MILDRED J. MAZGAJ, Pеtitioner Below, Petitioner v. MATTHEW R. IRBY, IN HIS OFFICIAL CAPACITY AS STATE TAX COMMISSIONER OF WEST VIRGINIA, Respondent Below, Respondent
No. 24-ICA-395
IN THE INTERMEDIATE COURT OF APPEALS OF WEST VIRGINIA
June 27, 2025
W. Va. Office of Tax Appeals Docket No. 23-1064
MEMORANDUM DECISION
Petitioner Mildred J. Mazgaj appeals the September 3, 2024, Final Decision of the West Virginia Office of Tax Appeals (“OTA“) that affirmed the valuation by the State Tax Commissioner of Wеst Virginia of Ms. Mazgaj‘s oil and gas interests in Ohio County, West Virginia. Respondent Matthew Irby filed a response in his official capacity as State Tax Commissioner of West Virginia (“Tax Commissioner“).1 No reply was filed.
This Court has jurisdiction over this appeal pursuant to
During the relevant time period, Mildred J. Mazgaj owned mineral interests in seven natural gas wells in Ohio County. The parcel at issue in this appeal had 52.47567 acres producing oil and natural gas. This case arose after the Property Tax Division of the Tax Commissioner‘s Office issued a tentative notice of increase in appraisal to Ms. Mazgaj on January 17, 2023, notifying her that the tentative mineral appraisal for one of her oil and gas interests had increased by at least ten percent and one thousand dollars, as required by
OTA conducted an evidentiary hearing on November 7, 2023, and both parties presented evidence and testimony. The main issue before OTA was whether the Tax Department properly valued Ms. Mazgaj‘s mineral interest. Frank Capehart, Assistant Director of the Tax Commissioner‘s Property Tax Division, testified regarding the process of valuing Ms. Mazgaj‘s interests, starting with the gross receipts paid to her by the producer. He also noted the volatility of oil and gas royaltiеs in previous years due to changes in natural gas prices and the modification from using one-year averages to three-year averages in calculations. Mr. Capehart explained that “the only time acreage affects the valuation for an active oil and gas property is if the producing acreage exceeds 125 аcres.” He testified that none of Ms. Mazgaj‘s royalty interests exceed the 125-acre threshold, thereby rendering this provision meaningless for her valuation. After the hearing, the parties submitted briefs for OTA‘s consideration.
In her arguments, Ms. Mazgaj asserted that her mineral interest was improperly assessed because the Tax Department did not follow the guidelines in thе pertinent emergency legislative rule sections 3.12 (defining “communitized area“) and 3.34 (defining “natural gas producing property“).2 Ms. Mazgaj alleged that her mineral acreage
Notably, the emergency rule cited by Ms. Mazgaj is no longer effective. After its adoption, the Legislative Rule-Making Review Committee proposed amendments that were adopted, and the final and current version of
In its final decision, OTA determined that the controlling law to be applied in the appeal is
The West Virginia Administrative Procedures Act governs our standard of review in administrative appeals, including appeals from final decisions of the Office of Tax Appeals:
(g) The court may affirm the order or decision of the agency or remand the case for further proceedings. It shall reverse, vacate, or modify the order or decision of the agency if the substantial rights of the petitioner or petitioners have been prejudiced because the administrative findings, inferences, conclusions, decision, or order are:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority or jurisdiсtion of the agency;
(3) Made upon unlawful procedures;
(4) Affected by other error of law;
(5) Clearly wrong in view of the reliable, probative, and substantial evidence on the whole record; or
(6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.
Findings оf fact of the administrative law judge will not be set aside or vacated unless clearly wrong, and, although administrative interpretation of State tax provisions will be afforded sound consideration, this Court will
review questions of law de novo. Syllabus Point 1, Griffith v. ConAgra Brands, Inc., 229 W. Va. 190, 728 S.E.2d 74 (2012).
Syl. Pt. 1, Antero Res. Corp. v. Steager, 244 W. Va. 81, 851 S.E.2d 527 (2020).
On appeal, Ms. Mazgaj asserts four assignments of error. First, she argues that the OTA implicitly applied the incorrect burden of proof to Ms. Mazgaj‘s apрeal because it agreed with and adopted the Tax Commissioner‘s arguments. In the Tax Commissioner‘s briefing below, it quoted Syllabus Point 2 of Western Pocahontas Properties, Ltd. v. County Commission of Wetzel County, 189 W. Va. 322, 431 S.E.2d 661 (1993), which states the “burden is on the taxpayer challenging the assessment to demonstrate by clear and convincing evidence that the tax assessment is erroneous.” However, as Ms. Mazgaj correctly points out, the Legislature altered the burden of proof in
However, we cannot find that OTA erred by applying the wrong burden of proof when its decision does not affirmatively state the incorrect standard. The decision merely states that “the burden of proof is on the petitioner to show the West Virginia State Tax Department‘s actions are erroneous, unlawful, void or otherwise invalid” and cites to
An appellant must carry the burden of showing error in the judgment of which [she] complains. This Court will not reversе the judgment of a [lower tribunal] unless error affirmatively appears from the record. Error will not be presumed, all presumptions being in favor of the correctness of the judgment.
Syl. Pt. 5, Morgan v. Price, 151 W. Va. 158, 150 S.E.2d 897 (1966); Cobble v. Lester, No. 24-ICA-201, 2024 WL 5201017, at *2 (W. Va. Ct. App. Dec. 23, 2024) (memorandum decision). Furthermore, “where an order of a court of record is merely silent upon any particular matter, it will be presumed, notwithstanding suсh silence, that such court
For her second and third assignments of error,4 Ms. Mazgaj claims that OTA abused its discretion by agreeing with the Tax Commissioner that “basing valuations on royalty production is unrelated to acreage” because “production itself is indeed based on a royalty owner‘s acreage contained within a unit.” Accordingly, Ms. Mazgaj argues that thе emergency legislative rule placing limitations on communitized acreage at 125 acres should directly impact the Tax Commissioner‘s calculation of her royalty production valuation and that OTA should have found that applying sections 3.12 and 3.34 of the emergency legislative rule that defined “communitized area” and “natural gas producing property” was necessary when making the relevant calculations.
Under West Virginia law, the Tax Commissioner was obligated to determine the value of property producing oil, natural gas, natural gas liquids, or any combination thereof “at its fair market value determined through the process of applying a yield capitalization model to the net рroceeds.”
The emеrgency rule cited by Ms. Mazgaj contains a section titled “Methods of Valuation” that also dictates a process of applying a yield capitalization model to net receipts.
[t]he summation of the annual discounted income streams shall be the market value estimate for the royalty interest of the producing oil or natural gas well
for an area of up to one hundred twenty-five (125) acres per producing natural gas wells and up to forty (40) acres per producing oil wells.
Based on the record before us, the Tax Commissioner followed these procеdures and determined the appraised value of Ms. Mazgaj‘s natural gas royalty interest for the 2023 tax year. Ms. Mazgaj does not argue any error in the calculations performed by the Tax Commissioner, except that she states that “the valuation process utilized by the Tax Commissioner‘s office is simply incomplete.” However, rather than making a thorough, cogent argument regarding this assertion, Ms. Mazgaj summarily states that the definitions of “communitized area” and “natural gas producing property” from the emergency legislative rule should “come into play.” Her brief before this Court does not outline the process she proposes should have been used, and without citation to the record, she only brоadly references the “algebraic equation” she presented below to demonstrate what the valuation process would look like had the Tax Commissioner “followed the final piece of the puzzle.” Upon review, we find nothing in the emergency rule‘s definitions of “communitized area” or “natural gas producing property” that would alter or add a step to the valuation provisions that were undisputedly properly undertaken by the Tax Commissioner. Accordingly, this assignment of error fails.
For her final assignment of error, Ms. Mazgaj asserts that OTA erred when it stated it does not have the authority to grant equitable relief because the Legislature granted it such authority in
Accordingly, we affirm the September 3, 2024, decision of the Office of Tax Appeals.
Affirmed.
ISSUED: June 27, 2025
CONCURRED IN BY:
Chief Judge Charles O. Lorensen
Judge Daniel W. Greear
Judge S. Ryan White
Notes
§ 110-1J-3. Definitions. As used in this rule and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section.
3.12. “Communitized area” means an area involving more than one leаse, due to a cooperative agreement or legal mandate, and is developed for the drilling and operation of a single or multiple oil or gas wells, or both, by one or more operator.
3.34. “Natural gas producing property” means the property from which natural gas or natural gas liquids has been produced or extracted at any time during the calendar year preceding the July 1 assessment date. Natural gas producing property includes the interest or interests underlying an area of up to one hundred twenty-five (125) acres of surface per vertical well for property with active wells on the parcel; and communitized acres of surface per horizontal well for properties with one or more active wells. All acreage of a natural gas producing property in excess of one hundred twenty-five (125) acres per vertical well, or the communitized acres per horizontal well, shall be valued at the non-producing rate per acre referenced in section 4 of this rule.