Gazette photo by Chip Ellis
Well, Coal Tattoo is back up and running … and let’s start the week off by pointing to a fascinating op-ed commentary in this morning’s Gazette, in which former Gazette reporter Tom White and Ted Boettner, executive director of the West Virginia Center on Budget and Policy, report:
The state Tax Department’s Property Valuation Training and Procedures Commission has declined to act on a request by the Assessors Association to develop a plan to appraise and tax coal under lease by coal producers.
Citing information from Nick Casey, lawyer for the state Assessors Association, White and Boettner explain:
Appalachian coal often has two owners, the landholder and the coal producer or operator. The landholder has a real estate interest and can collect a royalty (on average about 6 percent of revenue from clean tons mined). Under the current system, the landholder pays taxes on coal reserves based upon a formula centered around that royalty interest. This process is called the Reserve Coal Valuation Model, and it was developed after lengthy litigation over reserve coal taxation in the 1990s. Active coal currently being mined also is valued based upon the royalty rate to the landowner under a different rule.
But Casey said the lease-holder, or coal producer of active coal, also has a personal property interest in coal the company is mining. This is called chattel real interest. The term refers to personal property associated with leased land. It is supposed to reflect the value associated with that property interest over a period of time.
Casey said that if the royalty rate for coal averages about 6 percent, then logically the state is failing to appraise, assess and tax on the remaining 94 percent of the revenue from production of that coal — the chattel real. He said that the current tax structure for producing oil and gas currently appraises and assesses taxes on both the royalty land-owner and the chattel real gas producer. Two property owners, two tax bills. But under the current system, where there are two owners of producing coal property, there is only one tax bill to the landowner.