Severance Tax (for an LLC) Bond - Southern Ute Indiana Tribe in Colorado

Brief Summary

The Southern Ute Indian Tribe does not set one bond amount for severance tax. Each working interest owner or operator posts security equal to its own highest two month tax liability, so the figure grows with production. A surety bond lets your LLC meet that requirement without tying up a cash deposit or a bank letter of credit in the Tribe's treasury.

Section 21-2-114 of the Southern Ute Indian Tribal Code requires working interest owners and operators paying the Tribe's 6.5% severance tax to post security equal to the highest tax liability they have accrued during a two month period. A surety bond is one accepted form. Operators with at least five consecutive years of payments and a good compliance record may apply for a waiver.

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How to Apply for a Severance Tax (for an LLC) Bond:

• Confirm the LLC is a working interest owner or operator paying severance tax to the Southern Ute Indian Tribe.
• Get the required security amount from the Tribe, based on the LLC's highest two month tax liability.
• Provide the LLC's legal name and the names of its members or managers to the surety.
• Supply recent financial statements for the LLC, since the bond amount tracks production revenue.
• Have the bond issued with the Southern Ute Indian Tribe as obligee and file it with the Tribe.
• Watch for a written order from the Authorized Representative, since late posting draws a $200 per day penalty.

Detailed Information About the Colorado Severance Tax (for an LLC) Bond:

Who has to post security

The Southern Ute Indian Tribe taxes oil, condensate, natural gas, methane, casing head gas, processed gas and associated liquids severed from lands under its taxing jurisdiction. Title 21 of the Southern Ute Indian Tribal Code, the Severance Tax Code, sets the rate at 6.5% of value in Section 21-2-103. The current version was repealed and replaced by Resolution No. 2025-212, approved by the Bureau of Indian Affairs on April 9, 2026, and effective June 1, 2026. Under Section 21-2-114(1), all working interest owners or operators paying the tax must post security with the Tribe. An LLC that holds a working interest or operates wells on the Reservation is the principal on the bond.

How the amount is set

There is no flat figure. The security must equal the highest tax liability that has previously accrued to that working interest owner or operator during a two month period. A company with large monthly production posts a much larger bond than a small interest owner, and the amount can need to rise as production grows. Ask the Tribe for the figure it has calculated for your company before the bond is written.

Five year waiver

Section 21-2-114(2) lets working interest owners or operators who have paid severance tax to the Tribe for at least five consecutive years, with a record of good standing and tax compliance, apply in writing to the Tribal Council or its Authorized Representative for a waiver. The waiver is discretionary. The Tribe weighs the totality of the circumstances and the best interests of the Tribe. A new operator or a newly formed LLC will not have the five year history and should plan to post security.

Other accepted forms of security

Besides a surety bond, the code accepts a cash deposit held in suspense by the Tribe's treasury, or an assignment to the Tribe of a certificate of deposit or irrevocable letter of credit from a federally insured bank or savings and loan association. Whatever form is used is released only after the taxpayer is no longer subject to the code and the Authorized Representative, the Tribe's Chief Financial Officer or a designated Severance Tax Administrator, determines that no tax, penalty or interest is owed.

What happens if you do not post it

Under Section 21-2-111(3), a person who fails to comply with a written order to post security is assessed a civil penalty of $200 per day for each day of violation. Monthly returns and payments are due by the last day of the second month after the month of severance under Section 21-2-109(4), and the bond backs those payments. Confirm the current bond form and filing steps with the Tribe before the bond is issued.

Eligibility and Requirements for a Colorado Severance Tax (for an LLC) Bond:

• Bond amount equal to the highest tax liability accrued during any two month period, under Tribal Code Section 21-2-114(1).
• Southern Ute Indian Tribe named as obligee.
• Bond stays in force until the LLC is no longer subject to the code and the Tribe confirms nothing is owed.
• Alternatives allowed: cash deposit, assigned certificate of deposit, or irrevocable letter of credit from a federally insured institution.
• Waiver available only after five consecutive years of payments with good standing, on written application.

Colorado Severance Tax (for an LLC) Bond FAQs:

Official and Additional Resources for the Colorado Severance Tax (for an LLC) Bond: