The Kevin review. [volume] (Kevin, Mont.) 1922-1929, 1928-01-05

acIcQ at the last session OF the
Montana legislature providing
for the taxation of oil royalties
and royalty interests was held
unconstitutional Friday in a
decision handed down hre by
District Judge John ]. Greene
in an action brought by w. H.
Byrne against the Fulton Oil
company. The company had,
under authority granted by the
new law, withheld from Byrne
approximately $500 to cover
royalty tax payments and in
holding the statute unconstitu-
tional Judge Greene decreed
that Byrne was entitled to re-
cover this amount, as claimed
in his suit against the Fulton
company.
Under the provisions of the
law it became the duty of any
corporation producing petro-
leum to deliver to the state
board of equalization, not lat
er than Mar. 81 of each year, a
verified statement setting forth |
the names of the owners of the
producing property, together
with the names of any persons
holding royalty interests there /
in and the amount of their
holdings. II followed that the
board should assess the royalty
at its full cash value and that
the levy should be made on the
same basis as net proceeds Of
mines are taxed.
The law provided that thei
operator and royalty holderl
should be jointly and severally
liable for fhe tax and that col
lection from the operator
should be made in the same
way as the levy on net mine
proceedseaEe. received.
The levy was designated as
lien against the royalty. The
provision of the law which led
TO the Byrne-Fulton company
suit permitted the operator to
withhold from any proceeds of
affected royalty the amount oi
the tax for which the OPERATOR
was jointly liable.
In this case, the Fulton COM
pany had paid approximately
81 500 in taxes to the treasurer !
Of ToOle county on account Of !
the royalty assessed to Byrne,
and had withheld the samel &
amount for surrender to thel :
county at the next tax pay =
ment date. Byrne claimed that 8
this withholding Of the pro- '
ceeds from the royalty was IL 4
legal and brought suit to recov- i
er the amount from the Fulton !
company. In its decision, the ]
court held that the company 4
was without defense in that
the act under which it had z
withheld a portion of Byrne's
royalty income was unconstitu-
tiOnal.
Judge Greene held that an C
oil we'll is mine and that I'M A
der the provisions of Monta ir
mas constitution, only the net g,
of mines can be tax IL
ed; that the new law was an n,
attempt to tax an intangible
interest in mining property and &C
not the proceeds; that the leg q
islature was without power to OI
levy a tax upon the mineral
content Of land as such; that th
he state is restricted to prOcur- tv
ng revenues from this source ve
Dnly from net proceeds that if m
he act is treated as net pro-
leeds tax it is unconstitutional be
because it is discriminatory Kt
between the operator and thel Of
'Oyalty owner, and that if it bel of
reated as a tax upon a tangi- 20
lie interests in mining proper TT
Y it is also discriminatory be- mr.
ween particular property be- tv
to the same class. re,
Judge Green's decision is of bu
ar reaching consequence to-
he oil industry, involving, as
does, royalty interests held mr.,
y hundreds of persons and f.,
ffecting scores of operators. f.,
his case was the first in which, an
he validity of the law was at-l f., m
acked and, it is understood, We We
1ll be appealed to the statel cal