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Corbett Asks For Automatic Withholding On Drilling Royalty Payments

Scott Detrow / StateImpact Pennsylvania

A drilling rig on a Tioga County farm

Pennsylvania Public Radio’s Mary Wilson contributed to this report.
A bill likely to be passed within the next two weeks will mean smaller royalty payments for people who have leased their land for oil and natural gas drilling.
The language is part of Senate Bill 1541 — scroll to the bottom of this post to read it —  an omnibus tax bill introduced by Senate Republican Pat Browne last month. It requires energy companies to automatically withhold the 3.07 percent of royalty payments that landowners would owe in state taxes.
The Corbett Administration came up with the proposal, and Governor Corbett has asked House and Senate leaders to pass it alongside the state budget, which needs to be signed into law within the next 12 days.

Department of Revenue spokeswoman Elizabeth Brassell compares the setup to employer tax withholdings. “This change would allow the department to more quickly and accurately collect income tax due on royalty payments, particularly in the case of non-residents,” she wrote in an email.
The “non-residents” Brassell is referring to are people who live out-of-state, but own Pennsylvania land where drilling is taking place.
This would not be a tax increase. Landowners are already required to pay taxes on their royalty payments, but are tasked with reporting and paying the levy themselves.
While taxes aren’t going up, the Department of Revenue says improved documentation of royalty payments would lead to a $5.3 million increase in tax collections next year, and about $2 million more a year going forward.
Pennsylvania took in $46 million from taxes on drilling royalties in 2010 — that’s up from $35 million in 2009. (2011 figures aren’t available yet.)

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