affect Property Taxes? Even though they’re income-producing, in reality they actually serve to decrease your surface value because any realtor or prospective purchaser of the surface (without the mineral rights) would not consider any equipment such as this to add to the property value.

Thanks.

6

Thank you Mr. Cotten for the excellent information.