Oil & gas outreach & training - PowerPoint Presentation

Oil & gas outreach & training New Mexico Taxation & Revenue Department Property Tax Division State Assessed Property Bureau

General information WHEN DO REPORTS NEED TO BE FILED? On or before the last day of February of the tax year. Extension Request. On or before March 30th. Extension requests: Must be postmarked on or before the last day of February of the tax year, to prevent penalty. Received after the last day of February, will not be granted/approved. Must be completed on the CAB-EXT form and may be mailed, faxed or emailed.

General information Mail: NM Taxation & Revenue Department Property Tax Division State Assessed Property Bureau P.O. Box 25126 Santa Fe, NM 87504-5126 Email: elaisa.romero@state.nm.us Fax: (505) 827-0438

Instructions & Forms

General instructions Property Valuation Day All property subject to valuation for property taxation purposes shall be valued as of January 1 st of each tax year. Persons Preparing the Report Owner Lessee of the property Authorized Agents (Letter of Authorization is required)

General instructions Reporting Requirements Prepared from books & records of the property owner. Every report is subject to verification by audit & appraisal. Complete & return the original report. (Retain copy for owners records) Must be filed with the Property Tax Division, State Assessed Property Bureau, in Santa Fe, New Mexico. On or before last day of February of the tax year OR file an extension. A copy of the Director’s approved extension must be returned with the report. When report is mailed, the postmark shall be the date used for purposes of computing penalty. If the last day for filing falls on a Saturday, Sunday or a legal state or national holiday, filing is timely if performed on the next workday. If mail is received without a postmark, it will be considered to have been postmarked five (5) days before receipt.

General instructions Records Maintenance Every reporting entity shall maintain maps, books and accounts of all property subject to assessment in a manner that will permit accurate valuation and location as of January 1 st of the tax year. Reporting requirements are per New Mexico statutes and regulations. All report must include the following specific breakdowns: Listing of all property (real & personal) The exact location of such property by: County School District Municipality Special Districts Contact State Assessed Property Bureau for assistance on School Districts.

General instructions Regulatory, Stockholder’s and Other Reports All companies must provide a copy of the Annual Report that is submitted to their respective federal and state regulatory bodies. All companies that provide an Annual Report to their stockholders must submit their current report. If the company is a subsidiary you must submit the parent’s stockholder report. If none of this applies, then you must submit Audited Financial Statements, i.e., Balance Sheet & Income Statement.

General instructions Penalties Failure to file a required (complete) report or requested supporting data on a timely bases, is liable for a civil penalty Civil penalty is an amount equal to five percent (5%) of the property taxes ultimately determined to be due for the tax year or years for which the required report or data was not filed. Failure to file a required (complete) report or requested data with the intent to evade any tax, is liable for a civil penalty. Civil penalty is an amount equal to twenty-five percent (25%) of the taxes ultimately determined to be due for the tax year or years for which the required report or data was not filed.

General instructions Penalties Any person who intentionally refuses to file a required (complete) report or who knowingly makes a false statement in a required (complete) report is guilty of a misdemeanor and shall be punished by the imposition of a fine of not more than one thousand dollars ($1,000) Civil penalties authorized shall be imposed and collected at the time and in the manner that the tax is imposed and collected. In order to assist in the imposition and collection of the penalties the person having responsibility for determining the value of the property shall make an entry in the valuation records indicating the liability for any penalties due under Section 7-38-8, Subsections F through K, NMSA 1978.

General instructions REPORTING FORMS General & special industry forms provided are to be completed in their entirety. Use the proper form for each type of property, as defined in the general & special industry form instructions. Do not leave any lines blank. (Use “none” or “not applicable”) Computer generated printouts are accepted as long as they are as follows: Must be clearly labeled as to the information provided Cross-referenced to the reporting form that it replaced. This applies to all general & special industry reporting forms except for CAB-02 Form, New Mexico Property Summary and CAB-03 Form, County Property Summary. This forms cannot be substituted, unless they are duplicated EXACTLY .

General instructions REPORTING FORMS CAB FORMS CAB-01 Form, Application for Registration. CAB-01 (A) Form, Taxpayer Information. CAB-02 Form, New Mexico Property Summary. CAB-03 Form, County Property Summary. CAB-04 Form, Real Estate, Buildings and Improvement. All land being reported on this form must include a complete legal description. (Real Estate Deeds)

General instructions REPORTING FORMS CAB FORMS CAB-05 Form, Personal Property Report. CAB-06 Form, Construction Work in Progress. CAB-07 Form, Agriculture Application. CAB-08 Form, Leased or Rented Real and Personal Property.

7-36-27. Special Method of valuation; Pipelines, tanks, sales meters and plants used in the processing, gathering, transmission, storage, measurement or distribution of oil, natural gas, carbon dioxide or liquid hydrocarbons.

OIL & GAS (Pipeline) instructions ADDITIONAL REPORTING FORMS CAB FORMS CAB-P1 Form, Gas Meter Valuation Schedule. CAB-P2 Form, Pipeline Valuation Schedule. Regulated Unregulated CAB-P3 Form, Pipeline and Gas Utility Plant Valuation Schedule.

OIL & GAS (Pipeline) instructions DEFINITIONS Construction Work in Progress. Depreciation. Direct Customer Distribution Pipeline. Economic Obsolescence. Functional Obsolescence. Other Justifiable Factors. Pipeline. Plant. Taxable Value. Requests for Functional/Economic Obsolescence Must be made at the time the annual report is filed. Must be based on a situation present at least six (6) months prior to January 1 st of the tax year and expected to continue indefinitely. Must be supported with sufficient documentation to demonstrate how the factor was arrived and how it applies to the property for which the obsolescence is claimed. Must be based on objective evidence. 20% Floor(Residual) 7-36-27. Subsection D (3) Property valued under this subsection shall not be less than twenty percent of the tangible property cost of such item of property. Property Value divided by 3 = Taxable Value

OIL & GAS (Pipeline) Locally Assessed Pipeline Properties 7-36-27. Regulations 3.6.5.34 (B) Oil & Gas Pipelines – Non-Pipeline Property Pipelines, tanks, sales meters and plants which are not used in the conduct of the pipeline business and which are not necessary to the proper functioning of the pipeline business, are not subject to valuation by the division and are valued by the county assessor of the county in which the property is located.

Well drilling rig operator 7-36-2. Allocation of responsibility for valuation and determining classification of property for property taxation purposes; county assessor and department. C. The department is responsible and has the authority for valuation of all property subject to valuation for property taxation purposes and used in the conduct of the following businesses: All resident and nonresident persons customarily engaged in construction that involves the use during a tax year of the machinery, equipment and other personal property in more than one county. For the purposes of this paragraph, “Construction” means drilling wells of any type, including seismograph shot holes or core drilling.

Well drilling rig operator 7-36-33. Special Method of Valuation; certain industrial and commercial personal property.

Well drilling rig operator instructions ALL REAL ESTATE & IMPROVEMENTS ARE TO BE REPORTED TO THE COUNTY ASSESSOR OF THE COUNTY WHERE THE PROPERTY IS LOCATED. All rotary drilling rigs not located in the state on January 1 st , but brought into the state & located there for more than twenty (20) days subsequent to January 1 st shall be valued for property taxation purposes. 7-38-7.1 (A)(B) All personal property owned & used in the drilling activity must be reported on the CAB-05

Well drilling rig operator instructions ADDITIONAL REPORTING FORMS CAB-D1 Form, Well Drilling Rig Property Valuation Schedule. CAB-D2 Form, Drilling Equipment Allocation/Distribution * NOTE * A copy of the daily work order log for January 1 st or the first day a rotary drilling rig is located in New Mexico must accompany the annual rendition.

Well drilling rig operator instructions CAB-D1 FORM Column 1 School District Column 2 CAB USE ONLY Column 5 Depth Capacity Column 4 Rig Info. Column 3 Location Column 6 Property Value Using the schedule in Instruction G-3 Property values determined are posted to the CAB-D2 Form 7-36-33. Regulations 3.6.5.40 (D)(3)

Well drilling rig operator instructions CAB-D1 FORM DEFINITIONS Depth Capacity Rotary Drilling Rig Unit Rig Class

Well drilling rig operator instructions CAB-D2 FORM - NMAC 7-38-7.1 (D) Column 7 Multiply Column 6 by the percentage calculated on Column 5 Column 1 County Column 2 School District Column 3 Actual days in county / state Column 4 Total days in Calendar Year (365) Column 5 Percent of days (Allocation factor) Column 3 / Column 5 Column 6 Property Value from CAB-05 or CAB-D1

Well drilling rig operator instructions Carry the total Allocated Property Value by county and school district to the CAB-03’s

Summary

Bucket 1Production Equipment Ad Valorem Tax - § 7-34-1 et seq . “Equipment” is wells and non mobile equipment used at a production unit in connection with severance, treatment or storage of production unit products. § 7-34-2 (G). If the property meets this definition, it is not valued for the property taxation purposes AT ALL . §§ 7-36-7 (B) (2), 7-34-5. Mill rates established by DFA apply to the value of the product severed as proxy for equipment valuation. Bucket 2 State (Centrally) Assessed Pipeline Property - §§ 7-36-2, 7-36-27 TRD has responsibility for valuing all property that is subject to valuation and that is “used in a pipeline business.” Pipeline is all pipe and appurtenances used in a gathering, transmission, or distribution business, except in-plant pipeline, direct customer distribution line, and small sales meters. § 7-36-27 (B)(8). Valuation method: Small sales meters – per schedule set by TRD, which is based on average acquisition cost less average accumulated depreciation. Pipeline – acquisition cost less depreciation less other justifiable factors with a valuation floor of not < 20% of acquisition cost Construction-work-in-progress (the total balances of work orders for construction/installation on the last day of the previous year) – 50% of the amount expended and entered on the accounting records of taxpayer as of 12/31 of the previous year. Bucket 3 Locally Assessed Pipeline Property – NMAC 3.6.5.34(B) This bucket contains pipeline, tanks, sales meters and plants that are not (a) used in the conduct of pipeline business, (b) used in a public utility, or (c) necessary to the proper functioning of either. This property is locally valued by the county assessors. Property in this bucket is valued under the same statutory methodology as Bucket 2, state (centrally) assessed pipeline property. Bucket 4 Other Locally & State (Centrally) Assessed Commercial/Industrial Property Used by the Oil & Gas Businesses - § 7-36-33 This bucket does not include: (a) “equipment” that falls into Bucket 1; or (b) property valued under 7-36-27 (Buckets 2/3). This property can be valued locally by the county assessors & by the State ( C entrally) Assessed Property Bureau. General Valuation Method: acquisition cost less depreciation and other justifiable factors with a floor of not < 12.5 % of acquisition cost. Construction-work-in-progress: 50% of the amount expended as of 12/31 of the previous year. Statute authorizes TRD to establish schedules of value for like types of property and requires TRD to adopt schedules of value for drilling rigs and large off-highway construction equipment. All Multi-County Construction/Drilling and Out of State Construction/Drilling are valued by State (Centrally) Assessed Property Bureau. NMAC § 3.6.5.40(D) values rigs by depth capacity.

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