North Dakota Code 57-38-59.4 – Withholding requirement for oil and gas royalty payments to nonresidents
1. For purposes of this section:
Terms Used In North Dakota Code 57-38-59.4
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Individual: means a human being. See North Dakota Code 1-01-49
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Organization: includes a foreign or domestic association, business trust, corporation, enterprise, estate, joint venture, limited liability company, limited liability partnership, limited partnership, partnership, trust, or any legal or commercial entity. See North Dakota Code 1-01-49
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Partnership: includes a limited liability partnership registered under chapter 45-22. See North Dakota Code 1-01-49
- Person: means an individual, organization, government, political subdivision, or government agency or instrumentality. See North Dakota Code 1-01-49
- State: when applied to the different parts of the United States, includes the District of Columbia and the territories. See North Dakota Code 1-01-49
- Trustee: A person or institution holding and administering property in trust.
- United States: includes the District of Columbia and the territories. See North Dakota Code 1-01-49
- year: means twelve consecutive months. See North Dakota Code 1-01-33
a. “Publicly traded partnership” means a publicly traded partnership as defined in section 7704 of the Internal Revenue Code [26 U.S.C. § 7704] which is not treated as a corporation.
b. “Remitter” means any person who distributes royalty payments to royalty owners. c. “Royalty owner” means a person or entity entitled to receive periodic royalty payments for a nonworking interest in the production of oil or gas.
2. Except as provided in subsection 3, each remitter shall deduct and withhold from the gross amount of the royalty payment made to each nonresident individual or business entity that does not have its commercial domicile in this state at the highest marginal rate in section 57-38-30.3 minus three-fourths of one percent. Sections 57-38-59 and 57-38-60 apply to the filing of the returns and payment of the tax under this subsection.
3. This section does not apply to royalty payments made to a royalty owner if the royalty owner is:
a. The United States or an agency of the federal government, this state or a political subdivision of this state, or another state or a political subdivision of another state; b. A federally recognized Indian tribe with respect to on-reservation oil and gas production pursuant to a lease entered under the Indian Mineral Leasing Act of 1938 [25 U.S.C. § 396a through 396g]; c. The United States as trustee for individual Indians; d. A publicly traded partnership; e. An organization that is exempt from the tax under this chapter; or f. The same person or entity as the remitter.
4. a. This section does not apply to a remitter that produced less than three hundred fifty thousand barrels of oil or less than five hundred million cubic feet of gas in the preceding calendar year as certified to the tax commissioner in the manner and on forms prescribed by the tax commissioner.
b. Each remitter that is exempt from withholding under this subsection shall make an annual return to report royalty payments that exceed the dollar amounts in subsection 6 and must be reported in the same manner as provided in section 57-38-60.
5. a. Each year, a publicly traded partnership that is exempt from withholding under subsection 3 shall transmit to the tax commissioner, in an electronic format approved by the tax commissioner, each partner’s United States department of the treasury schedule K-1, form 1065, or form 1065-B, as applicable, filed electronically for the year with the United States internal revenue service.
b. A royalty owner that is a publicly traded partnership, or an organization exempt from taxation under section 57-38-09, shall report to the remitter and tax commissioner under oath, on a form prescribed by the tax commissioner, all information necessary to establish that the remitter is not required under subsection 2 to withhold royalty payments made to the partnership or organization.
6. If the royalty payment made to a royalty owner under this section is less than six hundred dollars for the current withholding period, or is less than one thousand dollars if the payment is annualized, the tax commissioner may grant a remitter’s request to forego withholding the tax from the royalty payment made to that royalty owner for the current withholding period or, if applicable, the royalty payments for the annual period.