West Virginia Code of State Rules
Agency 110 - Tax
Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT
Series 110-01K - Valuation Of Natural Resources other Than Coal, Oil Or Natural Gas For Ad Valorem Property Tax Purposes
Section 110-1K-3 - Definitions
Current through Register Vol. XLI, No. 38, September 20, 2024
As used in this rule and unless the context clearly requires otherwise, the following terms have the meaning ascribed in this section.
3.1. "Annual acres mined" means the average annual production, as defined in subsection 3.3 of this section, divided by the product of the average thickness (Thk) in feet of the natural resource being mined, as detailed in annual mining reports, multiplied by the tons per acre foot (as set out in Appendix A, Formula 2 to this rule) multiplied by the clean resource recovery rate (RR) at the mining operation, or as calculated from tonnage reported to the West Virginia Office of Miner's Health, Safety and Training/Office of Mining and Reclamation if substantially different. Appendix A, Formula 1, is the method to be used for calculating annual acres mined.
3.2. "Active mining property" means a mineable natural resource on a parcel or portion of a parcel involved in a mining operation, as defined in this Section, permitted by the West Virginia Office of Miner's Health, Safety and Training/Office of Mining and Reclamation. Each and every mineable natural resource shall be considered a separate active mining property.
3.3. "Average annual production" means the arithmetic mean of the annual rate of natural resource production of the three (3) most recent calendar years preceding the July 1st assessment date. If production during any of these three (3) calendar years involved a period of less than eleven (11) months, that production shall be annualized before the average annual production is calculated.
3.4. "Bands of investment discount component" means a discount rate derived by assigning rates to various debt and equity investment financing tiers and summing these rates, weighted by their respective percentages of total financing.
3.5. "Barren" means fee or mineral properties where other natural resource rights are owned, but a specific natural resource may never have been deposited or may have been subsequently removed by erosion.
3.6. "Capitalization rate" means a rate used to convert an estimate of income into an estimate of market value.
3.7. "Clean resource recovery rate" means the percentage of marketable resource that is recovered. The clean resource recovery rate must reflect the difference between calculated whole bed tonnage (tons-in-place) and mined tonnage as reported to the West Virginia Office of Miner's Health, Safety and Training/Office of Mining and Reclamation.
3.8. "Commissioner" or "Tax Commissioner" means the State Tax Commissioner of the State of West Virginia, or his or her delegate.
3.9. "Discount component" means a rate reflecting a provision for returning to an investor a sum of money equal to the aggregate of the anticipated return-on-investment over the economic life of an investment.
3.10. "Economic life method of recapture" means a method of developing a recapture rate by estimating the period of time an investment shall produce a return and estimating an equal periodic rate of recapture of the investment over this return period.
3.11. "Life of mining operation" means the number of years required to exhaust the natural resource at the average annual production rate. Fractional years shall be rounded to the nearest whole number.
3.12. "Management rate" means a rate reflecting a return to an investor for the management of similar investment portfolios.
3.13. "Mineable natural resource" means a natural resource which is so situated that it may be mined using generally accepted mining practices and suitable equipment. The condition of mineability presupposes that the resource is under lease and is being or is about to be mined.
3.14. "Mined-out" means a natural resource, or any portion thereof, determined to be depleted by prior mining operations.
3.15. "Mining operation" means an enterprise, permitted by the West Virginia Office of Miner's Health, Safety and Training/Office of Mining and Reclamation, which is engaged in actively obtaining or preparing to obtain a natural resource or its by-products from the earth's crust by underground, surface and auger mines. Each mining operation may have more than one (1) area designated as "Active Mining Property," as defined in this Section.
3.16. "Multiplier" means the "Present Worth of One (1) Per Period" for the life of the mining operation, as defined in this Section, employing the capitalization rate established in Section 4 of this rule, as determined by a standard mid-year life Inwood Table.
3.17. "Nonliquidity rate" means a rate reflecting a return to an investor representing the loss of interest on an investment arising from the time required to sell the investment.
3.18. "Operator" means an individual, partnership, corporation or other enterprise that is engaged in actively obtaining or preparing to obtain a natural resource or its by-products from the earth's crust in an active mining property.
3.19. "Property tax component" means a rate reflecting a provision for returning to an investor a sum of money equal to property taxes paid over the economic life of an investment.
3.20. "Recapture component" means a rate reflecting a provision for returning to an investor a sum of money equal to his or her investment.
3.21. "Reserves" means the natural resource acres or portions of those acres, which: contain the mineable natural resources; are within a permitted mining property; and, are not within the active mining portion of the property.
3.22. "Risk rate" means a rate reflecting a return to an investor necessary to attract capital to an investment containing a possible loss of principal and/or interest.
3.23. "Royalty rate" means the rates determined annually by the Tax Commissioner which reflect the current market royalty rates for willing buyer-willing seller transactions for each of the natural resources and types of mining operations derived in Section 4 of this rule. The royalty rates are considered to be paid to each owner of a natural resource estate for all actively mined resources.
3.24. "Safe rate" means a rate reflecting a return to an investor on an investment which has little, if any, likelihood of loss of either principal or anticipated return on investment.
3.25. "Summation discount component" means a discount rate expressed as the aggregate of a safe rate, risk rate, nonliquidity rate, and management rate, adjusted for inflation.
3.26. "Thickness" means the measurement of all the visible natural resource, including any thinner resource beds seen above or below the main bed that comprise part of what is generally understood to be a logical mining unit. The thickness used in calculating the annual acres mined are set forth in Section 4 of this rule.
3.27. "Tons per acre foot" means the weight, in tons, of a relatively clean resource one foot in thickness and covering one acre. Appendix A, Formula 2, in this rule contains the method for calculating "tons per acre foot." From this formula, the following in-place tons per acre-foot (resource density) figures shall be used:
Limestone = 3,600 tons per acre foot
(2.65 lbs. resource/ 1 lb. water)
Sandstone = 3,400 tons per acre foot
(2.50 lbs. resource/ 1 lb. water)
Clay and Shale = 3,250 tons per acre foot
(2.39 lbs. resource/ 1 lb. water)
Sand and Gravel = 2,400 tons per acre foot
(1.77 lbs. resource/ 1 lb. water)
Salt = 2,950 tons per acre foot
(2.17 lbs. resource/ 1 lb. water)
3.28. "Unmineable natural resource" means a natural resource which is not a mineable natural resource as defined in this Section 3.
