State Supreme Court rejects request to reargue tax case
The state Supreme Court has turned down Fayette County’s request to reargue a case where the state’s high court ruled that oil and natural gas are not taxable real estate, according to the county’s chief assessor. James A. Hercik, CPE, said the latest development means the Supreme Court’s December ruling remains the law of the land, meaning that Fayette and other counties in Pennsylvania can no longer tax oil and natural gas rights.
However, Hercik said two professional groups – the County Commissioners Association of Pennsylvania and the Assessor’s Association of Pennsylvania – are working to close the legal loophole via passage of new legislation.
“They denied (our attempt to reargue the case). So our only recourse now would be to get the state legislature to change the wording of the law, so that oil and gas rights are listed as real estate,” said Hercik.
In its decision, the Supreme Court overturned a ruling by the lower Commonwealth Court that upheld counties’ ability to tax oil and natural gas. The crux of the Supreme Court decision was that since tax law doesn’t specifically mention oil and natural gas, those resources couldn’t be taxed as real estate.
Hercik said that Fayette stands to lose $90,000 in revenue because of the court decision. He added that approximately 25 to 30 counties in Pennsylvania had taxed those resources and also stand to lose revenue unless the law changes.
“This is big dollars across the state of Pennsylvania,” said Hercik.
Hercik said the assessor’s association, of which he is a member, has put together a committee to “try to draft some language” to send to the state legislature for approval.
“The hard part’s going to be finding a sponsor (in the state House or Senate),” said Hercik.
Assistant county solicitor John Cupp represented the county during the appeal process. The case dates back to 1998, when Fayette began taxing mineral resources under pressure from critics, who argued that failure to do so was unfair to surface property owners.
The Independent Oil and Gas Association of Pennsylvania headed a group of plaintiffs who filed suit against the county and its Tax Assessment Appeals Board. They argued that oil and natural gas weren’t taxable, even though other counties had levied such taxes for decades.
At the time of the Supreme Court ruling, Hercik termed it a “landmark decision” with budgetary implications across the Commonwealth.
For the reassessment that went into effect in Fayette this year, the county had approximately $36.5 million in assessed value, a category that included coal, stone, oil and natural gas.