Opinion ID: 2524427
Heading Depth: 1
Heading Rank: 5

Heading: Alternatively, the Pro-Rata Reduction Method Exempts Other Property from Taxation in Violation of the Exemption Limitations Contained in the Act

Text: In enacting the Oil and Gas Property Tax Act, the legislature took pains to restrict the exemptions that municipalities could offer to the owners of other property. [21] This was done to prevent an end run around the equal rate requirement. But as is demonstrated by the Messenger letter calculations, the effect of pro-rata reduction is to exempt from taxation a certain percentage of the value of other property. In the Messenger calculation the exemption amounts to 77.5% of the value of other property. This exemption permits a facially equal tax rate to have a distinctly unequal effect. In the words of Commissioner Mallott, this permits the fiscal equity inherent in the equal rate requirement to be frustrated. [22] In passing the act the legislature intended that no portion of otherwise taxable property in advantaged municipalities should go untaxed, for this would occur at the expense of the rest of the state. The legislature built the prohibition on exemptions into the act in order to prevent exactly this result. The act was a response to what one legislative committee described as a shocking inequity between oil and gas property advantaged municipalities and other municipalities. [23] Its purpose was to reduce this inequity by sharing tax revenues from oil and gas property statewide. No part of this purpose entailed state-funded tax relief to the owners of locally assessed property in tax advantaged municipalities. But by insulating a portion of locally assessed property from taxation, that is the effect of the pro-rata reduction method.