Land owners will have to pay taxes on the majority of the revenue that they receive from PDC including the following:

  • Royalties
  • Rental payments
  • Lease bonus payments
  • Delay rental payment
  • Right-of-way payment (partially taxable; based upon landowner’s tax basis in property subject to the right-of-way)
  • Damages (fully or partially taxable; based upon nature of the damages and tax basis of landowner): For example: Crop damage payments are taxable income because the damage payment is replacing income that would have been received from the sale of crops. Taxable income from damage payments for timber or property is dependent on whether any landowner tax basis can be allocated to the timber or property that was damaged. Contact your tax advisor for assistance with these determinations.

Production taxes consist of Severance Taxes and Ad Valorem Property Taxes which are paid annually based upon the amount of production or revenue from a well. These taxes are allocated and shared by certain ownership interests dependent upon statute, lease or other agreement, or the particular tax regulations.

A federal form W-9, Request for Taxpayer Identification Number (TIN) and Certification, is the IRS stipulated way of making sure “payers” of taxable income, other than employers, have the correct name, address, and identification number of the individual or entity that is the recipient of taxable income. This form is commonly sent so that a recipient can certify that the reported information is correct.

Please note that if PDC does not have the correct information on file, we will receive a report from the IRS noting that your name, address, or identification number does not match their records and we will be charged a penalty. In addition, if the incorrect information is not properly updated, we will be required to “withhold” income taxes from your future payments.

IRS form 1099 is the designated form for payers of certain types of taxable income (other than wages paid by employers) to report this income to the recipient and the IRS. A 1099-MISC is the type of 1099 that is sent for miscellaneous types of income such as royalties and rents.

Form 1099-MISC is required to be mailed to the recipients by the end of January and to the IRS by the end of February. You should therefore normally expect to receive your 1099-MISC from PDC Energy sometime in early February.

Dependent upon the type of income being reported, your amount on the 1099 may be the gross amount you earned during the tax year prior to certain deductions, resulting in the net payment amount you received.