Montana authorities must recalculate how much is owed by a Wyoming mining company that challenged its $3.4 million tax bill, after a judge ruled Monday that the state incorrectly valued the company’s coal sales over a three-year period.
The ruling from District Judge Jeffrey Sherlock in Helena came in a lawsuit filed by Cloud Peak Energy Inc.
The state alleges the Gillette, Wyo., company undervalued coal that it sold between 2005 and 2007 and paid too little in taxes as a result. The coal was sold to affiliates that Cloud Peak partially owns - a common industry practice that also is under scrutiny by federal regulators investigating royalties on coal shipped to Asia.
Sherlock said tax authorities erred in coming up with a value for Cloud Peak’s coal based on when it was shipped. He agreed with Cloud Peak attorneys who said the value should be based on when the contract was signed.
“The date of the contract is the better metric of market value - it is the ‘actual sale date’ more than the date when the coal is loaded onto a train,” Sherlock wrote.
Montana officials said taxes, interest and penalties were owed on sales from Cloud Peak’s Spring Creek strip mine near Decker, a 260-worker operation that dug up more than 17 million tons of coal last year. State officials wanted the company to pay an additional $1.9 million in taxes, $1.2 million in interest and $232,000 in penalties for the three years.
Cloud Peak sued the Department of Revenue over the matter in March 2012. The company has acknowledged that it may owe some additional tax, but its lawyers argued that the $16.31 per ton value alleged by the state was roughly twice as much as the coal’s actual value.
Spokesman Rick Curtsinger said Cloud Peak would work with the state agency to finalize what it owes.
“Cloud Peak Energy is committed to complying with all of the laws and regulations governing its business activities and has a strong reputation for compliance and stewardship,” Curtsinger said.
Dan Whyte, deputy chief legal counsel of the Montana Department of Revenue, said the agency was evaluating the judge’s decision to determine what course of action to take.
Cloud Peak paid $57 million in state and local taxes and royalties in Montana in 2012, according to the company. Taxes for 2005-07 were not available.