Diepenbrock Explains National Helium Settlement

Earlier this year, Seward County settled a tax appeal lawsuit by one of the county’s largest taxpayers. The taxpayer in the lawsuit, National Helium Corporation, had constructed a new plant in 2015, and according to Seward County Counsel Dan Diepenbrock, the new plant was appraised for $177 million. However, Tuesday, Diepenbrock said National Helium claimed that new towers constructed with the plant were equipment and under Kansas law tax exempt, and this would make 90 percent of the plant tax exempt. “That’s been the big battle,” he said. “We said ‘No it’s the other way around. You can’t tell me that tower that’s five stories high is the same as a refrigerator. That’s part of the real estate, so it should be taxed as part of the real estate.’”Diepenbrock said there were millions of dollars at stake with the lawsuit. “We were set to go to final hearing in September, but we had a mediation in June,” he said. “We ended up settling the case sometime in July. We agreed on a value of the plant.” The National Helium plant was finished and put into production in mid-2015, and in 2016, the plant was first put on the county’s tax rolls. Diepenbrock said the lawsuit was an expected move on the company’s part. “We knew the battle was coming, and we knew they were going to protest and appeal,” he said. Diepenbrock said in 2016, National Helium’s tax bill was nearly $5.88 million, but because of the claim that 90 percent of the plant was exempt, company officials claimed only 10 percent of that total was due. “We’re litigating the case as we go. 2017 comes along,” he said. “They paid this, yet they appealed. They’re looking to win the appeal and get that money refunded. 2017 comes along. Their tax bill is a little higher. It’s $6.1 million. They paid the first half, which is due in December of 2017. When May of 2018 came along, they decided not to pay that second half because we were in litigation.” Diepenbrock said the case was scheduled to go to trial in September, and National Helium officials were still opting to go to court to see what would happen. The case, though, would be settled in July. Diepenbrock said before the settlement was reached, the company was paying $6 million in taxes, and in 2016, that was what was paid. The next year, though, they would only pay the first half of that amount, $3 million, making for $9 million between 2016 and 2017. “The way we settled the case, their tax that they owed was going to be about $3.55 million, I believe,” he said. Diepenbrock said under the settlement, National Helium would pay about $7 million, but because $9 million had already been paid, the county would owe a $2 million refund. He added based upon the settlement, the county agreed to a lower assessed value because of several opinions from the Kansas Board of Tax Appeals that would have gone against the county. “There’s a nitrogen plant in Montgomery County,” he said. “There’s another type of plant similar to this in other places. The Board of Tax Appeals opinions, they’ve been getting a little better for counties, but we were looking at a risk. I told the county commissioners when this all started that, even though the Board of Tax Appeals had been ruling against counties, I thought in the end we were going to win, but we would have to take it all the way to the Supreme Court.” Diepenbrock also warned commissioners they would be in the case for a long haul, and refunds would likely build up should National Helium win. Still, he was confident the county would win. “We would probably lose at the Board of Tax Appeals, and we’d have to take it to the Court of Appeals,” he said. “If we could get the Supreme Court to take the case, if we’d still lost at the Court of Appeals, I was convinced that we would ultimately win. I was convinced that an appellate court, including the Supreme Court, would look at those five story towers and say, ‘No, it’s not like a refrigerator or an air conditioner. It’s part of the real estate.’ We were dug in for the long haul, but knowing that there was the risk, we had the mediation in June and ultimately settled the case.” The refund the county now owes under the settlement is $3.101 million, but Diepenbrock said National Helium agreed to not require the county to simply write a check for that amount. “We could set that off over four years,” he said. “Over the next several years, they are going to pay, I think it’s about $3.52 million in tax, and for the next four years, we will set off $775,367 against the $3.52 million. We don’t have to cough up the money essentially, and the college doesn’t have to send money back and the school district doesn’t have to send money back.” Diepenbrock said because both county and National Helium officials did not want to keep litigating the case every year, the agreement extends through 2023.

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