Tax Levies
Tax Levies For Unpaid Taxes In The Oil And Gas Industry
To schedule a free consultation, please call (303) 463-8799 or fill out our contact form.
When a tax levy is issued in the oil and gas industry, it can delay revenue to owners, complicate title records, and create compliance risks if it is not handled properly.
What Is A Tax Levy In The Oil And Gas Industry
In the oil and gas industry, a tax levy is a legal claim that is placed by the IRS or a state revenue agency against a company’s assets or revenue, due to unpaid taxes.
A tax levy allows the taxing authority to seize funds, oil and gas production revenues, and/or property to satisfy outstanding tax obligations.
What Can A Tax Levy Affect
Tax levies can impact:
- working interests
- royalty interests
- production revenue
- division order payments
- equipment, leases, and other assets
Who Is Impacted By A Tax Levy
Tax levies can have an impact on oil and gas operators, oil and gas purchasers, and owners.
Oil and gas operators: An oil and gas operator can have a tax levy placed against them for their own unpaid taxes. However, a tax levy against the operator does not automatically give the IRS or the state revenue department the rights to revenue that belongs to other owners (working interest owners and royalty owners).
Oil and gas purchasers: Oil and gas purchasers (first purchasers, marketers, pipeline companies, etc.) are often served with tax levy notices, because they are holding the money. When a purchaser receives a levy, they are legally required to withhold payments to the named taxpayer and remit specified amounts to the tax authority, instead of the owner. In short, the tax levy attaches to the revenue stream, and oil and gas purchasers are responsible for enforcing it.
Owners: Working interest owners and royalty owners can have tax levies placed against their individual interests. This impacts their share of production revenue and their division order payments. When a tax levy is placed on an owner, the oil and gas operator or purchaser is required to redirect that owner’s payment to the taxing authority that issued the levy. In this case, the tax levy is owner-specific and follows the ownership interest, not the well as a whole.
Because ownership is fractional and layered, a single well could have dozens or hundreds of owners, and the owners could have different tax statuses. This means that oil and gas operators and purchasers must carefully track which payments are subject to tax levies in order to avoid title and accounting disputes, overpayments to owners, underpayments to tax authorities
ExTex Services
If tax levies sound complicated and burdensome, it is because they are!
Fortunately, at ExTex, we’ve got you covered! If you want to be sure that tax levies (and everything else related to division orders) are handled properly, we can be the outsourced, back-office solution that you need.
Founded in 1998, we are SOC compliant, and we work with oil and gas purchasers and operators of all sizes.
For more information about tax levies, or to schedule a free consultation, call (303) 463-8799 or fill out our contact form.
Please note: In addition to tax levies, we also handle tax warrants for unpaid county taxes.
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.
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“ExTex’s attention to detail makes challenging projects seamless.”
Mark B, VP of Finance, Texas
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