We have mineral rights in McKenzie and Mountrail Counties, there is a severance tax taken out of royalty checks and as of 1-1-14 there is a 3.2% “alien” tax taken out for nonresident royalty payments. We live in Montana so there is no income tax from ND but we do pay income tax in Montana on royalties from ND.
The 3.2% tax along with the severance tax is listed on the monthly statements we receive on royalties from Hess and Whiting. I would direct you to the folks at XTO to explain the breakdown to you. The folks at the ND tax office in Bismarck wouldn’t go into much detail when called other than to say the ND legislation had authorized the tax. We are one of those families that “lost” mineral rights under “navigable” waters in Lake Sakakawea so this additional tax is a bit of a jab in the eye. We have already paid the ultimate price and then to be taxed on what is left is an insult. Oil creates greed and this is just another example.
There is a bit of apples and oranges going on with this discussion: Severence Taxes: yes, taken out of check State income taxes: yes, you need to file (evidently a couple of states have special agreements with ND). Real Estate Taxes: No.
Thank you to all that provided their input on my tax question. I truly appreciate you taking the time to respond.
Thank you Ed. My accountant is pretty sharp and I would hate to think she doesn’t have a handle on this oil stuff.
I pay income taxes in both North Dakota and Minnesota on my royalty income.
Wait - I live in MN and have mineral rights in ND. I filed ND State taxes last year. They take taxes out of my checks. Do you mean I may not have to pay them?
This from a State of Minnesota revenue fact sheet: “Special cases Reciprocity Reciprocity agreements prevent you from having to pay income tax to two different states. Minnesota has reciprocity agreements with North Dakota and Michigan. That means if you are a Minnesota resident working in North Dakota or Michigan, you pay income tax to Minnesota. Likewise, if you are a resident of North Dakota or Michigan working in Minnesota, you must pay income tax to your home state. Reciprocity agreements cover only income earned from the performance of personal services; such as wages, salaries, tips, commissions and bonuses. They don’t cover capital gains from tangible property, rents, royalties and gambling winnings. That means you would have to file a Minnesota return for those earnings originating in Minnesota even if you are a resident of another state.” My reading says that the reciprocity agreement between the two states doesn’t include revenue from mineral rights as not being taxable income in North Dakota. If so, you did well to file last year, Janie.
Ed’s info on Minnesota is the same as reciprocity agreement ND has with Montana. We pay income tax on royalty $ in our home state of Montana only. Severance and “alien” taxes are totally separate, taken out and shown on monthly statements before we even see a check. Our CPA takes care of everything. Montana and ND have a long standing reciprocity agreement.
Christine: When you went to 2560, did you get a new division order?
Guess there was another strange thing about this well I have talked about. Back in 2013 when it started, there showed up two wells with the same name at the same section… 152-104-28. The well is named Stubbs 21-28 and there were two for awhile and now they just show one??
It appears that the permits for those two wells have been cancelled.
I have 3 wells drilled from sect 34. The laterals go down thru 3 and the bottom hole location is in 10 My ownership is in 10. I recieve royalties for these wells because they transit my ownership. You would find this information in the well file, or you can call the ND Industrial commission oil and gas division. They are very accommodating,
I noticed on my last production statement that my owner’s decimal figure fluctuated monthly on one of the wells. I thought it would always be the figure that was on the division order papers. It is a well that the company has been holding out on paying until all the little issues were finally solved, so there are quite a few months of back pay with a variety of different decimal interests. Anyone out there know about that? I have emailed the company, but of course they don’t answer.
Christine, I don’t understand how there can be 2 pools. how can they just incorporate a new pool? I thought all pools were set up to make sure something like this didn’t happen? How can they permit a new pool that incorporates an existing pool with existing wells?
I think that clears up some incorrect thinking for me. We have 7 wells in each of 2 adjacent 1280 spacing’s. If the company drills that extra well in the 2560 spacing, the coefficient will not change for royalties for the existing 1280 spaced wells, but only for the one sitting on the line. Is that correct?
That is strange that the permits were canceled as we just received a nice check for the well production… maybe that was the end of that well??
Thanks everyone for your comments. It is so nice to have a site to go to that answers questions. Wrote to our oil company 2 days ago… twice and still haven’t heard back. Thanks again!!
Do your research. I have been told to find out the production of other wells in the area. I think that “don’t be hasty” should be the order of the day.
You can get much information by looking on the ND Industrial Commission oil and gas division. With the price of oil down. You might just do your intense research and be ready for them if and when they come to call or you decide to ask for offers. I am certainly not that knowledgeable. Have made many mistakes.
Actually, my experience from reading Ms. Bohnsack’s posts is that she is quite knowledgeable. What she means by looking on the ND Industrial Commission is to rummage through its oil and gas division website. You can search wells, look at maps, etc. For some reason, some of the features don’t work well in Safari, so use Chrome or one of the other browsers. The state publishes the results of its auctions, so that is useful information as well. If there is significant money involved you might want to consider retaining some professionals as you will likely save money (and protect from liability) in the long run. On that point, I don’t have any particular recommendations, but others might have. Remember “Act in haste, repent at leisure”. Good luck.