Section 7-451 - Minerals, water and other natural resources1.Allocation of receipts. To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the trustee shall allocate them as follows: A. If received as nominal delay rental or nominal annual rent on a lease, a receipt must be allocated to income; [2017, c. 402, Pt. A, §2(NEW); 2019, c. 417, Pt. B, §14(AFF).]B. If received from a production payment, a receipt must be allocated to income if and to the extent that the agreement creating the production payment provides a factor for interest or its equivalent. The balance must be allocated to principal; [2017, c. 402, Pt. A, §2(NEW); 2019, c. 417, Pt. B, §14(AFF).]C. If an amount received as a royalty, shut-in-well payment, take-or-pay payment, bonus or delay rental is more than nominal, 90% must be allocated to principal and the balance to income; and [2017, c. 402, Pt. A, §2(NEW); 2019, c. 417, Pt. B, §14(AFF).]D. If an amount is received from a working interest or any other interest not provided for in paragraph A, B or C, 90% of the net amount received must be allocated to principal and the balance to income. [2017, c. 402, Pt. A, §2(NEW); 2019, c. 417, Pt. B, §14(AFF).] [2017, c. 402, Pt. A, §2(NEW); 2019, c. 417, Pt. B, §14(AFF).]
2.Allocation from interest in water. An amount received on account of an interest in water that is renewable must be allocated to income. If the water is not renewable, 90% of the amount must be allocated to principal and the balance to income. [2017, c. 402, Pt. A, §2(NEW); 2019, c. 417, Pt. B, §14(AFF).]
3.Timing of extractions. This Part applies whether or not a decedent or donor was extracting minerals, water or other natural resources before the interest became subject to the trust. [2017, c. 402, Pt. A, §2(NEW); 2019, c. 417, Pt. B, §14(AFF).]
4.Pre-2002 ownership. If a trust owns an interest in minerals, water or other natural resources on January 1, 2002, the trustee may allocate receipts from the interest as provided in this Part or in the manner used by the trustee before January 1, 2002. If the trust acquires an interest in minerals, water or other natural resources after January 1, 2002, the trustee shall allocate receipts from the interest as provided in this Part. [2017, c. 402, Pt. A, §2(NEW); 2019, c. 417, Pt. B, §14(AFF).]
Amended by 2019, c. 417,§ B-14, eff. 6/20/2019.Added by 2018, c. 402,§ A-2, eff. 7/1/2019.