CHAPTER 12 STATE MINERAL TAXATION: THE WYOMING EXPERIENCE

• Jurisdiction: United States

Mineral Taxation
(Mar-Apr 1977)
CHAPTER 12
STATE MINERAL TAXATION: THE WYOMING EXPERIENCE
Joseph B. Meyer
Legislative Services Offices
Laramie, Wyoming

INTRODUCTION

To understand the nature of and future trends in mineral taxation in Wyoming requires a general familiarity with the overall structure of Wyoming taxes. During the period July 1, 1975, through June 30, 1976, Wyoming state government was primarily financed by sales taxes ($58 million dollars), use taxes ($14 million dollars), gasoline taxes ($23 million dollars), commercial vehicle compensatory fees ($15 million dollars), mineral severance taxes ($40 million dollars) and federal aid and grants (in excess of $160 million dollars).¹ During the period July 1, 1975, through June 30, 1976, local governmental entities in Wyoming were primarily financed by property taxes against nonmineral property ($85 million dollars), property taxes against minerals ($71 million dollars), state shared sales and use taxes (1/3 of total sales taxes and 1/6 of total use taxes), state shared gasoline taxes and federal aid and grants.² Wyoming has been and currently is very dependent upon the mineral industry, primarily oil producers, to support governmental services.

Throughout most of the history of Wyoming the "ad valorem" or property tax has produced most of the revenue for governmental services. However, for several years the state four mill levy permitted by the Wyoming Constitution has not been levied nor have state capital improvements been financed by general obligation bonds since the 1930's. The only state property tax levy currently utilized is a maximum six mill levy, the proceeds of which are redistributed to school districts via a state foundation program. In Wyoming property tax revenues are primarily used to finance local governmental units.

In 1935 Wyoming adopted a sales tax for the first time. Currently the state of Wyoming imposes a three cent sales tax with an optional additional one cent sales tax available to cities and counties. Sales and use tax revenues are the largest source of revenue to the state general fund. Wyoming does not impose an income tax and passage of a constitutional amendment in 1974 requiring full credit for sales, use and ad valorem taxes against any income tax

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liability may well prevent any future income tax impositions.³

From 1890 when Wyoming became a state until 1969, the only substantial tax against the mineral industry in Wyoming was an ad valorem tax based on the value of the severed minerals. This in part was due to the intense debate relative to what taxes the mineral industry should pay which occurred during the Wyoming constitutional convention of 1889.⁴ One faction argued for an ad valorem tax against all minerals except coal which was to be taxed at a flat rate per ton. Another faction argued for minerals to be taxed by some method at the state level with revenue generated to be redistributed to local governmental units. Following several days of debate the convention adopted one section on its face purporting to require the taxation of coal lands at the value of the land including the coal deposits and a second section requiring all minerals to be taxed in addition to surface improvements but in lieu of taxes on the land based on the value of the gross product produced in such manner as may be provided by law. A subsequent decision of the Wyoming supreme court indicated that the tax is in the nature of an ad valorem tax on personalty and is not a severance tax.⁵

In 1969 the first severance tax in Wyoming was adopted.⁶ To indicate to the public that the mining industry was paying ad valorem taxes in addition to the severance tax, the tax was phrased such that the tax was 62.5 mills with a credit of 52.5 mills which was the average mill levy for ad valorem purposes in 1969. The revenue generated by this initial severance tax was credited to the state general fund.

In 1974 following an attorney general's ruling stating that each class of minerals could be taxed separately and the uniformity requirements of the Wyoming constitution applied only to property taxes against minerals,⁷ a severance tax on trona, coal, petroleum and natural gas excluding production from a property or lease whose average daily production did not exceed ten barrels per day, oil shale or any other fossil fuel minerals was increased from one to three percent.⁸ During the 1974 legislative session a

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resolution for a constitutional amendment was passed and subsequently adopted by the qualified electors of Wyoming.⁹ ) The amendment provided for an excise tax of one and one half percent on the value of the gross product extracted for fossil fuel minerals and such other minerals as designated by the legislature the proceeds of which were to be deposited to a permanent fund, the corpus of which was inviolate and the investment income of which was to be credited to the state general fund.

In 1975 the excise tax on nonfossil fuel minerals was increased from one percent to two percent, on fossil fuel minerals was increased from three percent to four percent and on coal an additional incremental tax was adopted in the amount of .4% per year to a maximum tax of an additional two...