Severance tax services provide oil and gas companies with the information and resources necessary to navigate the complexities of state severance taxes and royalty rates, reducing compliance burdens, administrative overhead and avoiding overpayments.

 

Severance taxes are among the largest tax sources for upstream oil and gas producers, accounting for an estimated one-tenth of total state and local sales and use taxes in 2008. Understanding the nuances of severance tax laws is essential to increasing the benefits of incentives and deductions to produce more oil and gas from the ground.

 

Incentive Programs

The Texas Railroad Commission has a number of incentive programs that help reduce the cost of oil and gas production in the state by providing exemptions or reductions from the severance tax. These incentives are used to encourage drilling, completing wells, or initiating enhanced recovery projects. Read more here to get more info regarding Severance Tax Services.

 

These programs are available to any operator with a working or royalty interest in oil, natural gas, or minerals in the state. They are designed to encourage producers to invest in the state and promote the conservation of natural resources, as well as to fund important state infrastructure projects.

 

Revenue Distribution

Most states distribute their severance tax revenues, and the resulting funds are used to pay for various programs, such as road construction, public safety, or environmental protection. Alaska, for example, deposits all of its Oil and Gas Production Taxes into its general fund. This helps ensure that all of the money goes to important state expenses, such as education and law enforcement.

 

In some states, severance tax collections are used to support the state’s rainy day fund. Louisiana, for instance, has a rainy-day fund that can be used for up to two years if it is not completely depleted. However, the state has statutory restrictions that limit withdrawals from its rainy-day fund.

 

If your employer pays you a lump sum in lieu of a severance package, that amount is subject to employees’ tax and must be declared on your individual tax return. Your employer will apply for a tax directive through the South African Revenue Service (SARS) before you receive this payment, so that SARS will work out the correct employees’ tax to be withheld from the benefit. Here is a qualified Severance Tax service provider.

 

During the time between you receiving your severance benefits and filing for your tax return, it is important to make sure that you have all of your paperwork in order. It may also be useful to contact your HR department or employee benefits/executive compensation lawyer so that they can assist you with this step of the process.

 

Recompute Your Severance Allowance

The federal government and the District of Columbia pay severance allowances on the basis of creditable service for up to five years, or until you reach the age of 62. If you later resign or become involuntarily separated, the agency from which you were employed must recompute your severance allowance on the basis of your new age and all your creditable service that is still eligible to be paid. Check out this related post to get more enlightened on the topic: https://en.wikipedia.org/wiki/Property_tax.