State and Local Tax Alert: Changes to Taxation of Oil and Gas Reserves

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The Ohio Tax Commissioner recently issued a memorandum to county auditors regarding significant changes to the taxation of oil and gas reserves starting in tax year 2016.  These significant changes include:

On September 1, 2016, the final iteration of the ODNR file will be released.  If producers find discrepancies in taxable volume amounts, they may file DTE form 6A with the applicable county auditor or auditors no later than October 3, 2016.  If DTE form 6A is filed, the auditor shall use the amended values for 2016 if the taxable value has not decreased more than ten percent from the ODNR information.  If the difference is more than ten percent, the auditor is directed to bill based upon the ODNR data and the taxpayer will need to file a formal complaint with the board of revision and present evidence to establish the reason for the difference.

Going forward, the changes discussed above will significantly change how the ad valorem tax is collected.  As such, it will be very important to accurately report production volume to ODNR, accurately track shrinkage, and confirm that ODNR is accurately attributing volume to each active production site.  In the event that there are discrepancies with the information, it will be essential for producers to file complaints regarding the valuation, and it will be the producers’ burden to prove that the data reported to ODNR and the resulting calculation is incorrect. 

Vorys has extensive experience in state and local tax and the oil and gas industry.  Contact your Vorys attorney with questions or concerns about the ad valorem tax and how it impacts your business.