By: Carriker S.B. No. 844 A BILL TO BE ENTITLED AN ACT 1-1 relating to tax credits for the discovery of new oil or gas fields. 1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-3 SECTION 1. The Tax Code is amended by adding Chapter 204 to 1-4 read as follows: 1-5 Sec. 204.001. DEFINITIONS 1-6 In this chapter: 1-7 (1) "Commission" means the Railroad Commission of 1-8 Texas. 1-9 (2) "Field" means an accumulation of oil or gas or 1-10 both that is not in natural pressure communication, or otherwise 1-11 connected to any other accumulation of oil or gas or both. 1-12 (3) "New field" means a field that has been certified 1-13 by the commission as a previously unrecognized and unidentified 1-14 field. 1-15 (4) "Discovery well" means an oil or gas well by which 1-16 a new field discovery is made. 1-17 (5) "Spud" means the initial penetration of the earth 1-18 by the drill bit for an oil or gas well under proper permit from 1-19 the commission. 1-20 (6) "Completed" means the well has been equipped to 1-21 produce hydrocarbons and the commission has been notified as 1-22 required by commission rules. 1-23 Sec. 204.002. TAX CREDIT FOR NEW FIELD DISCOVERIES 2-1 (a) Persons who obtain a certification of a new field 2-2 discovery from the commission as the result of a discovery well 2-3 spudded during the period of January 1, 1994 through December 31, 2-4 1994 are eligible for a tax credit applicable against the taxes 2-5 imposed by Chapters 201 and 202 of this code upon the commission 2-6 notifying the comptroller that 521 new fields have been discovered 2-7 as the result of wells spudded during 1994. 2-8 (b) The amount of the tax credit shall be as follows: 2-9 (1) $10,000 for each discovery well spudded during 2-10 1994 if the number of discovery wells spudded that year is 521 or 2-11 more, but less than 721; 2-12 (2) $25,000 for each discovery well spudded during 2-13 1994 if the number of discovery wells spudded that year is 721 or 2-14 more. 2-15 Sec. 204.003. CERTIFICATION OF NEW FIELD DISCOVERY 2-16 (a) The commission shall have the authority to establish the 2-17 method of determining whether a new field has been discovered. The 2-18 commission may require an applicant for a new field discovery to 2-19 provide the commission with any relevant information required to 2-20 administer this chapter. Upon determining that a well spudded 2-21 during 1994 resulted in the discovery of a new field, the 2-22 commission shall furnish a certificate of new field discovery to 2-23 the applicant. 2-24 (b) For purposes of obtaining a tax credit under this 2-25 chapter, applications for new field discoveries must be made to the 3-1 commission within 90 days of the date the discovery well is 3-2 completed in the proposed new field. In no event will an 3-3 application for new field discovery be accepted by the commission, 3-4 for purposes of obtaining a tax credit, after 180 days from the 3-5 cessation of drilling operations. 3-6 Sec. 204.004. TAX CREDIT FOR ADDITIONAL WELLS IN A NEW FIELD 3-7 Upon the commission notifying the comptroller that 842 discovery 3-8 wells have been spudded in 1994, persons obtaining a new field 3-9 discovery during that year shall be eligible for an additional 3-10 $25,000 tax credit for each additional well spudded and producing 3-11 from that field, within 10 years from the spud date of the 3-12 discovery well. The tax credit is available to persons who obtain 3-13 a new field discovery regardless of who drills the additional well. 3-14 Sec. 204.101. APPLICATION 3-15 To qualify for the tax credit, a person who receives a new 3-16 field discovery certificate from the commission must apply to the 3-17 comptroller. The comptroller shall approve the application of a 3-18 person who demonstrates eligibility for a tax credit. The 3-19 comptroller shall have the power to establish procedures in order 3-20 to comply with this Act, and may require a person applying for the 3-21 tax credit to provide any relevant information. The commission 3-22 shall immediately notify the comptroller in writing if it 3-23 determines that the new field designation obtained by the applicant 3-24 has been revoked or if it discovers any information that affects 3-25 the tax credit. 4-1 Sec. 204.201. APPLICABILITY OF TAX CREDIT 4-2 (a) Tax credits earned under this chapter may only be 4-3 applied against the severance taxes imposed by Chapters 201 and 202 4-4 of this code. The tax credit must be used within five years after 4-5 it is approved by the comptroller and may be applied to either oil 4-6 or gas severance taxes regardless of the field from which the 4-7 production originates. 4-8 (b) Tax credits provided under this chapter shall only be 4-9 available if at the time the application for a tax credit is made, 4-10 the discovery well that is the basis for the tax credit is 4-11 producing oil or gas from the discovery field. 4-12 Sec. 204.202. TRANSFERABILITY OF TAX CREDIT 4-13 The tax credit earned under this chapter is fully 4-14 transferable. 4-15 Sec. 204.301. REVOCATION OF NEW FIELD DESIGNATION 4-16 (a) If the commission determines that a designated new field 4-17 is connected with another recognized field, the tax credit provided 4-18 by this chapter is cancelled. 4-19 (b) Persons responsible for paying the severance tax will 4-20 not be liable for any taxes offset by tax credits available under 4-21 this chapter prior to the date of cancellation unless the tax 4-22 credits were obtained in violation of this chapter or any rules or 4-23 orders of the commission. 4-24 Sec. 204.302. PENALTIES 4-25 (a) Any person who makes or subscribes any application, 5-1 report, or other document and submits it to the commission to form 5-2 the basis for an application for a tax credit under this chapter, 5-3 knowing that the application, report, or other document is false or 5-4 untrue in a material fact, may be subject to the penalties imposed 5-5 by Chapters 85 and 91, Natural Resources Code. 5-6 (b) Upon notice from the commission that the certification 5-7 for a new field discovery has been revoked, the tax credit may not 5-8 be applied to oil or gas production sold after the date of 5-9 notification. Any person who violates this subsection is liable to 5-10 the state for a civil penalty if the person applies or attempts to 5-11 apply the tax credit allowed by this chapter after the 5-12 certification for new field discovery is revoked. The amount of 5-13 the penalty may not exceed the sum of: 5-14 (1) $10,000; and 5-15 (2) the difference between the amount of taxes paid or 5-16 attempted to be paid and the amount of taxes due. 5-17 (c) The attorney general may recover a penalty under 5-18 subsection (b) of this section in a suit brought on behalf of the 5-19 state. Venue for the suit is in Travis County. 5-20 Sec. 204.400. RULES AND ORDERS 5-21 The commission has broad discretion in administering this 5-22 chapter and may adopt and enforce any appropriate rules or orders 5-23 that the commission finds necessary to administer this chapter. 5-24 SECTION 2. This Act takes effect September 1, 1993. 5-25 SECTION 3. EMERGENCY. The importance of this legislation 6-1 and the crowded condition of the calendars in both houses create an 6-2 emergency and an imperative public necessity that the 6-3 constitutional rule requiring bills to be read on three several 6-4 days in each house be suspended, and this rule is hereby suspended, 6-5 and that this Act take effect and be in force from and after its 6-6 passage, and it is so enacted.