Northern Panhandle lawmakers fight against natural gas taxation changes
CHARLESTON — A bipartisan group of lawmakers from the Northern Panhandle and natural gas-producing regions stood strong against a bill Tuesday that would reduce tax revenues to their counties.
House Bill 2581, providing for the valuation of natural resources property and an alternate method of appeal of proposed valuation of natural resources property, passed the House of Delegates 66-34 Tuesday.
HB 2581 would change the valuation, assessment, review, and appellate rights of property owners regarding valuation, classification, and taxability of real estate and personal property taxation. It would provide revised methodology to value oil and natural gas properties by the State Tax Commissioner.
The bill also expands the jurisdiction of the Office of Tax Appeals to include property tax valuation, classification, and taxability. It provides that if a county assessor rejects a petition, the petitioner may appeal to the county Board of Equalization and Review or the Office of Tax Appeals, allowing for certain appeals from decisions of the Tax Commissioner and Board of Equalization and Review to the Office of Tax Appeals.
The committee substitute to HB 2581 would alter the method used by the State Tax Department for valuing active oil and gas wells for property tax purposes. The value would be determined by using a weighted average price from regional markets, less the actual expenses as reported by the taxpayer.
Del. Diana Graves, R-Kanawha, said the bill was meant to more fairly valuate taxes on natural gas property.
“By state statute, property has to be assessed at its true and actual value,” Graves said. “To achieve that requirement in the past, the State Tax Department has used a mass appraisal system to value certain types of property, and that was due to the impracticality of valuing that property by individual basis…For the first time in recent history, the State Tax Department has agreed to a compromise where they do value oil and gas wells based on the true and actual value.”
Concerns were raised Tuesday about the fiscal effect on the budgets of county commissions and county school boards in natural gas-producing counties. Del. Dave Pethel, D-Wetzel, said HB 2581 would have an enormous impact on Marshall, Wetzel, Tyler, Doddridge, Ritchie, Ohio, Brooke, and Harrison counties.
Citing data from the State Tax Department, Pethel said Tyler County stands to lose $1.9 million in property tax revenue, Doddridge and Marshall counties would lose $1 million, Wetzel County would lose $886,000, Ohio County would lose $765,000, Ritchie County would lose $860,000, Brooke County would lose $499,000, and Harrison County would lose $314,000.
“Let me say that — especially Wetzel, Tyler, Richie, and Doddridge — these are all very rural counties, and they don’t have an industrial tax base to make up these losses,” Pethel said. “Are we going to have these large companies and are they going to continue to pay the tax? Or is the school board and the county commission going to have to raise the levy rate and put that back on individual property owners?”
Pethel was joined by Del. David Kelly, R-Tyler, who warned lawmakers that one day a Legislature might try to take tax revenue from their districts.
“You may think this could never happen to your district,” Kelly said. “You may think that there’s no way someone could put their sights on you and say, we want your number one resource. It can happen…I hope you think long about your vote.”
Del. Lisa Zukoff, D-Marshall, said that with the passage of HB 2581 and a bill passed earlier Tuesday, House Bill 2493, Marshall County was taking a $3 million hit to county tax revenues. HB 2493 changes how assessments are made for coal mine properties.
Zukoff had introduced a bill, House Bill 2081, that would have required lessees of West Virginia real estate who make natural resources royalty payments for in-state property to any nonresident lessor, to withhold West Virginia personal income tax on natural resources royalty payments. That bill made it out of the House Energy and Manufacturing Committee on Feb. 17, but never was brought up by the House Finance Committee.
“We had a bill before us that didn’t make it to this group today that would have charged out-of-state landowners the taxes that West Virginia folks have to pay on their royalties,” Zukoff said. “All West Virginians have to pay those taxes, but that bill never made it here. I’ll let you decide why.”
Del. Mark Zatezalo, R-Hancock, dissented from his fellow Northern Panhandle delegates. Zatezalo said he agreed with the concerns about reduced tax revenue but said the current tax scheme for natural gas is unfair and creates roadblocks to the industry expanding in the state.
“If we don’t produce the resources, which are here in sufficient quantities, we’ll ship it out to whoever is going to use them,” Zatezalo said. “I think this bill is actually a more accurate way to calculate the tax…It is unfair to ask people to be taxed for a cost that’s way down the line from where the gas was produced. We’re attempting to fix that problem here with this bill.”
The bill now heads to the state Senate.
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