Category: Compliance & Regulations

Ad valorem taxes are a type of tax that is levied on the value of a product or property. This tax is calculated as a percentage of the assessed value of the item being taxed. Ad valorem taxes are commonly used to raise revenue for local governments and are typically based on the value of real estate, personal property, or other assets.

One area where ad valorem taxes can have a significant impact is in the mineral industry. Minerals are often subject to ad valorem taxes, which can affect both the mineral owners and the companies that extract these resources from the ground.

For mineral owners, ad valorem taxes can have both positive and negative impacts. On the one hand, these taxes can provide a source of revenue for local governments, which can help fund essential services such as schools, hospitals, and infrastructure. This can be especially beneficial for mineral owners who live in areas where mineral extraction is a major source of economic activity.

However, ad valorem taxes can also be a significant expense for mineral owners. In some cases, these taxes can account for a significant portion of the value of the minerals being extracted. This can make it more difficult for mineral owners to profit from their resources, particularly if the price of the minerals is low or if extraction costs are high.

For companies that extract minerals, ad valorem taxes can also have significant implications. These taxes can increase the cost of mineral extraction, which can affect the profitability of the company. This can be especially true in areas where ad valorem taxes are high or where the value of the minerals being extracted is relatively low.

In some cases, companies may choose to pass on the cost of ad valorem taxes to mineral owners by reducing the price paid for the minerals. This can further impact the profitability of mineral owners, particularly if they are already facing high extraction costs or low mineral prices.

It is important for mineral owners and companies alike to understand the impact that these taxes can have on their operations and to plan accordingly.

Valor is uniquely positioned to assist mineral owners in managing and understanding the intricacies of ad valorem taxes, which are levied on mineral properties based on their assessed value. Our team includes seasoned professionals with years of experience in navigating these nuanced taxes, ensuring that our clients’ financial obligations are met accurately and efficiently. By partnering with Valor, mineral owners can benefit from our expert handling of tax assessments, filings, and disputes, thereby avoiding common pitfalls such as overpayment or non-compliance. Our proactive approach not only safeguards owners against potential legal issues but also optimizes their tax positions to enhance the profitability of their investments. Let Valor take the complexity out of ad valorem taxes so you can enjoy the full benefits of your mineral rights without the burden of tax management.

Contact Valor Today

Contact us today if you need support managing your minerals.

The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

When it comes to mineral estate planning, many mineral rights owners don’t realize how easy it is to lose these rights. Assets do not always remain static once the initial transfer has occurred. In fact, unless their mineral rights are in states such as Texas, Oklahoma, or New Mexico, inheritors will likely need to take action to keep their legal rights to mineral assets valid.

How Can You Lose Your Mineral Rights?

The tricky part is the laws around mineral rights vary from state to state. Your rights will be different depending on where your mineral rights are located, as will the timeline by which your rights might revert to the surface owner. Many rights are lost when owners lose track of their filing dates or fail to update or refile an affidavit to maintain them.

Take North Dakota, for example. In order to remain the owner of severed mineral rights in this state, you need to file an affidavit every 10 years. Otherwise, your rights revert back to the surface owner. In the 1999 case of Spring Creek Ranch vs. Svenberg, Spring Creek sought the addresses of mineral rights owners. All they found was a deed from 1950 without a street address, but this was sufficient for “reasonable inquiry,” and the mineral rights reverted to them. As long as effort is made to discover the owners of rights and the rights remain dormant, then ownership can be transferred.

Another way you can lose your mineral rights is by failing to pay state ad valorem property taxes on them. Just like any other legal asset, mineral rights must be properly paid to the county tax office. If you don’t pay taxes on your mineral rights, you risk losing them.

Some mineral rights have been lost through poor management. Oversight of a filing or expiration date can cause havoc for inheritors and their assets. Not being proactive is also a risk — owning property in a popular area that doesn’t get leased due to poor management can be just as unfortunate for inheritors.

Still, some people just don’t care about their assets as much as others. This can be especially true of mineral rights. If an owner feels like their assets will never be tapped into or yield a product, then they might want to avoid paying taxes and the hassle of filing the stipulation process, and will voluntarily let their rights lapse.

What Happens If You Lose Your Mineral Rights?

It’s important to have some degree of urgency over keeping the rights to your mineral assets, but you don’t need to let fear or anxiety take hold. By arming yourself with knowledge, educating yourself, and preparing for the realities of mineral ownership, you can avoid many problems.

First, it’s crucial to know the different ways to lose or forego mineral rights. Check what the rules are in your state. Some states (like Louisiana) have “prescription assets” and others (like North Dakota) operate under a dormant mineral statute, which states that rights may be lost if owners are not utilizing their minerals.

Unfortunately, the process of getting rights back can be difficult, if not impossible. Once lost, mineral rights revert back to the surface owner, and you will not get them back unless you purchase them again or they are conveyed to you. That’s why ensuring your filing is up to date and that you know exactly what to do to maintain mineral rights in your state is so vital.

What Is the Best Way to Go About Protecting Your Mineral Rights?

Mineral rights don’t just stick around. Like any asset, they need maintenance. Luckily, if you have the right help and support, maintaining your rights isn’t too much of a chore.

1. Keep rights current by filing.

In most states, you will renew your mineral rights by filing an affidavit (similar to filing a deed). It should be drafted, executed (by signing and notarizing), and then filed in the applicable county. Valor can help you do this — we go find filing requirements, format pages according to the state’s individual rules, and so on so that you don’t have to.

2. Keep rights through a claim of dormancy.

If the surface in question is dormant, and you haven’t leased it to oil and gas companies, you can still maintain your rights to mineral assets if you file a statement of claim or dormant mineral deed to state that the surface is knowingly dormant. Timing for these filings will, again, vary from state to state.

3. Use technology to keep track of assets.

We use our proprietary platform mineral.tech® and its evolving built-in features to protect mineral rights from expiring. After you log rights onto the platform, it’ll alert both our team and you as the rights owner when they’re nearing their asset expiration date. This allows us to effectively manage, plan, file, and execute accordingly.

4. Partner with a company that’s got your back.

Valor is an expert in this industry, and we can keep you up to date with any state-specific changes or actions you need to complete to keep your mineral rights. Part of our job is to prevent mineral rights from expiring and transferring back to the original landowners. So, with us on your team, you can relax knowing that we have safeguards in place to mitigate this.

At Valor, we know the value and importance of assets. We never want to see a prospective or existing client lose their mineral rights. We have a deep interest in setting up inheritors to avoid challenges. Not every mineral management company will add this value; many will not agree to manage non-producing assets. But we see this as part of caring for clients’ overall interests.

While property tax statements may feel mundane and tedious, it is imperative that you do not overlook or ignore them.

While most property tax statements are correct and require no revisions, many can include discrepancies that can cost you money. At Valor, our team is committed to reviewing your property tax statements to ensure they are accurate. We do not want to see asset owners being taxed on land they don’t own or paying for a mistake made by a third party.

Basic information and key dates regarding property tax statements:

1. When are property tax statements mailed out?

Usually the first week of October.

Note:  Failure to receive a property tax statement does not waive penalties and interest. Therefore, it is important that you have records of all your property tax statements. 

2. What do I do if I don’t receive my property tax statement?

Visit your local county tax website (where your property resides) to search and access your statement. If you have Valor Mail Services set up, we will complete this process for you. 

3. What is the last day to pay my property taxes without penalties?

January 31st.

Need assistance with property taxes? Let us help! Contact us today and let Valor be your extra set of eyes.

The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.