(Sheridan, Wyo.) A bill dealing with mineral tax collections sailed through the Wyoming legislature and was signed by Gov. Matt Mead this week. The bill was met with almost no opposition and was one of the first to be signed into law this session.
Energy companies owe Wyoming counties over $42 million in delinquent mineral taxes, penalties, and fees. The largest portion, over $26 million, is owed to Campbell County, while over $7 million is owed to Sheridan County.
House Bill 72 allows counties to deduct extraordinary costs of collection prior to distribution of the tax and protects the county from liabilities for any uncollected taxes.
The way the law was previously written, it’s the county’s responsibility to collect the tax, portions of which are then distributed to entities within the county, such as the hospital.
Effectively, the county has to pay for the costs of these collections, and when they exceed the amount collected, the county is on the hook for it.
Following a slew of bankruptcies in the last economic downturn, this problem was brought to the forefront as claims against companies got tied up in bankruptcy courts. In one particularly large case, Alpha Resources left Campbell County with a $12 million tax bill.
The company has since sold off its assets in the Powder River Basin to another company, which then sold them off yet another company.
“They don’t plan on coming back to Wyoming, so they aren’t concerned about paying their taxes here,” said Sen. Michael Von Flatern (R-Gillette), who co-sponsored the bill.
The bill is effective immediately, meaning the counties can now deduct those costs from what’s ultimately collected.
Proactively, the bill protects county governments from liability should a county decide not to deal with the costs of collections, when it appears a futile effort.
The concern was an entity that receives levies from the collected taxes might sue the county for taxes it’s unwilling or unable to collect.
While it’s never happened, Von Flatern said it was a concern.
“We’ve always talked about the possibility,” he said.
Rep. Eric Barlow (R-Gillette), who sponsored the bill, said it won’t quite address the central problem, which is that some companies aren’t paying their tax liabilities. At the state level, mineral tax is collected monthly. However, the “ad valorem” taxes owed to the county are due 18 months after the time of production.
Barlow said House Bill 72 will go a long way to address some of the symptoms of this central problem.
“We’ll continue to work to address the bigger issue as well,” he said.