Bill would change schedule for mineral tax payments

CHEYENNE — With energy companies in some counties owing millions of dollars in unpaid ad valorem taxes, Wyoming lawmakers advanced a bill Friday aiming to reduce the lag time between when mineral extraction occurs and when companies must pay.

If the bill is approved by the full Legislature this year, the payment schedule for ad valorem taxes would change so they are due on a monthly basis. Currently, companies have up to 18 months after production to pay these taxes to the counties they’re doing business in.

In the meantime, a variety of issues, including a company going bankrupt or a mine changing hands, can keep a county from seeing the money it’s due.

After several amendments were rejected, lawmakers on the Select Committee on Coal/Mineral Bankruptcies ultimately settled on a 2021 start date for collecting the monthly payments.

The main challenge for lawmakers was striking a balance that is both fair to companies during the transitional period and beneficial for the counties seeking to get the payments they’re owed. For two years, beginning in 2021, companies would be required to simultaneously pay two bills – ad valorem taxes due from 18 months before and ad valorem taxes on the new monthly schedule.

During the meeting, officials from several counties spoke in favor of the new schedule. Jerimiah Rieman, executive director of the Wyoming County Commissioners Association, said mineral companies accrued $32 million in ad valorem tax delinquencies over the first half of 2019, adding a few counties were not included in those calculations.

“The commissioners very much are supportive of the bill that is before you,” Rieman said. “The commissioners have hardened around the start date of Jan. 1, 2021, as a result of this data and the compounding issues that they continue to face at the local level.”

Department of Revenue Director Dan Noble said his department, which would collaborate with the county and state treasurers to collect the payment, would need about six months to set up the payment structure. He added his department can be ready by January 2021, barring any additional responsibilities being shifted to the state.

From the view of mineral companies, however, the 2021 start date for the monthly payments was overly ambitious. Pete Obermueller, president of the Wyoming Petroleum Association, was on board with the bill, but said his group would prefer a start date in 2023. He added the overlapping schedules in tax payments effectively equates to a doubled tax on mineral companies during the two-year span.

“We can make ourselves feel better by saying it’s two different tax payments,” Obermueller said. “But I would posit to you that if we tried to do that with any other business entity or taxpayers in the states ... the pitchforks would be out.”

Obermueller said members of his association likely wouldn’t be fully prepared for the cash flow impacts of a 2021 start date.

While ultimately Obermueller and other representatives from mineral industries didn’t get their wish to push off the start date, there were a few concessions made to arrive at the 2021 start date.

One compromise was an option for companies to get a tax credit on sales or severance taxes if they meet their outstanding payments from the previous system by the end of the first year of the new schedule. The bill originally included a 5% tax credit for those companies that have paid their outstanding bills, but lawmakers approved an amendment to raise the tax credit to 7% in the first year of implementation.

The increase to the tax credit received pushback from lawmakers like Sen. Chris Rothfuss, D-Laramie, who said “no force in the universe” will drop the amount back to 5% during the legislative session.

“This is a one-way slope,” Rothfuss said. “How quickly do we want to roll down this hill?”

Another negotiation centered on a payment plan that companies could enter into with counties. In the original bill, companies would have the option to enter a separate payment plan that would let them stretch their taxes owed under the previous structure over the span of 36 months.

When the subcommittee seemed to be in a deadlock over the start date, Rep. Cathy Connolly, D-Laramie, offered a compromise amendment: a 2021 start date, but with 72 months for the payment schedule instead of 36. That amendment passed by a 5-3 vote.

With the amendment in place, the bill moved forward, with some lawmakers reiterating the need to not push off the start date.

“In my mind, if we let it go all the way out to 2022 or ‘23, how many more companies will file bankruptcies on us? And how much more money will we have to lose while we’re preparing this?” Sen. Michael Von Flatern, R-Gillette, said before the vote.

At the start of the meeting, Senate President Drew Perkins, R-Casper, who co-chairs the subcommittee, acknowledged the actions taken Friday would only mark one step in an ongoing process to figure out the schedule. Discussion of the bill will continue during the Legislature’s budget session, which begins Feb. 10.