Does There Need to Be a Texas Tea Party? Mineral Estate Taxation With Representation

Abstract

The Texas Tax Code sets forth how all taxes in Texas should be levied and against what party or property on which the tax should be levied. In the instance of mineral estate taxation, however, a conflict resides in how the oil and gas terms are defined and how these definitions apply to taxing mineral estates. The courts, however, are in bed with the State in the taxation dilemma. The application of the tax code to mineral "interests" is quite a mathematical achievement whose methodology cannot be protested. So, as in the urban mineral estate, how does one protest the valuation of one's minerals when quite possibly that valuation falls outside the Texas Tax Code? As usual, the presumption falls on the side of the taxing authority, not the protester. Texas Property Tax Code specifically sets forth that "all real and tangible personal property . . . is taxable" based on its appraised fair market value. The Texas Property Tax Code also sets forth that mineral interests are classified as real property. The misidentification of property interests causes confusion, and thus Texas is taxing mineral interest owners on ordinary income versus market value, which in this Author's opinion, imposes a double taxation or a surreptitious income tax on the citizens of the State of Texas.