Montezuma County commissioners denied a request by the assessor’s office to stop sending out tax bills to the owners of certain severed mineral assets.
Subsurface minerals are real property that are taxed by the assessor along with the surface acreage.
Mineral ownership becomes “severed” when the surface land is sold to a new owner but the mineral property underneath is retained by the seller.
Problems arise when mineral ownership is split between family members over multiple generations through wills and inheritances. The division of assets results in minuscule mineral right ownership per person.
Assessor Scott Davis reported that the cost of researching and billing these small amounts of severed subsurface mineral property is expensive and does not generate enough revenue to cover costs.
“We’re talking ownership rights down to the 1/64th level,” or even smaller, he said. “We spend a lot of time researching ownership and send out a tax bill for that amount” only to lose money on it.
He said the total expense for researching and processing 3,676 severed mineral tax accounts totals $46,000, though they only bring in $14,500 in tax revenue.
“Severed minerals are so numerous we do not have the staff to track them,” Davis said. “The minerals that are producing is what is keeping us alive.”
Audience member Ellen Foster laid out a detailed case for continuing the taxes on severed minerals no matter how small.
“Maintaining up-to-date records of mineral interests protects the mineral owners by establishing their right to collect royalties,” Foster said.
She suggests the assessor’s office charge a processing fee schedule for calculating the tax data base for mineral-right owners.
“Mineral owners make money by leasing, and have the potential to make money from royalties,” Foster continued. “All mineral owners should pay to maintain the data base that establishes their rights.”
The commissioners were undecided on the fees, and were not convinced to discontinue issuing of tax bills for severed mineral owners.
Commissioner Larry Don Suckla pointed out that when mineral owners are delinquent with the taxes, they go to a tax sale process with the treasurer’s office.
At a tax sale, investors called lien holders pick up the tax bill, and after three years of paying are eligible for a treasurers deed that transfers ownership of the mineral assets over to them.
“I disagree with (dropping the tax),” Suckla said. “Tax sales give a property owner the opportunity to purchase mineral rights under their land.”
Treasurer Sherri Dyess said that when minerals go to a tax sale, the surface owner is contacted and given first right of refusal.
