Uinta County treasurer explains problematic issues with new mineral tax legislation
EVANSTON — A bill passed by the Wyoming Legislature during the 2021 session is causing some confusion and consternation among county treasurers and entities dependent on county mill levies.
Enrolled Act 9, which originated as Senate File 60, deals with ad valorem taxation of mineral production in the state.
Though it overwhelmingly passed both legislative chambers (27 ayes in the 30-member Senate and 47 ayes in the 60-member House), there are elements of the law that are perhaps proving to be trickier and more difficult to implement than legislators envisioned.
The bill itself is likely confusing to anyone not well versed in the specifics of mineral production taxation in Wyoming.
Uinta County Treasurer Terry Brimhall explained how the process currently works and what will change as a result of the new law. Brimhall said there is currently a significant lag time of one to two years between when mineral production occurs and when companies pay taxes on that production.
For example, production that occurred in 2020 was reported to the state in early 2021. County assessors will receive and certify that information in summer of 2021 and tax bills will be sent out in September. Those bills would be due in two installments, with the first payment due in November 2021 and the second in May 2022.
The problem with the system as it has been is that companies may go out of business between the time production occurs and when the tax bills are finally due, causing difficulties for counties that may never receive payment.
Enrolled Act 9 is the result of an effort to change that significant lag time to a system in which production occurs one month and taxes are paid the following month, helping to ensure counties and organizations that receive mill levy monies actually receive those payments.
However, the issues with the legislation are coming into play because of the system devised to transition from the two annual payments on production a year or two prior, to the monthly payment approach.
Rather than force companies to pay both the 2020 and 2021 production year taxation in addition to monthly taxation on current production, companies will instead be given until 2035 to pay those taxes in full.
The new legislation calls for the first 2020 payment due in November of this year to be paid as it would have been previously.
However, the May 2022 payment and both payments on production in 2021 will be deferred and expected to be paid overtime, with 8% of the total owed for 2020 and 2021 due each year through 2035, with no interest accrual.
In order to help counties deal with any loss in revenue that occurs because of the deferment of those tax payments, the legislature created a loan fund from the Legislative Stabilization Reserve Account (LSRA or “Rainy Day Fund”) of $16,726,000.
counties are able to apply for no-interest loans to cover those losses and distribute the funds as taxation revenues would be distributed based on mill levies, paying the loans back as the deferred revenues are received.
School districts, also dependent on mill levies, would be “made whole” for any lost revenues through $26 million allocated from the school foundation program to fill in any gaps in the block grant education funding model.
Brimhall said there are a couple of problematic issues that she sees with the legislation, however.
First, the legislation does not specify what happens if a company goes out of business or into bankruptcy during the 12-year period provided for them to pay the 2020 and 2021 production year taxes.
If a county takes out a loan from the state to make up for those losses and the company goes out of business, it’s unknown if the county will still be required to pay back the funds they never received from the producer.
That creates the same sort of non-payment problem counties were dealing with that resulted in the legislation being crafted in the first place.
Second, Brimhall said the legislation specifically addresses counties and school districts and funds established to help fill in funding gaps.
However, it does not contain any references to special districts, such as park and recreation districts and BOCES districts, that also receive mill levy monies.
She explained that school foundation monies likely couldn’t be used by special districts that have school board trustees on their boards and questioned whether counties — who have no oversight or board involvement with special districts — were to include the losses to those districts in their loan requests and what would happen in the instance of non-payment by the producers.
Finally, Brimhall said the monthly payments will be based on production estimates the previous month and she is concerned about what happens if those estimates result in higher taxes being paid than would have been required based on actual numbers.
It is unclear whether monies will have to be returned by every recipient entity in a “true up” of estimates and actual values.
Brimhall said she believes the legislation was well intentioned and created in response to a legitimate problem; however, the uncertainties are causing headaches and concerns about budgets at a time when assessed valuation of mineral production in the county is already down about 50% from 2020 as compared to 2019.
State Sen. Wendy Schuler, who sits on the five-person revenue committee that sponsored the bill, said she is aware of the concerns voiced by county treasurers and added there are still many details the Wyoming Department of Revenue needs to work out.
She affirmed that the point of the legislation was to help ensure counties received the taxes owed by companies that may go out of business but acknowledged the transition period is the tricky part of the law.
In an email to the Herald, she indicated she had been speaking with her legislative colleagues about the bill and it is possible there may be some “tweaks” and revisions that would be helpful to the county in specific components in the next legislative session.