Plentywood herald. [volume] (Plentywood, Mont.) 1908-current, 1928-01-13

A law enacted at the last session of
the Montana legislature providing for
the taxation of oil royalties and royal
ty interests has been held ~unc0nstitu-
tiOnal in a decision handed down at
ChOteau by District Judge John j.
Greene In an action brought by w. III.
Byrne against the Fulton OH company.
The ompan had, under authority
granted by the new law, withheld from
Byrne approximately $500 to cover
royalty tax payments and in holding
the statute unconstitutional Judge
Greene decreed that Byrne was en-
titled to recover this amount, as
claimed in his suit against the Fulton
company.
Under the provisions of the law it be-
came the duty of any corporation pro-
ducing petroleum to deliver to the state
board of equalization, not later than
March 81 of each year, q verified state
ment setting forth the names of the
owners of the producing property, to-
gether with the names OF any persons
holding royalty interests therein n the
mount of their holdings. 1t followed
that the board should assess the royalty
at it's full cash value and that the levy
should be made on the same oasis as net
proceeds OF mines are taxed.
Designated as Lien
The law provided tina the operator and
royalty holder should be jointly and sew
orally liable for the tax and that collec-
ton from the operator should be made in
the same way as the levy on net mines
proceeds are received.
The levy was designated as q lien
against the royalty. The provision Of the
law which led to the Byrne-Fulton COM
pany suit permitted the operator to with
hold from any proceeds of affected royal
ty the amount Of the tax for which the
perator was jointly liable.
In this case, the Fulton company had
paid approximately 81, 500 in takes to the
treasurer of Toole county on account OF
the royalty assessed to Byrne, and had
withheld the same amount for surrender
date. Byrne claimed that this withhold
to the county at the next tax payment
ing of the proceeds from the royalty was
Illegal and brought the suit to recover
the amount from the Fulton company.
In its decision, the court held that the
company was without defense in that
the act under which 1T a withheld a
portion Of Byrne's royalty income was
unconstitutional.
Judge Greene held that an oil we'll is
a mine and that under the provisions of
Montana's constitution, only the net
proceeds of mines can be taxed, that the
new law was an attempt to tax an In
tangible interest in mining property and
not net proceeds: that the legislature was
without power to levy a tax upon the
mineral content Of Ian as such: that the
state is restricted to procuring revenue
from this source only from net proceeds;
that II the act is treated as q net pro-
ceeds tax 1t is unconstitutional because
it is discriminatory between the operator
and the royalty owner, n that II 1T be
treated as a tax upon a tangible interest
in mining property it is also discrim-
inatory between particular property be-
longing to the same class.
Judge Greene's decision is of far reach
ing consequence to the oil industry, in
volving. as 1t does, royalty interests held
by scores OF operators. This case was
the first in which the validity OF the law
was attacked and, 1t is understood, will
be appealed TO the state supreme court.
Byrne was represented before Judge
Greene by Senate L.. p. Donovan OF Shell
by and Judge II. l.. DeKalb of Lewistown
and j. A. McDonough and Arthur Jar
dine OF Great Falls appeared for the Full
ton company.