Taxing mineral rights separated from the surface land

Guest Commentary by Carroll County Auditor E. Leroy VanHorne

Here comes the taxman again.

Every time there is a mention regarding the county auditor we all think, Oh, now what is he going to tax and why?

Well, the auditor is going to be taxing those gas, oil and coal rights that have been separated from the land.

Should a person sign a lease agreement for any of the minerals under his property, he has not really sold anything except the right for someone to explore for those minerals. He has not sold anything tangible. We are all assured that there is gas, oil and coal under the property in Carroll County, and we are told that there is a lot of it. If and when those minerals are removed, there will a severance tax charged by the State of Ohio and the mineral owner will be charged a tax on the income derived by the royalties’ paid on those minerals.

If by chance the property owner separates the rights to the minerals, separate from the land and retains the minerals right, then we are talking about a whole different story. When a property owner does either of these things, he has created a separate mineral interest and the new owner will be required to pay a real estate tax on those minerals, the value of which is based on the majority of the sale prices. This is not a new tax. It has been in law in Ohio for many years.

None of us, as taxpayers, like paying more taxes than we already do. But the one thing that is most upsetting is when we find that there are those that should but are not paying their share of the taxes. For many years mineral rights have been reserved when the surface land has been sold. Just a couple of years ago the value of those mineral rights, at best, were worth no more than a few dollars and the tax minimal.

With the mineral rights now selling for as much as $5,000 an acre, the owners are now wanting to make their interest in those minerals known and recorded. Many of those have not paid a penny of tax for years. Well, that is going to change.

If you own mineral rights that are separated from surface property, you may be receiving a real estate tax bill that you have never received before. A bill will be generated for those rights and mailed within the next year or two.

What does this mean for those who own the land and the minerals rights? Absolutely nothing. There will be no increase in value and no increase in taxes if the land and minerals are not separated. However, when those that have separated mineral rights get taxed, those owning the land and paying taxes now will begin to see a decrease in their taxes. Why? Because all voted levies, when first enacted, are locked in at the amount of revenue generated that first year. As long as the original levy is not replaced it will continue to generate that same amount, regardless how many years it is in effect. When those that have separated mineral rights begin paying their share of the taxes, they will be paying a portion of that tax and the rest will pay less.

This process will take time. However, those parcels where the minerals have been separated will be addressed as we discover the legal owners. Those on which the tax is not paid, will be classified as delinquent and eventually be advertised for foreclosure and sold at auction or tax sale.