2019 New Mexico Statutes
Chapter 7 - Taxation
Article 36 - Valuation of Property
Section 7-36-23 - Special method of valuation; mineral property and property used in connection with mineral property; exception for potash and uranium mineral property and property used in connection with potash and uranium mineral property.
A. The provisions of this section apply to the valuation of all mineral property and property used in connection with mineral property except potash and uranium mineral property and property used in connection with potash and uranium mineral property, the methods of valuation for which are provided in Sections 7-36-24 and 7-36-25 NMSA 1978.
B. The following kinds of property held or used in connection with mineral property shall be valued under the methods of valuation required by the Property Tax Code:
(1) improvements, equipment, materials, supplies and other personal property held or used in connection with all classes of mineral property; "improvements" as used in this section includes surface and subsurface structures, but does not include pits, shafts, drifts and other similar artificial changes in the physical condition of the surface or subsurface of the earth produced solely by the removal or rearrangement of earth or minerals for the purpose of exposing or removing ore from a mine; and
(2) the surface value for agricultural or other purposes of class one productive or nonproductive mineral property when the surface interest is held in the same ownership as the mineral interests.
C. The value for property taxation purposes of class one productive mineral property is an amount equal to three hundred percent of the annual net production value of the mineral property.
D. The value for property taxation purposes of class two and class three mineral property is an amount equal to three hundred percent of the annual net production value.
E. The value for property taxation purposes of class one nonproductive mineral property shall be determined by applying a per acre value to the surface acres of the property being valued. The per acre value of class one nonproductive mineral property shall be determined under regulations adopted by the department, which regulations shall establish a per acre value based upon bonus bids accepted by the commissioner of public lands for the latest one year period in which bonus bids were accepted for the sale of mineral leases, which per acre value may be determined by geographical areas.
F. For purposes of this section, "annual net production value" means either:
(1) the average of five years' net production value from the mineral property for the five years immediately preceding the tax year in which value is being determined, or so much of the period during which the property has been in operation, with each year's net production value being determined by taking the year's market value of production of all minerals, including any bonus or subsidy payments, and deducting from that value:
(a) any royalties paid or due the United States, the state or any Indian tribe, Indian pueblo or Indian who is a ward of the United States;
(b) the direct costs, exclusive of depreciation, determined under generally accepted accounting principles consistently applied by the taxpayer, of extracting, milling, treating, reducing, transporting and selling the minerals; and
(c) the costs of depreciation, determined under generally accepted accounting principles consistently applied by the taxpayer, of property actually used in the extracting, milling, treating, reducing and transporting of the minerals; or
(2) the net production value from the mineral property for the year immediately preceding the tax year in which value is being determined, with that year's net production value being determined by taking the year's market value of production of all minerals, including any bonus or subsidy payments, and deducting from that value:
(a) any royalties paid or due the United States, the state or any Indian tribe, Indian pueblo or Indian who is a ward of the United States;
(b) the direct costs, exclusive of depreciation, determined under generally accepted accounting principles consistently applied by the taxpayer, of extracting, milling, treating, reducing, transporting and selling the minerals; and
(c) the cost of depreciation, determined under generally accepted accounting principles consistently applied by the taxpayer, of property actually used in the extracting, milling, treating, reducing and transporting of the minerals.
G. Annual net production value shall be determined under Paragraph (1) of Subsection F of this section unless the taxpayer elects to have it determined under Paragraph (2) of that subsection. To be effective, an election must be exercised by written notification to the department at the time the mineral property is reported to the department for valuation in a tax year. Once an election is exercised, a taxpayer may not change from the elected method without the prior approval of the department.
H. The department shall adopt regulations specifying procedures to be followed under, and the details of, the method for valuation of mineral property specified in this section.
History: 1953 Comp., § 72-29-12, enacted by Laws 1973, ch. 258, § 24; 1975, ch. 165, § 4.
ANNOTATIONSCross references. — For mines and mining, see Chapter 69 NMSA 1978.
Fair market value is theoretically what a willing seller would take and a willing buyer offer. Kaiser Steel Corp. v. Property Appraisal Dep't, 1976-NMCA-071, 83 N.M. 251, 490 P.2d 968, cert. denied, 83 N.M. 258, 490 P.2d 975.
Payments to be included in market value. — Portions of former 72-6-7(6), 1953 Comp., are pertinent as the market value is to include bonus or subsidy payments and there is evidence that the royalty payments fall into that category; however, amounts paid for improvements are not to be included as part of the costs, and depreciation on such improvements should also not be included. Kaiser Steel Corp. v. Property Appraisal Dep't, 1976-NMCA-071, 83 N.M. 251, 490 P.2d 968, cert. denied, 83 N.M. 258, 490 P.2d 975.
Market price as exchange value. — As to the price between a fictional seller and buyer, the market price of a commodity is the exchange value and it is determined by the demand for it in relation to the supply and is proved, when possible, by actual sales. Kaiser Steel Corp. v. Property Appraisal Dep't, 1976-NMCA-071, 83 N.M. 251, 490 P.2d 968, cert. denied, 83 N.M. 258, 490 P.2d 975.
Essential factors in determining market value are the existence of a demand and the accessibility of a market. Without a demand a rich natural resource may lie dormant and be commercially valueless. Create an active demand and the same deposit may find a ready market. Similarly, proximity to market may be a determining factor. Kaiser Steel Corp. v. Property Appraisal Dep't, 1976-NMCA-071, 83 N.M. 251, 490 P.2d 968, cert. denied, 83 N.M. 258, 490 P.2d 975.
Determination of market value of average annual output, less the actual cost, over the period of years involved requires an averaging of the costs. Kaiser Steel Corp. v. Property Appraisal Dep't, 1976-NMCA-071, 83 N.M. 251, 490 P.2d 968, cert. denied, 83 N.M. 258, 490 P.2d 975.
Legislative intention to authorize deduction must be clearly and unambiguously expressed in the statute. Kaiser Steel Corp. v. Property Appraisal Dep't, 1976-NMCA-071, 83 N.M. 251, 490 P.2d 968, cert. denied, 83 N.M. 258, 490 P.2d 975.
Separate taxation of severed mineral estates required. — Former New Mexico statutory provisions required the separate taxation of severed mineral estates and the public policy of this state was to tax separately the severed mineral rights from the remainder of the fee when in different ownerships. Kaye v. Cooper Grocery Co., 1957-NMSC-049, 63 N.M. 36, 312 P.2d 798.
Even after conveyance of fractional undivided interest in the minerals, the entire mineral estate should be separately assessed and taxed as a unit. Kaye v. Cooper Grocery Co., 1957-NMSC-049, 63 N.M. 36, 312 P.2d 798.
Partial severance considered complete severance. — For assessment purposes, a partial severance conveyance is to be considered a complete severance of the mineral estate. Kaye v. Cooper Grocery Co., 1957-NMSC-049, 63 N.M. 36, 312 P.2d 798.
Duty of tenant in common to pay entire assessment. — The surface owner who has retained an undivided mineral interest becomes a tenant in common as to the mineral estate with his transferee of an undivided mineral interest, and as tenants in common each had the duty to pay the entire assessment on the mineral estate with a right of contribution against his cotenant for a proportionate part. Kaye v. Cooper Grocery Co., 1957-NMSC-049, 63 N.M. 36, 312 P.2d 798.
Owner of mineral estate will not lose interest through tax sale. — When the entire mineral estate has been conveyed by the surface owner and the mineral deed has been recorded prior to the assessment for the tax year, the owner of the mineral estate will not lose his interest through a tax sale unless the mineral estate has been separately assessed and the sale is had for the purpose of recovering delinquent taxes assessed against the mineral estate. Kaye v. Cooper Grocery Co., 1957-NMSC-049, 63 N.M. 36, 312 P.2d 798.
Negative mineral property production figure disallowed. — The statutory requirement of allocating the net taxable value of each item of property used in connection with mineral property prevents the use of the negative value for mineral property production to reduce the valuation of property valued under Section 7-36-33 NMSA 1978; therefore, the taxpayer cannot use a negative figure for mineral property production to reduce the positive value of property used in connection with mineral property. U.V. Indus., Inc. v. Prop. Tax Div. of Taxation & Revenue Dep't, 1979-NMCA-147, 93 N.M. 651, 603 P.2d 1108.
Regulation modifying statutory determination of annual net production contrary to section. — Regulation providing that the property tax department would not permit the use of minus figures for a particular year's net production value in calculating the average of five years' net production value was contrary to the provisions of Subsection F because the property tax department had no authority to adopt regulations modifying the statutory provision for determining the annual net production value. Santa Fe Pac.R.R. v. Prop. Tax Dep't, 1976-NMCA-071, 89 N.M. 446, 553 P.2d 726.
Regulation for geographical variance multiplier set aside. — Regulation providing for the use of a multiplier of 100 and of a quotient derived by dividing the total of the bonus bids by the number of acres leased by competitive bidding within a county was set aside since the provision in Subsection E for geographical variance did not support use of such multiplier because the evidence was that procedures for implementing such a variance had not been developed by property tax department. Santa Fe Pac.R.R. v. Prop. Tax Dep't, 1976-NMCA-071, 89 N.M. 446, 553 P.2d 726.
Burden of proof was on contestant and was both the burden of producing evidence and the burden of persuasion which was, in this case, where the validity of the state's valuation is in issue, not the burden of showing the correct valuation but to show the state's valuation was erroneous. However, an asserted failure in contestant's burden of persuasion does not require that the court uphold the state's valuation when that valuation is not supported by substantial evidence. Kaiser Steel Corp. v. Property Appraisal Dep't, 1971-NMCA-131, 83 N.M. 251, 490 P.2d 968, cert. denied, 83 N.M. 258, 490 P.2d 975.
Finding not supported by evidence inference. — Since the market value of the mine run coal was based on evidence of sales of 4% and 9% of production at $8.50 per ton, this evidence did not support an inference that 96% and 91% of production had a market value of $8.50 per ton absent evidence of a market at that price and, therefore, the finding utilizing a market value of $8.50 per ton for all mine run coal was not supported by substantial evidence. Kaiser Steel Corp. v. Property Appraisal Dep't, 1971-NMCA-131, 83 N.M. 251, 490 P.2d 968, cert. denied, 83 N.M. 258, 490 P.2d 975.
Law reviews. — For comment, "Taxation of the Uranium Industry: An Economic Proposal," see 7 N.M.L. Rev. 69 (1976-77).
For article, "Nonneutral Features of Energy Taxation," see 20 Nat. Resources J. 853 (1980).
