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Mark counsels clients in a number of industries regarding a range of business concerns. He helps businesses plan for and manage their tax obligations. In particular, Mark has represented investors and developers in numerous housing and tax credit transactions. His tax work also extends to advising clients as to corporate, partnership and individual tax issues at both the federal and state level. Mark has considerable experience representing taxpayers regarding state and local tax issues, including sales and use tax, income taxes, nonresident taxation, and property taxes. Further, Mark has advised landowners and lessees in the oil and gas business regarding federal income tax and state and local tax issues.  In addition, Mark works with clients to implement business transactions that allow companies to grow and adapt to changing business conditions. His work in this area includes negotiating purchases and sales of businesses as well as entity selection and formation and general business planning. Mark also counsels health care clients regarding tax structuring and transaction issues.

Many thanks to Kevin Scott for his assistance in preparing this post.

On June 14, 2018, Governor Kasich signed into law H.B. 430 which will go into effect in September of 2018. The bill clarifies the language covering sales and use tax exemptions for certain oil and gas industry participants. Specifically, the new law modifies the existing statute governing the sales and use tax exemption for property used directly in producing oil or gas. Following recent actions by the Ohio Department of Taxation, H.B. 430 can help to ensure predictability and stability by reaffirming the sales tax exemptions received by Ohio oil and gas operators and service providers.
Continue Reading New Ohio tax law clarifies and expands sales and use tax exemptions for the oil and gas industry

On Feb. 11, 2015, the biennial budget bill appropriating money for 2015 and 2016 was introduced in the Ohio House of Representatives. The bill incorporates Gov. Kasich’s proposals, which were released earlier this month in his Blueprint for a New Ohio. Generally, if enacted in its current form, there would be an overall reduction in personal income tax, with an increase severance tax, commercial activity tax and sales tax. This article focuses on the severance and commercial activity tax components of the bill.

Severance tax

The structure of the severance tax would be altered to incorporate an average price — the spot price — into the calculation of tax owed for extraction of natural resources horizontal drilling techniques. In the bill, a “horizontal well” is defined as “a well that is drilled for the production of oil or gas in which the wellbore reaches a horizontal or near horizontal position in the Point Pleasant, Utica, or Marcellus formation and the well is stimulated.” The new severance tax formula for those horizontal wells would be:
Continue Reading 2015-2016 Ohio budget bill proposes severance tax increase

Ohio Gov. John Kasich’s mid-biennium review plan calls for an increase in Ohio oil and gas severance taxes, as proposed in House Bill 472. These increased taxes would fund certain local governmental initiatives and the Ohio Department of Natural Resources. They also would help offset personal income tax cuts outlined in the mid-biennium plan.

The current production-based severance tax scheme does not distinguish between production generated by conventional oil and gas wells and production generated by horizontal wells. The current severance tax under R.C. § 5749.02 is levied at a rate of $0.10 per barrel of oil and $0.025 per thousand cubic feet (MCF) of natural gas.

For conventional oil and gas wells, the tax under H.B. 472 would remain a volume-based tax but the rates would increase to $0.20 per barrel of oil and $0.03 per MCF of natural gas. The tax would be imposed on the “severer,” defined for conventional wells as the person who actually removes the oil or gas from the ground. Other changes to the state’s regulatory scheme are intended to militate against this tax increase, however, resulting in no economic change to the costs of production for conventional wells.1 Moreover, low-producing conventional wells would be completely exempt from the severance tax.
Continue Reading Ohio severance tax is a point of ongoing negotiation

This is the first in a series of blog entries regarding Ohio state and local taxes imposed on oil and gas operations.

Oil and gas operators in Ohio currently pay a variety of state and local taxes:

  • Commercial activity tax (CAT) which is a 0.26% excise tax on all Ohio-based gross receipts. The tax is paid by the recipient of the gross receipt—e.g., landowners on rent, drillers on drilling fees, and operators on mineral production. No deductions are permitted for costs. Some related-party exceptions apply.
  • Property (ad valorem) taxes. All real property in Ohio is subject to the real property tax administered by counties for the benefit of public schools, counties, cities, libraries, and other local governmental entities. In general, Ohio real property taxes average 2.25 to 2.75% of fair market value per year. Ohio counties do not use a consistent method for assessing oil and gas properties. In the future we expect to see some standardization for taxing severed mineral estates—for example, separate parcel numbers used and/or more efforts to tax minerals even if not being actively produced. We expect to provide a more detailed discussion about ad valorem property taxes and severed mineral interests in the near future.
  • State unemployment and workers’ compensation taxes like other employers.
  • State sales and use taxes on taxable purchases of goods and services.
  • Municipal income taxes on company’s taxable income in some locales.
  • Drillers’ and operators’ employees pay state and local income taxes like other employees.
  • Ohio severance taxes:
    – 20 cents per barrel of oil
    – 3 cents per MCF (thousand cubic feet) of natural gas
    – No tax on severance of “natural gas liquids” including benzene and butane

Comparison to peer states with shale gas potential and shale oil potential:

Continue Reading How Ohio Stacks up on Taxation of Oil and Gas Operations