royalty clause with other provisions in leases (or addenda attached to the lease) that prohibits the deduction of post-production costs. Additionally, it is unclear how Ohio courts will handle oil and gas leases where the point of valuation of the royalty payment is shifted from the wellhead to a point further downstream. It is important to pay careful attention to the specific language in the royalty provision in determining whether the deduction of post- production costs is permissible.
Colorado and Ohio, is a regular speaker on issues relating to the development of unconventional shale plays and has given a variety of presentations regarding legal issues relating to oil and gas development. Eli earned his B.A from Kenyon College and his J.D., with honors, from Marquette University Law School.
Zachary Oliva is a partner with Kiefaber & Oliva LLP. Zack focuses his practice on energy and corporate law. He regularly assists clients in the drafting of oil and gas title opinions, purchase and sale agreements and contract interpretation. Additionally,
About the Authors:
Eli Kiefaber is a partner with Kiefaber & Oliva LLP. Eli focuses his practice on oil and gas matters, including acquisition and divestiture of oil and gas assets, title opinions, joint operating agreements, federal leases, pooling and unitization issues.
he assists clients with the negotiation, drafting and review of business formations, contracts and service agreements. Zack earned his B.A. from The Ohio State University and his J.D. from Capital University Law School. He is licensed to practice in New Mexico, Ohio and Texas.
Eli is licensed to practice law in Texas, Oklahoma,
PA Requires Oil and Gas Lessees to Withhold State Income Taxes from Nonresident Lessors
By Glenn A.W. Thompson, Steptoe & Johnson PLLC
Under Act 43 of 2017 beginning January 1, 2018, anyone that pays Pennsylvania-source non-employee compensation or business income to a non-resident individual or disregarded entity that has a non-resident member, and is required to file a Federal Form 1099-Misc must withhold an amount computed at the specified tax rate (currently 3.07%). The new withholding obligations clearly apply to most payments to non-resident independent contractors for services in the course of a trade or business. The obligation extends beyond non-resident individuals to payments to a disregarded entity (like an LLC) that has a non-resident member. However, the definition of “payments” does not include a partner or shareholder’s distributive share of income from a partnership or Pennsylvania S corporation. Any lessee of Pennsylvania real estate who makes a lease payment to a non-resident lessor, defined to include an
individual, estate or trust, must withhold Pennsylvania personal income tax on rental payments. Obviously contemplating oil and gas leases, “lease payments” include but are not limited to rents, royalties, bonus payments, damage payments, delay rents and other payments made pursuant to a lease. There is an exception for
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