Our Severance Tax review process analyzes the state tax implications placed on the extraction of non-renewable natural resources intended for consumption in other states. Various state-specific exemptions exist that allow natural resource well operators to significantly reduce their tax burden when minerals are taken from the ground. Operators often overpay their fair share of severance taxes as the reporting rates vary by volume and state.
Invoke’s tax consultants work through the following phases during a Severance Tax management project:
Preliminary Tax Review
Invoke will meet with your personnel in order to understand the overall severance tax processes and procedures. This includes working with IT resources and tax personnel to extract relevant data from your system and obtaining access to the appropriate state reporting software.
Phase I focuses on the following:
- Determine entities and locations involved in the review
- Understand procedures for reporting of severance tax to jurisdictions
- Confirm periods open under the statute of limitations, including any audits or signed statute waivers in each taxing jurisdiction
- Determine location and format of records needed to complete review
- Map extracted data while importing into Consultants system
- Identify any refunds or credits on transactions or locations which you are pursuing or pursuing through a third party
- Identify any entities currently under a severance tax audit
Financial Data Analysis and Documentation of Findings
Invoke will review your purchase data, well records and compliance records in order to understand the information and to identify those areas where recoveries and severance tax audit reduction opportunities may exist.
Phase II focuses on the following:
- Extraction and validation of procurement data
- Review of severance tax returns filed with jurisdictions
- Review well reports and data to identify and apply for well exemptions
- Analyze purchase data to maximize marketing deductions
- Review of any audit work papers and other related documentation
- Interview personnel to further clarify severance tax procedures and opportunities
Invoke then discusses and provides detailed transactions and well information to be included in a refund claim or captured through audit reductions during any stage of a review or audit. This includes transactions that will be presented through work papers or refund claims with each state’s taxing authority.
Preparation of Refund Claims and Severance Tax Audit Reductions
Invoke will file refund claims and submit Audit Reductions to taxing authorities in order to capture recoveries in the most efficient manner.
Phase III focuses on the following:
- Prepare support documentation for recoveries and audit reduction transactions
- Prepare and provide work papers for any recoveries and audit reduction savings identified
- Submit documentation to appropriate taxing authorities for review and approval
- File any return amendments using the required taxing authority’s compliance software
- Assist you in gathering additional documentation required to defend recoveries and audit reduction positions
- Communicate with the state taxing authorities as necessary, in order to expedite severance tax positions
- Consultant will report approved savings, including refunds and audit reductions, to Client when received from taxing authority
Invoke will provide you with requests for information required to complete the Services. Any amounts, transactions that have been assessed by a taxing jurisdiction for which Invoke will seek as an audit reduction will be provided to you in the form of schedules and/or summaries during the Engagement.
Refund Claims and Audit Reduction Verification
Invoke will work with the taxing authorities in order to verify both refund claims and audit reduction savings.
This Phase includes assisting you in defending the recoveries and audit reductions as follows:
- Analyzing any technical issues raised by the taxing authorities related to recoveries and/or audit reductions filed by Invoke with the taxing authority
- Preparing responses and gathering additional documentation in order to validate recoveries or audit reductions filed by Invoke with the taxing authority
- Working with your vendors, as necessary, to validate any recoveries or audit reductions filed on behalf of Invoke with the taxing authority
- Representing you at any administrative meetings, conferences and/or hearings, as permitted by law related to the recoveries or audit reductions filed by Invoke with the taxing authority