Our client overpaid in Severance Tax. Their method for computing and remitting severance tax hadn’t considered exemptions and rate reductions. They needed to minimize the risk of incorrectly disclosing tax expense on financial statements, cut costs by making sure tax administration laws were followed correctly, and maximize revenue and shareholder value.
Application of tax expertise led to the recovery of tax savings for previous years in excess of $500,000 across numerous states; Recognition of $350,000 in immediate future savings annually across various states; Addendum to affiliate company contracts resulted in immediate savings of $75,000, and expected future annual savings of $200,000+ when benchmarked against growth projections for that period.
Read on for more information on how we successfully delivered a positive outcome for our client.
Our client had overpaid in Severance Tax. Their approach to calculating and remitting Severance Tax did not involve an inquiry to ascertain eligibility for the Oil and Gas Severance Tax exemptions and rate reductions to which they were entitled by a number of regulatory authorities.
Our client desired risk mitigation associated with incorrectly stating tax expense in financial statements, cost reduction through proper application of tax administrative code, and establishment of best practices and internal controls, resulting in sustained revenue growth and increased shareholder value.
Our tax specialists analyzed the history of severance taxes for the period eligible for a tax refund with a focus on identifying chances for tax reduction and exemption. Our research established methods for future tax liability reduction, when permitted.
The scope of the analysis included marketing expenses, ROI calculations for eligible assets, and tax deductions. For gas wells, additional research was conducted to identify exemptions associated with high-cost gas exemptions and low-producing wells.
To ensure the continuity of new processes and procedures, Sirius Solutions trained our client’s Revenue Accounting Staff and JIB Accountants on the necessary accounting treatment of transactional activity relating to severance tax and allowed deductions.
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