Arkansas method of taxing gas royalties challenged in White County suit

SEARCY, Ark. (AP) — A White County couple has filed a lawsuit claiming that property taxes levied by counties on natural gas royalties are illegal because taxes on the gas have already been paid by companies removing it from the ground.

The suit in White County Circuit Court says the severance tax paid by the companies extracting the gas make the royalties tax an "illegal exaction."

The suit was filed April 1 by Kenneth Joe May and Mary May. It names as defendants all of the state's assessors and collectors, and seeks class-action status that would include anyone who pays the property tax on gas royalties.

In addition to claiming double taxation, the suit also labels as invalid a formula used by assessors across the state to figure the value of gas royalties.

"The formula uses figures that are not realistic," said Heber Springs attorney Richard Mays, who filed the suit. "The average contract price used by the assessor doesn't reflect the actual price paid for gas produced on the property. In fact, it's way high."