Mineral rights owners entitled to severance tax refunds
Thousands of mineral rights owners in Colorado who receive royalties from leasing their rights to energy production companies are missing out on income from severance taxes. Mary Ellen Denomy, a Rifle CPA who specializes in oil and gas accounting, said of the 50,000 mineral rights owners in the state who receive royalties, about 40,000 haven’t received their rightful refunds from state severance taxes.”Colorado is one of the few states where royalty owners file their own severance tax returns,” said Denomy, who is on the board of the National Association of Royalty Owners. “With the credits that we are allowed for local ad valorem tax paid, in many cases, you can receive all of the severance tax withheld back as a refund.”The refund is not automatic, however. You must file for a refund.In Garfield County, oil and gas production companies send mineral rights owners to whom they pay royalties a statement of the severance taxes withheld.”It’s similar to (income tax) withholding,” Denomy said.Last year only 7,500 of the 50,000 royalty owners in Colorado received refunds from severance tax.”Most folks don’t know they’re supposed to file,” she said. Either they do not know about the tax refund or they don’t wish to pay a tax expert to prepare the form.Annual refunds can range between $100 and $1,000, depending on the amount of royalties received. At the least, the state is keeping about $4 million in tax revenue that should go to royalty owners, Denomy said.”Even if it’s only 20 bucks, there’s no reason not to get it. That’s a tank of gas in a small car,” Denomy said.Just as with income tax, taxpayers have until April 15 to file a severance tax refund form. Royalty owners can also file for up to three years’ worth of severance tax refunds.”The little guys have to get their’s too,” she said.Severance taxes are distributed to local governments in the form of energy impact grants where energy production takes place .Denomy said the National Association of Royalty Owners Rocky Mountain Chapter has severance tax packets with instructions available. To receive a packet, call 625-1675.
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