Board of Supervisors v. Superior Oil Corporation

• Decision Date: 13 October 1925
• Citation: 210 Ky. 539
• Parties: Board of Supervisors of Estill County v. Superior Oil Corporation.
• Court: United States State Supreme Court — District of Kentucky

210 Ky. 539

Board of Supervisors of Estill County v. Superior Oil Corporation.

Court of Appeals of Kentucky.

Decided October 13, 1925.

Taxation — Oil and Gas Leases, and Rights Thereunder, Subject to Taxation for Fair Cash Value, Estimated at Price They Would Bring at Fair Voluntary Sale — "Property." — Oil and gas leases, and rights conferred thereby are "property" within meaning of Constitution, section 172, and Kentucky Statutes 1922, section 4020, and are subject to taxation at their fair cash value, estimated at the price they would bring at a fair voluntary sale, and arbitrarily fixing valuation at a percentage of gross production during tax period was erroneous.

Appeal from Estill Circuit Court.

JOHN W. WALKER for appellant.

RIDDELL & SHUMATE for appellee.

OPINION OF THE COURT BY COMMISSIONER SANDIDGE.

Reversing.

Appellee, Superior Oil Corporation, owns 29 oil and gas leases in Estill county, Kentucky, covering 1,865 acres of land, on which there are 230 producing oil wells. It listed those properties for taxation as of July 1, 1922, the assessment date, as being worth $75,000.00. Appellant, board of supervisors, after notice and upon hearing, raised the assessment, fixing $255,280.00 as the value of its oil and gas leases and rights, and $30,000.00 as the value of its oil well supplies, materials, equipment, tanks, etc. Appellee thereupon prosecuted an appeal to the Estill quarterly court. Upon the trial before that tribunal appellee was denied any relief and the judgment of the board of supervisors was affirmed. It thereupon prosecuted an appeal to the Estill circuit court, and, upon the trial there, the court fixed the value of appellee's property for purposes of taxation at $129,600.00. Appellant, board of supervisors, prosecutes this appeal from that judgment.

That the court reached an erroneous conclusion is demonstrated beyond question by the following quotation from the judgment rendered herein:

"The court being advised holds and adjudges that on account of the inability of the parties to show by evidence what the future value of the property will be, or what the oil production from the property in the future will be, that it is impracticable to capitalize the value of these and like properties, and that the true method of taxation of properties of this character, in view of the fact that the owners are required to pay the oil production or license tax, is to take the gross income for the taxing period and to reduce the amount thereof 40 per cent, to cover costs of operation, depreciation and other charges, leaving the balance of 60 per cent, which amount should be taxed for each year, and applying this percentage to the total incomes from these properties for said year at $216,600.00, the court finds that the value of said properties for taxation for said year is $129,600.00."

Oil and gas leases and the rights conferred thereby are "property" within the meaning of section 172 of our Constitution and are subject to taxation at their fair cash value, estimated at the price they would bring at a fair, voluntary sale. Constitution, section 172; section 4020, Kentucky Statutes, 1922; Wolfe County v. Beckett, 127 Ky. 252, 105 S.W. 447; Mt. Sterling Oil & Gas Company v. Ratliff, 127 Ky. 1, 104 S.W. 993; Raydure v. Board of Supervisors, 183 Ky. 84, 209 S.W. 19; ...