Suspense Funds And Payments
Suspended Funds And Payments ~ Outsourced Oil And Gas Accounting Services
To schedule a free consultation, please call (303) 463-8799 or fill out our contact form.
As part of our oil and gas division order services, we distribute revenue to royalty owners, which can be a far more complicated process than it might seem.
On the surface it probably seems straightforward…send revenue payments to owners. Oftentimes, however, that proves difficult to do, and payments to owners can be suspended for brief periods of time or even for years.
At ExTex, we have the experience and expertise to resolve the issues that lead to suspension of funds and to properly comply with unclaimed property laws, which vary from state to state.
There are dozens of reasons revenue payments get suspended. The issues run the gamut from missing or inaccurate information to ownership, title, and legal issues, and we tackle them all!
Below are some of the most common problems that lead to suspension of payments.
Missing Or Invalid Owner Information
Owner information issues that can cause suspended payments include:
- returned mail
- no current mailing address on file
- checks that were never cashed (also known as “stale” or “outdated” checks)
- returned electronic payments (ACH was rejected or the bank account was closed)
Missing Or Invalid Taxpayer Identification Issues
Tax information issues that can cause suspended payments include:
- missing W-9 form
- missing or invalid Tax Identification Number (TIN)
- missing W-8BEN for foreign owners
Title Or Ownership Issues
Title and ownership issues that can cause suspended payments include:
- deceased owner and/or probate
- multiple heirs or conflicting claims
- dissolution of a trust or a corporation
- unclear title or discrepancies on the deed
- pending title transfer
Legal Or Regulatory Issues
Legal or regulatory issues that can cause suspended payments include:
- garnishments (e.g. for child support or outstanding debts)
- liens (e.g. for a tax levy)
- bankruptcy (Chapter 7 or Chapter 11)
- joint interest dispute (between working interest partners)
- regulatory requirements
Minimum Threshold Balances
Oil and gas royalty payments can also be temporarily suspended when the amount due to an owner is small. Many oil and gas leases allow operators to hold small balances until a minimum payment is reached. Typically, if royalty owners accrue $25 or more in a given month, they are sent a payment. For accrued funds that are less than $25, owners will receive a check for those funds annually in October, or once their account reaches $25.
Division Order Not Set Up
Payments can also be suspended if a division of interest (the document that outlines how royalties from oil and gas are divided up) has not been set up.
In many states, oil and gas operators are not required to pay royalties until a signed division order is received, so funds are lawfully held in suspension until ownership for a specific well or property is verified. Division order issues tend to crop up during new well setups, property acquisitions, and reworks of wells.
ExTex’s Expertise Pays Off
Thanks to almost 30 years experience in division orders and back office accounting for oil and gas companies, we are able to keep suspended payments at a minimum and clean up old suspension issues when we start working with new clients. In the past, thanks to our diligence and experience, we have been able to release payments to royalty owners that had been held up for years.
In the event that we cannot track down an owner within the required amount of time, we follow all unclaimed property laws, which are different in every state.
For more information about suspense funds and payments for oil and gas royalties, or to schedule a free consultation, call (303) 463-8799 or fill out our contact form.
ExTex Division Order Services, LLC is located in the Denver metro area (in Golden, Colorado), and we provide back office outsourcing services for oil and gas companies across the U.S. and Canada.