Tax Information | Print |
- Will I have to report the revenue I receive for federal and/or state income tax purposes?
- What is an "ad valorem tax"?
- What is a "severance tax"?
- What is a "conservation tax"?
- Why am I being asked to provide a W-9?
- Why is backup withholding deducted from my revenue check?
- What is a DR21-W tax form?
All royalty interest owners who receive at least $10 annually and working interest owners that receive at least $600 annually will receive an IRS Form 1099-MISC, which is mailed to the owner by January 31st of the following year. The income reported to the IRS is gross income prior to any deductions or taxes. If applicable, the 1099 will also list any U.S. withholding amounts deducted from your revenue checks. Payment types typically include the following:
- Rental payments
- Lease Bonus Payments
- Delay Rental Payment
- Right-of-way payment (partially taxable; based upon landowner's tax basis in property subject to the right-of-way)
- Damages (fully or partially taxable; based upon nature of the damages and tax basis of landowner):
To request a replacement for a lost 1099 or for questions regarding your 1099, please send an email including your name and owner number to 1099 Questions. You may also call the 1099 hotline number at 304-808-6599.
An Ad valorem tax is more commonly known as a “property tax”. It is typically a county tax based on the appraised value of the oil and gas in the well and related equipment. The values are generally based on the level of production occurring in the previous calendar year or based on the estimated fair market value of well equipment or economic interest in the property.
Most states levy severance tax when oil and gas is produced in the state. These taxes are computed on the basis of volumes and/or values of the oil, condensate, gas, or NGL produced and sold or consumed. This tax is generally levied at the time and place that the minerals are "severed" from the producing reservoir.
This is a tax levied by states to provide funds for the state government's energy conservation, oversight, and research programs.
Federal law requires that individuals and partnerships provide a valid Taxpayer Identification Number (TIN) for each owner. For individuals, a TIN is their Social Security Number (SSN). For companies, trusts, limited liability company (LLC), etc., the Federal Employer Identification Number (FEIN) is nine digits.
A valid TIN or SSN must be provided to PDC for reporting and identification purposes. If the appropriate TIN is not received, PDC is required to withhold a percentage of your payment and remit it to the Internal Revenue Service Department. The IRS requires withholding of 28% of all revenues (30% for foreign residents) until the appropriate information is provided.
In the state of Colorado, severance taxes may be withheld and remitted to the State on owner's behalf. If applicable, an owner will receive a DR21-W tax form before March 1 of the following year showing various revenue and any severance tax withheld during the previous calendar year.