I recently received a bill for mineral taxes due to Reeves county. For 2020 - they were based on a valuation roughly 2.5 times what I made on them. For 2021 - they were based on a valuation roughly 1.5 times what I made on them. If the oil company is providing this info every year… then why isn’t the county charging accordingly? How do they justify inflating the value? Even the IRS only taxes me on actual money made.
These are property taxes based on the calculated market value of the producing minerals, and not income taxes on the net income. The value is based on the average oil and gas price during prior year and the production volumes and then applying an estimated decline of production over the economic lift of the well and discounted for time and your royalty DOI (decimal). It is supposed to be the value that a willing buyer and seller would agree to and, in that sense, similar to the property taxes on your home. This is a general description of the valuation process.
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Use the looking glass feature at the top of the page to search for a discussion on protesting Reeves County tax appraisals. There are several recent ones that will will give you lots of good detail.
Not trying to defend the tax people but the point you need to understand is those taxes are not based on the income you received last year from the well but on your share of its appraised market value. Those same rules apply to producing mineral interests anywhere in Texas not just Reeves Co.
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Thanks for the info . . . .
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