By Craddick H.B. No. 1974 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to tax credits for the discovery of new oil or gas fields. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. The Tax Code is amended by adding Chapter 204 to 1-5 read as follows: 1-6 Sec. 204.001. DEFINITIONS 1-7 In this chapter: 1-8 (1) "Commission" means the Railroad Commission of 1-9 Texas. 1-10 (2) "Field" means an accumulation of oil or gas or 1-11 both that is not in natural pressure communication, or otherwise 1-12 connected to any other accumulation of oil or gas or both. 1-13 (3) "New field" means a field that has been certified 1-14 by the commission as a previously unrecognized and unidentified 1-15 field. 1-16 (4) "Discovery well" means an oil or gas well by which 1-17 a new field discovery is made. 1-18 (5) "Spud" means the initial penetration of the earth 1-19 by the drill bit for an oil or gas well under proper permit from 1-20 the commission. 1-21 (6) "Completed" means the well has been equipped to 1-22 produce hydrocarbons and the commission has been notified as 1-23 required by commission rules. 2-1 Sec. 204.002. TAX CREDIT FOR NEW FIELD DISCOVERIES 2-2 (a) Persons who obtain a certification of a new field 2-3 discovery from the commission as the result of a discovery well 2-4 spudded during the period of January 1, 1994 through December 31, 2-5 1994 are eligible for a tax credit applicable against the taxes 2-6 imposed by Chapters 201 and 202 of this code upon the commission 2-7 notifying the comptroller that 521 new fields have been discovered 2-8 as the result of wells spudded during 1994. 2-9 (b) The amount of the tax credit shall be as follows: 2-10 (1) $10,000 for each discovery well spudded during 2-11 1994 if the number of discovery wells spudded that year is 521 or 2-12 more, but less than 721; 2-13 (2) $25,000 for each discovery well spudded during 2-14 1994 if the number of discovery wells spudded that year is 721 or 2-15 more. 2-16 Sec. 204.003. CERTIFICATION OF NEW FIELD DISCOVERY 2-17 (a) The commission shall have the authority to establish the 2-18 method of determining whether a new field has been discovered. The 2-19 commission may require an applicant for a new field discovery to 2-20 provide the commission with any relevant information required to 2-21 administer this chapter. Upon determining that a well spudded 2-22 during 1994 resulted in the discovery of a new field, the 2-23 commission shall furnish a certificate of new field discovery to 2-24 the applicant. 2-25 (b) For purposes of obtaining a tax credit under this 3-1 chapter, applications for new field discoveries must be made to the 3-2 commission within 90 days of the date the discovery well is 3-3 completed in the proposed new field. In no event will an 3-4 application for new field discovery be accepted by the commission, 3-5 for purposes of obtaining a tax credit, after 180 days from the 3-6 cessation of drilling operations. 3-7 Sec. 204.004. TAX CREDIT FOR ADDITIONAL WELLS IN A NEW FIELD 3-8 Upon the commission notifying the comptroller that 842 3-9 discovery wells have been spudded in 1994, persons obtaining a new 3-10 field discovery during that year shall be eligible for an 3-11 additional $25,000 tax credit for each additional well spudded and 3-12 producing from that field, within 10 years from the spud date of 3-13 the discovery well. The tax credit is available to persons who 3-14 obtain a new field discovery regardless of who drills the 3-15 additional well. 3-16 Sec. 204.101. APPLICATION 3-17 To qualify for the tax credit, a person who receives a new 3-18 field discovery certificate from the commission must apply to the 3-19 comptroller. The comptroller shall approve the application of a 3-20 person who demonstrates eligibility for a tax credit. The 3-21 comptroller shall have the power to establish procedures in order 3-22 to comply with this Act, and may require a person applying for the 3-23 tax credit to provide any relevant information. The commission 3-24 shall immediately notify the comptroller in writing if it 3-25 determines that the new field designation obtained by the applicant 4-1 has been revoked or if it discovers any information that affects 4-2 the tax credit. 4-3 Sec. 204.201. APPLICABILITY OF TAX CREDIT 4-4 (a) Tax credits earned under this chapter may only be 4-5 applied against the severance taxes imposed by Chapters 201 and 202 4-6 of this code. The tax credit must be used within five years after 4-7 it is approved by the comptroller and may be applied to either oil 4-8 or 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. 204.202. TRANSFERABILITY OF TAX CREDIT 4-15 The tax credit earned under this chapter is fully 4-16 transferable. 4-17 Sec. 204.301. REVOCATION OF NEW FIELD DESIGNATION 4-18 (a) If the commission determines that a designated new field 4-19 is connected with another recognized field, the tax credit provided 4-20 by this chapter is cancelled. 4-21 (b) Persons responsible for paying the severance tax will 4-22 not be liable for any taxes offset by tax credits available under 4-23 this chapter prior to the date of cancellation unless the tax 4-24 credits were obtained in violation of this chapter or any rules or 4-25 orders of the commission. 5-1 Sec. 204.302. PENALTIES 5-2 (a) Any person who makes or subscribes any application, 5-3 report, or other document and submits it to the commission to form 5-4 the basis for an application for a tax credit under this chapter, 5-5 knowing that the application, report, or other document is false or 5-6 untrue in a material fact, may be subject to the penalties imposed 5-7 by Chapters 85 and 91, Natural Resources Code. 5-8 (b) Upon notice from the commission that the certification 5-9 for a new field discovery has been revoked, the tax credit may not 5-10 be applied to oil or gas production sold after the date of 5-11 notification. Any person who violates this subsection is liable to 5-12 the state for a civil penalty if the person applies or attempts to 5-13 apply the tax credit allowed by this chapter after the 5-14 certification for new field discovery is revoked. The amount of 5-15 the penalty may not exceed the sum of: 5-16 (1) $10,000; and 5-17 (2) the difference between the amount of taxes paid or 5-18 attempted to be paid and the amount of taxes due. 5-19 (c) The attorney general may recover a penalty under 5-20 subsection (b) of this section in a suit brought on behalf of the 5-21 state. Venue for the suit is in Travis County. 5-22 Sec. 204.400. RULES AND ORDERS 5-23 The commission has broad discretion in administering this 5-24 chapter and may adopt and enforce any appropriate rules or orders 5-25 that the commission finds necessary to administer this chapter. 6-1 SECTION 2. This Act takes effect September 1, 1993. 6-2 SECTION 3. EMERGENCY. The importance of this legislation 6-3 and the crowded condition of the calendars in both houses create an 6-4 emergency and an imperative public necessity that the 6-5 constitutional rule requiring bills to be read on three several 6-6 days in each house be suspended, and this rule is hereby suspended, 6-7 and that this Act take effect and be in force from and after its 6-8 passage, and it is so enacted.