The Arizona Revised Statutes have been updated to include the revised sections from the 56th Legislature, 1st Regular Session. Please note that the next update of this compilation will not take place until after the conclusion of the 56th Legislature, 2nd Regular Session, which convenes in January 2024.
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This online version of the Arizona Revised Statutes is primarily maintained for legislative drafting purposes and reflects the version of law that is effective on January 1st of the year following the most recent legislative session. The official version of the Arizona Revised Statutes is published by Thomson Reuters.
14-7420 - Minerals, water and other natural resources
14-7420. Minerals, water and other natural resources
A. 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:
1. If received as nominal delay rental or nominal annual rent on a lease, a receipt must be allocated to income.
2. 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.
3. If an amount received as a royalty, shut-in-well payment, take-or-pay payment, bonus or delay rental is more than nominal, ninety per cent must be allocated to principal and the balance to income.
4. If an amount is received from a working interest or any other interest not provided for in paragraph 1, 2 or 3, ninety per cent of the net amount received must be allocated to principal and the balance to income.
B. An amount received on account of an interest in water that is renewable must be allocated to income. If the water is not renewable, ninety per cent of the amount must be allocated to principal and the balance to income.
C. This article applies whether or not a decedent or donor was extracting minerals, water or other natural resources before the interest became subject to the trust.
D. If a trust owns an interest in minerals, water or other natural resources on the effective date of this article, the trustee may allocate receipts from the interest as provided in this article or in the manner used by the trustee before the effective date of this article. If the trust acquires an interest in minerals, water or other natural resources after the effective date of this article, the trustee shall allocate receipts from the interest as provided in this article.