1-1 By: Craddick (Senate Sponsor - Carriker, Bivins) H.B. No. 1975
1-2 (In the Senate - Received from the House April 19, 1993;
1-3 April 19, 1993, read first time and referred to Committee on
1-4 Finance; May 10, 1993, reported favorably by the following vote:
1-5 Yeas 11, Nays 0; May 10, 1993, sent to printer.)
1-6 COMMITTEE VOTE
1-7 Yea Nay PNV Absent
1-8 Montford x
1-9 Turner x
1-10 Armbrister x
1-11 Barrientos x
1-12 Bivins x
1-13 Ellis x
1-14 Haley x
1-15 Moncrief x
1-16 Parker x
1-17 Ratliff x
1-18 Sims x
1-19 Truan x
1-20 Zaffirini x
1-21 A BILL TO BE ENTITLED
1-22 AN ACT
1-23 relating to tax exemption for oil and gas wells returned to
1-24 productive status after three years of inactivity.
1-25 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-26 SECTION 1. Section 202.052, Tax Code, is amended to read as
1-27 follows:
1-28 Sec. 202.052. Rate of Tax. (a) The tax imposed by this
1-29 chapter is at the rate of 4.6 percent of the market value of oil
1-30 produced in this state or 4.6 cents for each barrel of 42 standard
1-31 gallons of oil produced in this state, whichever rate results in
1-32 the greater amount of tax.
1-33 (b) For oil produced in this state from a new or expanded
1-34 enhanced recovery project that qualifies under Section 202.054 of
1-35 this code, the rate of the tax imposed by this chapter is 2.3
1-36 percent of the market value of the oil.
1-37 (c) For oil produced in this state from a well that
1-38 qualifies under Section 202.056, the rate of tax imposed by this
1-39 chapter shall be reduced to zero.
1-40 SECTION 2. Section 201.053, Tax Code, is amended to read as
1-41 follows:
1-42 Sec. 201.053. Gas Not Taxed. The tax imposed by this
1-43 chapter does not apply to gas:
1-44 (1) injected into the earth in this state, unless sold
1-45 for that purpose;
1-46 (2) produced from oil wells with oil and lawfully
1-47 vented or flared; <or>
1-48 (3) used for lifting oil, unless sold for that
1-49 purpose<.>; or
1-50 (4) produced in this state from a well that qualifies
1-51 under Section 202.056.
1-52 SECTION 3. Subchapter B, Chapter 202, Tax Code, is amended
1-53 by adding Section 202.056 to read as follows:
1-54 Sec. 202.056. EXEMPTION FOR OIL AND GAS FROM WELLS
1-55 PREVIOUSLY INACTIVE. (a) In this section:
1-56 (1) "Commission" means the Railroad Commission of
1-57 Texas.
1-58 (2) "Hydrocarbons" means any oil or gas produced from
1-59 a well.
1-60 (3) "Three-year inactive well" means any well that
1-61 has not produced in more than one month in the three years prior to
1-62 the date of application for severance tax exemption under this
1-63 section.
1-64 (b) Hydrocarbons produced from a well qualify for a 10-year
1-65 severance tax exemption if the commission designates the well as a
1-66 three-year inactive well. The commission may designate a well
1-67 without an application, or an application may be made to the
1-68 commission for approval under this section. The commission may
2-1 require an applicant to provide the commission with any relevant
2-2 information required to administer this section. The commission
2-3 may require additional well tests to determine well capability as
2-4 it deems necessary. The commission shall notify the comptroller in
2-5 writing immediately if it determines that the operation of the
2-6 three-year inactive well has been terminated or if it discovers any
2-7 information that affects the taxation of the production from the
2-8 designated well.
2-9 (c) If the commission designates a three-year inactive well
2-10 under this section, it shall issue a certificate designating the
2-11 well as a three-year inactive well as defined by Subsection (a)(3)
2-12 of this section. The commission may not designate a well under
2-13 this section after February 29, 1996.
2-14 (d) An application for three-year inactive well
2-15 certification shall be made during the period of September 1, 1993,
2-16 through August 31, 1995, to qualify for the tax exemption under
2-17 this section. Hydrocarbons sold after the date of certification
2-18 are eligible for the tax exemption.
2-19 (e) The commission may revoke a certificate if information
2-20 indicates that a certified well was not a three-year inactive well
2-21 or if other lease production is credited to the certified well.
2-22 Upon notice to the operator from the commission that the
2-23 certificate for tax exemption under this section has been revoked,
2-24 the tax exemption may not be applied to hydrocarbons sold from that
2-25 well from the date of revocation.
2-26 (f) The commission shall adopt all necessary rules to
2-27 administer this section.
2-28 (g) To qualify for the tax exemption provided by this
2-29 section, the person responsible for paying the tax must apply to
2-30 the comptroller. The comptroller shall approve the application of
2-31 a person who demonstrates that the hydrocarbon production is
2-32 eligible for a tax exemption. The comptroller may require a person
2-33 applying for the tax exemption to provide any relevant information
2-34 necessary to administer this section. The comptroller shall have
2-35 the power to establish procedures in order to comply with this
2-36 section.
2-37 (h) If the tax is paid at the full rate provided by Section
2-38 201.052(a), 201.052(b), 202.052(a), or 202.052(b) before the
2-39 comptroller approves an application for an exemption provided for
2-40 in this chapter, the operator is entitled to a credit against taxes
2-41 imposed by this chapter in an amount equal to the tax paid. To
2-42 receive a credit, the operator must apply to the comptroller for
2-43 the credit not later than the first anniversary after the date the
2-44 commission certifies that the well is a three-year inactive well.
2-45 (i) Penalties
2-46 (1) Any person who makes or subscribes any
2-47 application, report, or other document and submits it to the
2-48 commission to form the basis for an application for a tax exemption
2-49 under this section, knowing that the application, report, or other
2-50 document is false or untrue in a material fact, may be subject to
2-51 the penalties imposed by Chapters 85 and 91, Natural Resources
2-52 Code.
2-53 (2) Upon notice from the commission that the
2-54 certification for a three-year inactive well has been revoked, the
2-55 tax exemption shall not apply to oil or gas production sold after
2-56 the date of notification. Any person who violates this subsection
2-57 is liable to the state for a civil penalty if the person applies or
2-58 attempts to apply the tax exemption allowed by this chapter after
2-59 the certification for a three-year inactive well is revoked. The
2-60 amount of the penalty may not exceed the sum of:
2-61 (A) $10,000; and
2-62 (B) the difference between the amount of taxes
2-63 paid or attempted to be paid and the amount of taxes due.
2-64 (3) The attorney general may recover a penalty under
2-65 Subdivision (2) of this subsection in a suit brought on behalf of
2-66 the state. Venue for the suit is in Travis County.
2-67 SECTION 4. This Act takes effect September 1, 1993.
2-68 SECTION 5. The importance of this legislation and the
2-69 crowded condition of the calendars in both houses create an
2-70 emergency and an imperative public necessity that the
3-1 constitutional rule requiring bills to be read on three several
3-2 days in each house be suspended, and this rule is hereby suspended,
3-3 and that this Act take effect and be in force from and after its
3-4 passage, and it is so enacted.
3-5 * * * * *
3-6 Austin,
3-7 Texas
3-8 May 10, 1993
3-9 Hon. Bob Bullock
3-10 President of the Senate
3-11 Sir:
3-12 We, your Committee on Finance to which was referred H.B. No. 1975,
3-13 have had the same under consideration, and I am instructed to
3-14 report it back to the Senate with the recommendation that it do
3-15 pass and be printed.
3-16 Montford,
3-17 Chairman
3-18 * * * * *
3-19 WITNESSES
3-20 FOR AGAINST ON
3-21 ___________________________________________________________________
3-22 Name: James E. Nugent x
3-23 Representing: Texas Railroad Commission
3-24 City: Austin
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3-26 Name: David Garlick x
3-27 Representing: Texas Railroad Commission
3-28 City: Austin
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