Tax Honor System Not Working in New Mexico

State lawmakers in New Mexico were told this week the state is missing out on millions of dollars in revenue because oil and gas companies are not reporting their drilling rigs and miles of pipelines.

Appraisal expert Jerry Wisdom, owner of Total Assessment Solutions Corp. testified before a panel of lawmakers and said the honor system is not working in New Mexico.

“We deal with these companies, and we know how they report property,” Wisdom told the Taxation and Revenue Stabilization Committee. “It’s all self-reporting; this is the process we go through to find these items. These omissions are creating an inequity among the other taxpayers.”

He explained his appraisers drive thousands of miles to locate gas pipelines and rigs and other equipment, then cross-check county records to see which assets are being reported and taxed.

The state relies on a self-reporting method but Wisdom maintains it’s resulted in underreported assets and rigs and as a result, homeowners and businesses are paying higher property tax bills.

One Senator, John Arthur Smith, D-Deming agrees.

“From a fairness standpoint, we have a huge problem here,” said the Senator who chairs the Senate Finance Committee.

How much of a problem. Wisdom displayed a map showing the number of rigs operating in Eddy County on Jan. 1 from 2007 to 2006. There 318 rigs but only 111 had been reported as personal property and taxed.

In Lea County, there were 247 operating rigs and 136 were not reported for the tax rolls.