In Texas, I own royalties on an abstract in Midland county. 7 wells pass thru this abstract and other abstracts ending in Martin county. My royalty revenue is based solely on my Midland county holdings, but I have been notified of an assessment for taxation in Martin county. Has anyone successfully challenged a similar situation? Can you cite an appropriate law or ruling that I might use in a challenge?
Review the two county tax notices and appraisal detail from the appraisal companies to make sure that the well value has been divided between the two counties based on the proportion of the wellbore or unit acreage in each county. Such as, 40% in Martin County and 60% in Midland County. This is a common practice, to divide the well between the two counties where the unit or horizontal wellbore is in both counties. You just need to verify that each county is not taxing at 100% of the total well value, only the reduced portion. Have seen this in multiple Texas counties.
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I realize this is a practice used on some wells. If the horizontal well goes through 5 tracts (abstracts) in the 2 counties and I owned mineral royalties in all 5 tracts, this is a non issue. The question pertains to when I own mineral royalties in only 1 tract in one county and the other county is assessing taxes.
As I understand it, if I own mineral royalties, I do not own any portion of a well - have no control over drilling, etc. I am merely entitled to a portion of the royalties on the revenue produced by each and every well in the abstract(s) for which I own mineral royalties. Since I only own mineral royalties in Midland county for this group of wells, what is the justification for taxing me in Martin county?
So, my question concerns whether anyone is aware of this being successfully challenged.
It seems obvious to me that taxing a well is not equivalent to taxing the mineral royalties, since the tax rates are different in different counties and incorrectly taxing in a county may result in exempt properties becoming taxable.
Has there not been a class action lawsuit filed on this yet?
No because there is zero economic harm to any party to have the taxes divided between the two counties. Producing minerals are not tax exempt and so you will pay taxes regardless. You taxes are based on your well or unit DOI which is by definition producing. No lawyer would consider spending his own money for a such losing class action because there will be no damages or fees to cover the costs. Nothing to stop you from filing,
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TennisDaze,
In the past you have sometimes posted helpful information on threads I started. On this issue, I am afraid your assertions do not match my real world experience. And when you start presenting yourself as an expert on what all attorneys would/are doing, you loose credibility to me.
If the total appraised mineral rights for a county are below a certain limit, they are exempt from taxation - were you not aware of that?
That has nothing whatsoever to do with your post about the taxable valuation being subdivided between 2 counties. Clearly the total value of the minerals / well / unit exceeds the limit or you would not be complaining. I addressed only the fact that the subdivision of value between counties is done all the time. If the assessed value is $3,000 and it is divided in half between the counties to be $1,500 in each county, then you will still only be taxed on a total of $3,000. Moreover, Sec 11.146 provides that the $500 exemption is based on the aggregated value of all mineral interests in the taxing unit (eg county) and not on an individual well basis. Seven wells at $200 each is $1400 aggregated total. So it may well be that a mineral owner is better off having the value subdivided if he does not own other producing minerals in the one or both counties and the total value is less than $1,000.