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Permalink Reply by John on February 7, 2015 at 10:40am

Am currently dealing with this. Chesapeake told us we needed "proof" that the taxes had been paid in full going back to when lease started. We called the carroll county treasurer and they are sending Ches a letter that will serve as proof that our taxes have been paid every year. We have been told by Ches once they receive that info we will be sent check for difference in taxes as clearly stated in lease.

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Permalink Reply by John on February 7, 2015 at 10:44am

And just to clarify the sure lease does not state Ches will pay the taxes. It states they will pay any INCREASE in taxes. Just for reference our taxes did not change the first year of lease, went up about 60 % the second year, and an additional 5 % or so the third year. So Ches will be sending us those differences going back to year lease was signed and NOT the entire amounts payed each year

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Permalink Reply by Cheryl on February 7, 2015 at 12:43pm

Our lease says: "Lessee shall pay all Ad Valorem taxes or assessment of Lease Products or Lease Product reserves made by any local state or federal entity or governmental unit attributable to, or resulting from the assessment of Lease Products from the Leased Premises regardless of the percentage of royalty paid to Lessor.  Lessee shall, in addition, pay any and all severance taxes or other excise taxes arising out of or relating to this Lease and/or the Lease Products." I'm pretty certain that the initial SURE lease did not include this wording, but this lease is very clear that CHK is responsible for payment of the Ad Valorem tax.  I'm just trying to decide on the best/simplest approach to getting the taxes paid.

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Permalink Reply by Dexter Green on February 8, 2015 at 7:40am

CHK can't pay the tax.  You have to pay it and then get them to reimburse you.  You also need to make sure that you don't get a 1099 for the reimbursement, because you don't want to pay taxes on it.

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Permalink Reply by Cheryl on February 8, 2015 at 5:34pm

Why can't CHK pay the tax?

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Permalink Reply by Dexter Green on February 9, 2015 at 5:28am

I should have said "won't" instead of "can't".  Technically anyone can pay your taxes for you.  Apologies as I misspoke.  

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Permalink Reply by INVICTUS on February 9, 2015 at 7:11am

Tax duplicate is in name of the property owner. That address on that bill is where the bill is sent, unless contractually stated otherwise.

Example of otherwise: RE Taxes are escrowed by lender, as in mortgage payments.

But anyone can pay on your tax bill.

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Permalink Reply by Cheryl on February 9, 2015 at 12:05pm

Exactly.  I just need to get CHK to add my bill to their list of tax liabilities.  I don't relish the thought of having to seek reimbursement year after year.

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Permalink Reply by John on February 8, 2015 at 4:45pm

I just looked at my lease and you are correct. Mine says what you stated for ad Valerom, then says what I originally said for property tax increases. Excuse my ignorance, but what is the difference between property tax and ad valorem taxes?

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Permalink Reply by Dexter Green on February 8, 2015 at 4:44pm

Latin for "at the value".  It's property tax.

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Permalink Reply by Frank Walker on February 9, 2015 at 10:34am

Hi Jesse

I'm from PA, too.  We have no ad valorem tax right now. But stay tuned.  It's what Wolf wants, and unless your lease protects you (and if Wolf gets his way) you will feel his bite soon enough.

Wolf's severance tax is an ad valorem tax because the amount of tax is dependent on the value of natural gas produced.

Most PA landowners have no protection in their leases against a "Wolf bite" ad valorem tax.  And Wolf knows it!  Say it with me, Jesse:

"Redistribution of wealth"

This exact sort of tax is a specialty of the "Wolf Pack" PA Democrats!

BTW, an ad valorem tax is not a property tax.

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Permalink Reply by Frank Walker on February 9, 2015 at 5:18pm

Hi again Jesse

I have no idea as to the cost.  I can guess, and using your terminology I would guess the hit will lie between your two alternatives, to wit:  more than a nuisance, but not large enough to be truly serious.  Much will depend upon your Lessee and the precise language of the law.

"Ad valorem tax" is a broad category of taxation and can include many possible kinds of taxes based on the value of (whatever).  "Ad valorem" is a rather general term and can connote different things in different states.  A severance tax is just one specific variety of a great many different kinds of ad valorem taxes.  By contrast, Jesse, our "impact fee" is NOT an ad valorem tax.  If you study how the impact fee is imposed (i.e., its basis), you will see why.

My own lease has a provision stating I promise to pay my share of any ad valorem taxes which might be imposed.  How that got by me I've no clue;  maybe temporary insanity.   Whenever I see that provision I become so disgusted with myself I could . . . . . . 

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