Tax questions / Understanding the 1099

Royalty interest owners receiving annually more than $10, and working interest owners receiving annually more than $600 pay taxes. The income reported to the IRS is your gross income prior to any other deductions or taxes. Kindly know that we do not provide tax advice to the owner on how to report the taxes. Please consult a tax professional for advice, if needed.

A 1099 tax form is a type of IRS document used in the United States to report various types of income other than wages, salaries, and tips (which are reported on a W-2 form). Here's a breakdown of what it is and how it's used:

• It's used to report non-employee income to the IRS.
• Typically issued by businesses or individuals who have paid someone $600 or more in a year for services, rent, prizes, or other income types.
• The IRS uses 1099 forms to ensure that all income is reported and taxed appropriately.
• If you receive a 1099, you’re responsible for reporting that income on your tax return—even if you didn’t receive a physical form.

1099 MISC

Report miscellaneous income (royalty interest) to the IRS. Revenue is reportable when ≥ $10. Always reportable - If an owner has income tax withheld (Box #4), ExxonMobil or its affiliate must report it.

1099 INT

Statutory Interest Income - Revenue is reportable when ≥ $600. Always reportable - If an owner has federal tax withheld, ExxonMobil or its affiliate must report it.

1099 NEC

Report non-employee compensation income (working interest) to the IRS. Revenue is reportable when ≥ $600.

1099 Reconciliation

Please find below the math in order to get from the gross value to the net value:

Gross Value - Deductions (already includes the State Withholdings) + Reimbursements - Taxes + Statutory Interest = Net Value.

Tax forms are issued annually based on federal requirements. These forms are typically sent on or about January 31st. Corrections are processed in early April and late July.

Your tax forms are always available in your owner’s profile in our Online System. You can download a copy as many times as you need.

A severance/production tax is a state tax levied against both royalty and working interest owners on their pro rata share of oil and gas production. State governments set owner severance tax rates and levy the tax when natural resources such as oil and gas are "severed" from the earth.

State taxes are withheld pursuant to the applicable laws as they apply to either the state of residency or the state of production.

Federal Backup Withholding is assessed when the owner does not have the SSN/TIN on the account. A timeframe is given for the owner to send in the W9 form so it can be added to the account. If Federal Backup Withholdings were applied, the owner will need to consult with a tax preparer to see if a refund of it is possible.

Ad Valorem taxes on minerals are levied at the county level. Ad Valorem is Latin for "according to value." In Texas (and in some other states), this tax becomes payable only when minerals are producing (as opposed to non-producing) and are billed and collected once per year. Mineral interests are classified as real property and are taxed based on the appraised fair market value. In its simplest form, fair market value is the price a willing buyer from the open market will pay for a mineral interest within the currently prevailing market conditions.