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Faqs

GENERAL QUESTIONS

PermRock Royalty Trust (the “Trust”) was established in 2017 by a trust agreement among Boaz Energy II, LLC (“Boaz Energy”), as Trustor, Argent Trust Company, as Trustee (the “Trustee”) effective December 30, 2022 and Wilmington Trust, National Association, as Delaware Trustee.

No. The Trust is a grantor trust.

Unitholders receive monthly distributions of the Trust’s net cash flow. The Trust is a Delaware statutory trust formed to own an 80% net profits interest (the “NPI”) in certain oil and natural gas producing properties in the Permian Basin of West Texas (the “Underlying Properties”) on a perpetual basis.

The Trust is a flow-through, grantor trust for federal income tax purposes. Unitholders receive annual Forms 1099 reporting their income from the Trust. Information will be provided on the Trust’s website and in a tax information booklet regarding deductions, including depletion deductions, that shield a portion of a unitholder’s income from tax and reduce a unitholder’s basis in their units (calculated as the greater of cost depletion or, if allowable, percentage depletion). The Trust cannot acquire additional properties, have any leverage or hedge its oil and gas production (other than hedges put in place by Boaz Energy at the time of the Trust’s initial public offering).

Boaz Energy is the current owner and operator of a majority of the Underlying Properties.

No. Unlike actively managed trusts where a management team is empowered to grow the trust’s assets through new acquisitions, the Trustee is not empowered to engage in any business or commercial activity, nor can the Trustee use any portion of the trust estate to acquire additional properties.

Distributions are paid monthly to unitholders who hold units on the record date (the “Record Date”), which is typically the last business day of each month. The distributions are paid 10 business days following the Record Date.

Based on third-party reserve reports, economic production from the Underlying Properties is expected for at least 75 years.

The Trust does not have a specific termination date. However, some events that could cause the Trust to dissolve include:

  • the Trust, upon the approval of the holders of at least 75% of the outstanding units could sell the NPI;
  • the annual cash available for distribution to the Trust is less than $2 million for each of any two consecutive years;
  • the holders of 75% of the outstanding trust units vote in favor of dissolution; or
  • the Trust is judicially dissolved.

Once the decision has been made to dissolve the Trust, the Trust’s assets will be sold either by private sale or public auction and the cash received from the sale, after payment or the making of reasonable provision for payment of all claims and obligations of the Trust, will be distributed to the unitholders of record at that time.

You can download the Final Prospectus by clicking on the PDF
Final Prospectus

You can download the Conveyance by clicking on the PDF
Conveyance

You can download the Trust Agreement by clicking on the PDF
Trust Agreement

No. The trust cannot buy or sell the units. You will need to do that through your broker.
No. The trust cannot have a DRIP program set up. You may be able to set that up through your broker.
No. That is a decision that you should make in conjunction with your financial advisor or broker.

No. The Trust is a grantor trust. The trust does not have a specific end date. There are, however, some events that could cause the trust to terminate:

  • If there are two successive fiscal years In which the Trust’s gross revenues from the Royalty Properties are less than $2,000,000 per year,
  • A vote of Unitholders.
Once the decision has been made to terminate the Trust, the Royalty Properties will be sold for market value and the cash received from the sale less any applicable administrative costs will be distributed to the Unitholders of record at that time.
No. We don’t maintain any Unitholder records here. You will want to contact your broker or the transfer agent to make sure that they have the correct address in their records.

American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
1-800-358-5861
www.astfinancial.com

TAX QUESTIONS

Although the deadline imposed by the IRS is not until April 1st, we generally have the booklets and yellow worksheets mailed by March 1st.
No. The distributions are considered royalty income and are ordinary income, taxed at your marginal rate.
No. The distributions are considered ordinary income and taxed at your marginal rate.
We are considered a grantor trust, not a partnership and do not have the same reporting requirements that a partnership does. The cash distributions are reported on a 1099-Misc form by your broker.

The distribution itself is not a return of capital. However, unitholders are entitled to a recovery of their capital investment via a sale of units and through cost depletion deductions. The depletion allowance may be considered a return of capital.

The yellow worksheet contains important tax information for the current year just ended. You should compare the information regarding the number of units and dates you were a unitholder of record located approximately 2/3 from the top of the page with your records to determine that the correct information was reported to the Trust. Once you have determined that the information is correct, then you can use the dollar amounts located approximately half-way down the page to report on the appropriate schedules on your tax return. If the information is not correct, then you must determine your proportionate share of the Trust revenues and expenses using the tax booklet that was included with the yellow worksheets.

SPECIFIC QUESTIONS

If there is a difference between your records and what the yellow worksheet shows, then you should contact your broker to compare the number of units owned and the times for which those units were owned. You will need to calculate your proportionate share of the revenues and expenses for the Trust manually using the tax booklet that came with the yellow worksheet, as we cannot provide an amended worksheet. If there is a difference between your records and what the yellow worksheet shows, then you should contact your broker to compare the number of units owned and the times for which those units were owned. You will need to calculate your proportionate share of the revenues and expenses for the Trust manually using the tax booklet that came with the yellow worksheet, as we cannot provide an amended worksheet.
If you have changed brokers, added or made changes to accounts already with your broker; or if you hold units with more than one brokerage firm, you will receive a yellow worksheet for the units held with each firm. Sometimes if brokerage firms have merged, the information is not merged together into one system. All of the above scenarios can result with you receiving more than one yellow worksheet. Usually if you add the worksheets together, it will equal the total units you own for the period your records show you owned those units. If adding the yellow worksheets together does not match the information in your records, then use your records and the tax booklet to calculate your proportionate share of the trust income.
No, this information is contained in a static database that cannot be changed or amended. You will need to calculate your proportionate share of the revenues and expenses for the Trust manually using the tax booklet that came with the yellow worksheet.
No, this information is contained in a static database that cannot be changed or amended. You will need to calculate your proportionate share of the revenues and expenses for the Trust manually using the tax booklet that came with the yellow worksheet.
No. Your best course of action is to calculate your information using the forms provided in the booklet and then try and duplicate the forms in your software. If that doesn’t work, you should call the software manufacturer and speak to them about the specific forms used and how to fill them out.
No, you do not report any trust income in an IRA or other tax-deferred account.

DEPLETION QUESTIONS

The cost basis is the total purchase price plus any commissions paid.
No. Since we don’t maintain any Unitholder records, you should consult your broker or review your files for that information.
No. You will need to calculate the depletion for each block of units purchased separately.
You sold your units before the first record date of that particular year; therefore you only owned the units through the previous year.

Disclaimer

The information contained in this section of our website is concise and is intended to only be a summary. Therefore, any information provided may not be complete. Unitholders are encouraged to read the Trust Agreement which is the document that describes the rights of Unitholders. Also, in the event of a conflict between anything described on our Website and the terms of the Trust Agreement, the Trust Agreement shall control. Furthermore, the federal, state and local tax consequences, and associated tax filing responsibilities, to a Unitholder of the ownership and sale of Units is dependent in part on each Unitholder’s specific tax circumstances; therefore, Unitholders should consult their own tax advisors regarding all tax issues concerning the ownership and sale of Units. The Trust exercises thorough effort to ensure the accuracy of the content of this Website, but makes no warranties as to the site’s accuracy or completeness and shall in no way be responsible for any loss or damages resulting from inaccuracies in information or any alterations made by third parties.

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© 2024 | The Trustee for PermRock Royalty Trust is Argent Trust Company.

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