H.B. No. 1974 1-1 AN ACT 1-2 relating to tax credits for the discovery of new oil or gas fields; 1-3 providing penalties. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subtitle I, Title 2, Tax Code, is amended by 1-6 adding Chapter 204 to read as follows: 1-7 CHAPTER 204. TAX CREDIT FOR NEW FIELD DISCOVERIES 1-8 Sec. 204.001. DEFINITIONS. In this chapter: 1-9 (1) "Commission" means the Railroad Commission of 1-10 Texas. 1-11 (2) "Field" means an accumulation of oil or gas or 1-12 both that is not in natural pressure communication or otherwise 1-13 connected to any other accumulation of oil or gas or both. 1-14 (3) "New field" means a field that has been certified 1-15 by the commission as a previously unrecognized and unidentified 1-16 field. 1-17 (4) "Discovery well" means an oil or gas well by which 1-18 a new field discovery is made. 1-19 (5) "Spud" means the initial penetration of the earth 1-20 by the drill bit for an oil or gas well under proper permit from 1-21 the commission. 1-22 (6) "Completed" means the well has been equipped to 1-23 produce hydrocarbons and the commission has been notified as 2-1 required by commission rules. 2-2 Sec. 204.002. TAX CREDIT FOR NEW FIELD DISCOVERIES. 2-3 (a) Persons who obtain a certification of a new field discovery 2-4 from the commission as the result of a discovery well spudded 2-5 during the period of January 1, 1994, through December 31, 1994, 2-6 are eligible for a tax credit applicable against the taxes imposed 2-7 by Chapters 201 and 202 upon the commission notifying the 2-8 comptroller that 521 new fields have been discovered as the result 2-9 of wells spudded during 1994. 2-10 (b) The amount of the tax credit shall be as follows: 2-11 (1) $10,000 for each discovery well spudded during 2-12 1994 if the number of discovery wells spudded that year is 521 or 2-13 more, but less than 721; 2-14 (2) $25,000 for each discovery well spudded during 2-15 1994 if the number of discovery wells spudded that year is 721 or 2-16 more. 2-17 Sec. 204.003. CERTIFICATION OF NEW FIELD DISCOVERY. 2-18 (a) The commission shall have the authority to establish the 2-19 method of determining whether a new field has been discovered. The 2-20 commission may require an applicant for a new field discovery to 2-21 provide the commission with any relevant information required to 2-22 administer this chapter. Upon determining that a well spudded 2-23 during 1994 resulted in the discovery of a new field, the 2-24 commission shall furnish a certificate of new field discovery to 2-25 the applicant. 3-1 (b) For purposes of obtaining a tax credit under this 3-2 chapter, applications for new field discoveries must be made to the 3-3 commission within 90 days of the date the discovery well is 3-4 completed in the proposed new field. In no event will an 3-5 application for new field discovery be accepted by the commission, 3-6 for purposes of obtaining a tax credit, after 180 days from the 3-7 cessation of drilling operations. 3-8 Sec. 204.004. TAX CREDIT FOR ADDITIONAL WELLS IN A NEW 3-9 FIELD. Upon the commission notifying the comptroller that 842 3-10 discovery wells have been spudded in 1994, persons obtaining a new 3-11 field discovery during that year shall be eligible for an 3-12 additional $25,000 tax credit for each additional well spudded and 3-13 producing from that field, within 10 years from the spud date of 3-14 the discovery well. The tax credit is available to persons who 3-15 obtain a new field discovery regardless of who drills the 3-16 additional well. 3-17 Sec. 204.005. APPLICATION. To qualify for the tax credit, a 3-18 person who receives a new field discovery certificate from the 3-19 commission must apply to the comptroller. The comptroller shall 3-20 approve the application of a person who demonstrates eligibility 3-21 for a tax credit. The comptroller shall have the power to 3-22 establish procedures in order to comply with this chapter and may 3-23 require a person applying for the tax credit to provide any 3-24 relevant information. The commission shall immediately notify the 3-25 comptroller in writing if it determines that the new field 4-1 designation obtained by the applicant has been revoked or if it 4-2 discovers any information that affects the tax credit. 4-3 Sec. 204.006. APPLICABILITY OF TAX CREDIT. (a) Tax credits 4-4 earned under this chapter may only be applied against the severance 4-5 taxes imposed by Chapters 201 and 202 of this code. The tax credit 4-6 may not be used until September 1, 1995, and may not be used after 4-7 August 31, 2000. The tax credit may be applied to either oil or 4-8 gas severance taxes regardless of the field from which the 4-9 production originates. 4-10 (b) Tax credits provided under this chapter shall only be 4-11 available if at the time the application for a tax credit is made, 4-12 the discovery well that is the basis for the tax credit is 4-13 producing oil or gas from the discovery field. 4-14 Sec. 204.007. TRANSFERABILITY OF TAX CREDIT. The tax credit 4-15 earned under this chapter is fully transferable. 4-16 Sec. 204.008. REVOCATION OF NEW FIELD DESIGNATION. (a) If 4-17 the commission determines that a designated new field is connected 4-18 with another recognized field, the tax credit provided by this 4-19 chapter is canceled. 4-20 (b) Persons responsible for paying the severance tax will 4-21 not be liable for any taxes offset by tax credits available under 4-22 this chapter prior to the date of cancellation unless the tax 4-23 credits were obtained in violation of this chapter or any rules or 4-24 orders of the commission. 4-25 Sec. 204.009. PENALTIES. (a) Any person who makes or 5-1 subscribes any application, report, or other document and submits 5-2 it to the commission to form the basis for an application for a tax 5-3 credit under this chapter knowing that the application, report, or 5-4 other document is false or untrue in a material fact may be subject 5-5 to the penalties imposed by Chapters 85 and 91, Natural Resources 5-6 Code. 5-7 (b) Upon notice from the commission that the certification 5-8 for a new field discovery has been revoked, the tax credit may not 5-9 be applied to oil or gas production sold after the date of 5-10 notification. Any person who violates this subsection is liable to 5-11 the state for a civil penalty if the person applies or attempts to 5-12 apply the tax credit allowed by this chapter after the 5-13 certification for new field discovery is revoked. The amount of 5-14 the penalty may not exceed the sum of: 5-15 (1) $10,000; and 5-16 (2) the difference between the amount of taxes paid or 5-17 attempted to be paid and the amount of taxes due. 5-18 (c) The attorney general may recover a penalty under 5-19 Subsection (b) in a suit brought on behalf of the state. Venue for 5-20 the suit is in Travis County. 5-21 Sec. 204.010. RULES AND ORDERS. The commission has broad 5-22 discretion in administering this chapter and may adopt and enforce 5-23 any appropriate rules or orders that the commission finds necessary 5-24 to administer this chapter. 5-25 SECTION 2. This Act takes effect September 1, 1993. 6-1 SECTION 3. The importance of this legislation and the 6-2 crowded condition of the calendars in both houses create an 6-3 emergency and an imperative public necessity that the 6-4 constitutional rule requiring bills to be read on three several 6-5 days in each house be suspended, and this rule is hereby suspended, 6-6 and that this Act take effect and be in force from and after its 6-7 passage, and it is so enacted.