Mineral Management for Organizations
Our services can benefit banks (trust managers), CPA’s, institutions, financial planners, attorneys and foundations
CRS can help craft, guide and support your organization’s mineral strategy
Every nonprofit seeking to fulfill its mission and service its community faces periods of uncertainty in its lifecycle, especially when it comes to dealing with mineral transactions. Questions surrounding compliance can be more complicated for tightly regulated entities than for traditional individual or commercial buyers and sellers.
Each mineral transaction should begin with a thorough evaluation of the asset in question. Caple would examine if there are any burdens, title concerns, market considerations, restrictions or debt obligations tied to a mineral interest that would prevent a smooth transition during a donation or future sale or that may affect ongoing management. The interest should then be financially evaluated to ensure that the property ownership supports the organization’s vision, short-term and long-term objectives.
Before beginning any mineral or real estate transaction, it is important to consider the ways in which your nonprofit organization’s objectives can be closely aligned with its overall mission. For instance, a property’s overall revenue or potential sale price can play a major role in determining how effectively an organization will be able to serve its community.
Oil and gas are commodities and therefore, oil and gas minerals and royalties are high risk and speculative in nature. As a nonprofit organization takes stock of each component of a mineral ownership or pending transaction, it must consider its fiduciary responsibility to make decisions that benefit the long-term stability of the organization.
The characteristics of a mineral asset can have a significant impact on the people who are stakeholders in your organization. In the case of a nonprofit enterprise, the ownership of these assets should tie into the mission of the organization and help further its agenda, financially support the mission and agenda, and not detract from the organizations image or credibility in that mission and agenda.
The pieces that make up a mineral transaction for a nonprofit entity will not be in harmony with one another unless each component is considered for how it impacts the whole. For instance, financial considerations must take into account possible tax concerns, budget needs and forecasting, financing options and donor intent.
Accepting a mineral interest donation, selling an interest, or signing a long-term lease can indicate the strength and stability of a nonprofit organization. Once a monthly royalty payment is established, or a sales price realized, your organization can focus its budget and resources on the important services it provides to its serviced community.
Finalizing a transaction of any kind helps an organization establish its presence in a community. A church or other organization will become a hub of activity, improving community cohesion and providing support to their local area.
Organizations that fall under the 501(c)(3) designation qualify for any number of local, state, and/or national tax benefits. According to IRS regulations, nonprofits are exempt from paying federal taxes, sales and property taxes. Some states may even provide relief to nonprofit organizations for payroll taxes.
Owning property is a way for nonprofits to gain control over their finances, generate additional income by leasing unused portions, or leverage assets to strengthen an investment portfolio.
Increased Donor Commitment
A wisely executed mineral sale is a signal to donors of a nonprofit’s long-term strength and its commitment to achieving mission goals and meeting strategic objectives.