July 4, 2022

Volume XII, Number 185

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July 01, 2022

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West Virginia Legislature Passes Bill Changing Oil and Gas Property Tax Valuation Methodology

On Friday, March 11, 2022, the West Virginia Legislature passed H.B. 4336, which changes the methodology the State Tax Commissioner utilizes for oil and gas property tax valuation. 

Specifically, H.B. 4336 requires the West Virginia State Tax Commissioner to develop a valuation approach for properties producing oil, natural gas, natural gas liquids, or any combination thereof, at its fair market value determined through the process of applying a yield capitalization model to net proceeds. H.B. 4336 specifies that net proceeds would be determined based on the actual gross receipts on a sales volume basis determined from the actual price received by the taxpayers as reported on the taxpayer’s return, less royalty interest receipts, and less actual annual operating costs. Further, H.B. 4336 specifies that the yield capitalization model will be composed of a working interest model and a royalty interest model and that the summation of the working interest model and royalty interest model shall represent the fair market value of the property. 

The Bill also provides a safe harbor provision for marginal well costs, limitations on calculations by the Tax Commissioner, annualized gross receipts and operating expenses before calculation of the models, limitations on minimum well valuations, an effective date for all assessments made on or after July 1, 2022, and a sunset date of July 1, 2025. H.B. 4336 also requires the Tax Commissioner to propose legislative rules, including emergency rules, to implement the new law.

The Bill will now be forwarded to Governor Justice for his signature.

© Steptoe & Johnson PLLC. All Rights Reserved.National Law Review, Volume XII, Number 74
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About this Author

Kurt Dettinger, Steptoe Johnson Law Firm, Charleston, Corporate and Energy Law Attorney
Member

Kurt Dettinger is a businessman-turned-lawyer who cut his teeth in the business world as a corporate banker.  Mr. Dettinger's business background is integral to his ability to understand his corporate clients' business, negotiate commercial arrangements on their behalf, and propose practical outcomes that make business sense.  Mr. Dettinger focuses his practice in the areas of energy law, energy and financing transactions, and government relations.  In his legal career, he has worked primarily in the private sector, but has also dedicated a portion of his career to...

304-353-8152
Michael W. Barill Member Steptoe & Johnson PLLC
Member

Mike Barill focuses his practice in taxation, and trust and estate administration.  He has significant experience in estate planning, estate administration, fiduciary litigation, taxpayer representation before the Internal Revenue Service and U.S. Tax Court, corporate and partnership taxation, retirement planning, and merger structuring and reorganizations.  He is the leader of the firm's Tax Practice Group and Estate and Trust Team.

614-221-5100
David E. Chaney Associate Steptoe & Johnson PLLC
Associate

For as long as he can remember, David Chaney has sought out opportunities to help people. A natural leader and active community member, David participates in a variety of community activities. His drive to make a difference in his community also led him to pursue a career as a lawyer. David uses this drive to help clients in the energy and business industry understand the impact of legal proceedings they face during the course of their work.

304-933-8188
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