© Gray Reed & McGraw, P.C. Jonathan Hyman & David Leonard Gray Reed – Houston Mark Andrews, ASA President, K.E. Andrews – Rowlett Pay Your Fair Share (And No More) Of Property Taxes
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© Gray Reed & McGraw, P.C.
Jonathan Hyman & David LeonardGray Reed – HoustonMark Andrews, ASA
President, K.E. Andrews – Rowlett
Pay Your Fair Share (And No More) Of Property Taxes
© Gray Reed & McGraw, P.C.
Importance of the Property Tax Function
“Property taxes along with utility costs and salaries are our top three expenditures and if we are going to move the needle to any degree we have to look there.”
-Global CFO of One of the Largest MLPs in the U.S.
© Gray Reed & McGraw, P.C.
Oil and Gas Property Taxes Defined
Valuing Economically Recoverable Reserves as of January 1st Subjective Market Value is Estimate or Opinion of Value,
Hypothetical Buyer and Seller Texas Uses Discounted Cash Flow Analysis
Negotiable Tax Taxpayer is Involved in Determination
Not Auditable Assessor is Charged With Determination of Value.
© Gray Reed & McGraw, P.C.
How To Be Effective
Proactive Aggressive Truthful Creative Prepared
© Gray Reed & McGraw, P.C.
Who is Involved?
Appraisal District Valuation Consultants Pritchard and Abbott, Inc.* Thomas Y. Pickett Capitol Appraisal Group Wardlaw and Associates
Appraisal Review Board
© Gray Reed & McGraw, P.C.
The Appraisal Review Process
Informal Process Opportunity to Obtain the Appraisal Supply Your Information
Formal Appeal Provides Taxpayer Additional Time Allows Fact Pattern to Take Shape
Board Hearing Point Out Deficiencies in Their Appraisal Present Your Case, Including Documentation
© Gray Reed & McGraw, P.C.
© Gray Reed & McGraw, P.C.
Next Step: “Lawyer Up”
© Gray Reed & McGraw, P.C.
Property Must be Appraised at Fair Market Value
© Gray Reed & McGraw, P.C.
What You Will Need to Provide To The Appraisal District
© Gray Reed & McGraw, P.C.
How Much To Pay?
© Gray Reed & McGraw, P.C.
Focus: Appraisal of Mineral Interest
© Gray Reed & McGraw, P.C.
What the Law Says
The appraisal district “must use the average price of the oil or gas from the interest for the preceding calendar year”
© Gray Reed & McGraw, P.C.
What the Law Says
The average price for the preceding calendar year is calculated by dividing the sum of the monthly average prices for which oil and gas from the interest was selling during each month of the preceding calendar year by 12.
© Gray Reed & McGraw, P.C.
Certain Appraisal Districts Are Not Following the Law
© Gray Reed & McGraw, P.C.
Pritchard & Abbott
© Gray Reed & McGraw, P.C.
Tres Palacios Gas Storage: A Case Study of Over Taxation
© Gray Reed & McGraw, P.C.
$800M
$600M
$400M
$200M
$0
October 2010
$725M
Tres Bought High
18
© Gray Reed & McGraw, P.C.
$800M
$600M
$400M
$200M
$0
October 2010
$725M
Tres Bet on the Shale Boom
19
© Gray Reed & McGraw, P.C.
20112012
2013
2014
JAN. 2011 – DEC. 2014
Projected Revenue & Profits3 Year Total
20
© Gray Reed & McGraw, P.C.
ShaleGas
Shale Gas
Shale Gas
Gas Storage Market Collapse
21
© Gray Reed & McGraw, P.C.
20112012
2013
2014
JAN. 2011 – DEC. 2014
Actual Profits Missed Projected Profits By 465%
22
© Gray Reed & McGraw, P.C.
October, 2010 December 3, 2014
$725M
$130M
50% Crestwood
50% Brookfield
Tres Bought High – Sold Low
$500M
$400M
$300M
$200M
$150M
$100M
$50M
$0
23
© Gray Reed & McGraw, P.C.
January 1, 2012
24
January 1, 2013
$425.8M$405.9M
$500M
$400M
$300M
$200M
$150M
$100M
$50M
$0
MCAD Appraised Values
24
© Gray Reed & McGraw, P.C.
January 1, 2012
25
January 1, 2013
Trial Results
$284.7M
$500M
$400M
$300M
$200M
$150M
$100M
$50M
$0
$244.6M
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© Gray Reed & McGraw, P.C.
Questions?
© Gray Reed & McGraw, P.C.
Jonathan Hyman & David LeonardGray Reed – HoustonMark Andrews, ASA
President, K.E. Andrews – Rowlett
Pay Your Fair Share (And No More) Of Property Taxes
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