Arkansas Code of 1987 (2023) › Title 26 - TAXATION (§§ 26-1-101 — 26-82-119) › Subtitle 3 - ADMINISTRATION OF LOCAL TAXES (§§ 26-23-201 — 26-28-308) › Chapter 26 - ASSESSMENT OF TAXES (§§ 26-26-101 — 26-26-2001) › Subchapter 11 - ASSESSMENT OF PROPERTY GENERALLY (§§ 26-26-1101 — 26-26-1125) › Section 26-26-1110 - Mineral rights - Definitions

(a)
(1)
As used in this section:
(A)
"Oil well" means a producing unit well or well that produces:
(i)
Only liquid hydrocarbons;
(ii)
Liquid hydrocarbons associated with the production of gas; or
(iii)
Gas associated with the production of liquid hydrocarbons; and
(B)
"Production equipment" means all piping and other equipment of an oil well from the bottom of the casing to and including the sales valve at the tank battery.
(2)
The county assessor shall assess all producing mineral interests in the county.
(3)
(A)
The county assessor shall assess the mineral interests in the land separate from the fee simple interest in the land when the:
(i)
Mineral interests in the land are held by one (1) or more persons that are different from the person or persons holding the fee simple interest; and
(ii)
County assessor is advised of the separate holdings by the recording of a deed in the county recorder's office.
(B)
When subdivision (a)(3)(A) of this section applies, a sale of the mineral interests for nonpayment of taxes shall not affect the title to the land itself, nor shall a sale of the land for nonpayment of taxes affect the title to the mineral interests.
(4)
(A)
The county assessor shall assess all production equipment as real property.
(B)
(i)
Except as stated under subdivision (a)(4)(B)(ii) of this section, when assessing the value of production equipment, the county assessor shall assess the production equipment at a value of one dollar ($1.00) per foot.
(ii)
Any portion of the casing in a well that has been rendered inoperable for producing oil or gas by a cement or mechanical plug shall not be subject to taxation.
(5)
If an oil well reported production in a prior year and reports an annual increase in average daily production, the annual increase in average daily production shall be assessed as newly discovered property only if the annual increase in average daily production is solely attributable to new production from a geologic zone or horizon that was not produced in a prior year from the existing oil well.
(6)
(A)
In calculating the working interest-assessed value of an oil well, the county assessor shall apply a uniform expense allowance per barrel of oil produced without regard to the average daily production of the oil well.
(B)
The expense allowance under subdivision (a)(6)(A) of this section shall be based as nearly as practicable on actual expenses per barrel of oil produced.
(7)
In assessing the value of an oil well based on an income approach, the income shall be based on the actual average price per barrel of oil in Arkansas during the immediately preceding calendar year.
(8)
All formulas, valuation tables, and guidance that are published or provided to the county assessors by the Assessment Coordination Division to be used in the valuation and appraisal of mineral rights for ad valorem tax purposes shall comply with the requirements of this section.
(b)
When any mineral rights assessed as set out in subsection (a) of this section become forfeited on account of nonpayment of taxes, they shall, in all things, be certified to and redeemed in the same manner as is provided for the certification and redemption of real estate upon which taxes duly assessed have not been paid.
(c)
(1)
Because of the difficulty of ascertaining the value of a nonproducing mineral right and in order to ensure equal and uniform taxation throughout the state, a nonproducing mineral right has zero (0) value for the purpose of property tax assessment and is included in the value of the fee simple interest assessed.
(2)
If the fee simple in the land and the nonproducing mineral right that has zero (0) value as determined under subdivision (c)(1) of this section are owned by different persons, there is no property tax due on the mineral right.
(3)
For a nonproducing mineral right that has zero (0) value as determined under subdivision (c)(1) of this section, the mineral right owner may agree to a voluntary property tax assessment of the mineral right and pay a property tax according to rules established by the Assessment Coordination Division with the assistance of the Arkansas Assessors' Association.
(4)
When a nonproducing mineral right begins producing minerals, the mineral right shall be assessed for tax purposes in accordance with rules established by the Assessment Coordination Division.
(d)
(1)
(A)
If the Assessment Coordination Division determines that a county assessor has failed to assess mineral interests as required under this section, the Assessment Coordination Division shall notify the county assessor by certified mail with copies to the:
(i)
County equalization board;
(ii)
County judge;
(iii)
County quorum court; and
(iv)
Reappraisal contractor, if applicable.
(B)
In addition, the notice may provide that state reappraisal reimbursement funds to the county may be withheld pending the outcome of a hearing if a hearing is requested by the county assessor within thirty (30) days from the date of the notice.
(2)
(A)
The county assessor may waive the right to a hearing and within thirty (30) days from the date of the notice agree to complete corrective action as required by the Assessment Coordination Division and return a signed and dated compliance verification form to the Assessment Coordination Division.
(B)
Upon receipt of the signed and dated compliance verification form, the Assessment Coordination Division shall release any withheld state reappraisal reimbursement funds and resume regular payments.
(3)
Termination of state reappraisal reimbursement funds may occur if the county assessor fails to:
(A)
Either request a hearing or return the signed and dated compliance verification form within thirty (30) days from the date of the notice; or
(B)
Complete the corrective action within the time provided in the compliance verification form.
(e)
(1)
(A)
Except as otherwise provided in this subsection, if mineral rights are subject to a division order or declaration of interest, the division order or declaration of interest reflecting ownership interest as of January 1 of the assessment year shall be:
(i)
In a common electronic workbook format established by the Assessment Coordination Division; and
(ii)
Submitted electronically by the distributor of the proceeds derived from the sale of minerals produced from the subject ownership interest to the county assessor annually by March 31.
(B)
A producer or operator of ten (10) or fewer producing wells is not required to submit a division order or declaration of interest in an electronic format but shall submit a division order or declaration of interest reflecting ownership interest that is in substantial compliance with the format established by the Assessment Coordination Division under subdivision (e)(1)(A) of this section.
(2)
(A)
A county assessor shall assess a penalty on a producer or operator equal to ten percent (10%) of the property taxes due on the mineral interests contained in a division order or declaration of interest that was not submitted as required under this subsection by April 15.
(B)
A penalty assessed under this section shall be:
(i)
Collected by the county collector in the same manner as other penalties related to property taxes; and
(ii)
Paid into a late assessment fee fund established on the books of the county treasurer for the county assessor.
(3)
A division order or declaration of interest submitted to a county assessor under this subsection is exempt from the Freedom of Information Act of 1967, §
25-19-101
et seq.
(4)
A producer or operator that pays one hundred percent (100%) of the property taxes due on assessed mineral interests:
(A)
Is not subject to the requirements of subdivision (e)(1) of this section; and
(B)
Shall provide written notice of the producer's or operator's intent to submit a division order or declaration of interest under subdivision (e)(1) of this section that applies to the assessed mineral interests at least six (6) months before the division order or declaration of interest is submitted under subdivision (e)(1) of this section.
Amended by Act 2021, No. 668,§ 1, eff. for assessment years beginning on or after January 1, 2022.
Amended by Act 2019, No. 538,§ 1, eff. for assessment years beginning on or after 1/1/2020.
Acts 1897, No. 30, § 1, p. 38; C. & M. Dig., § 9856; Acts 1929, No. 221, § 1; Pope's Dig., § 13600; A.S.A. 1947, § 84-203; Acts 2009, No. 421, § 1; 2011, No. 867, §§ 1, 2.