By Junell, Craddick H.B. No. 704
74R3258 CBH-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to an exemption from the oil and gas production taxes for
1-3 certain inactive oil and gas wells returned to production;
1-4 providing a civil penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Section 201.053, Tax Code, is amended to read as
1-7 follows:
1-8 Sec. 201.053. GAS NOT TAXED. The tax imposed by this
1-9 chapter does not apply to gas:
1-10 (1) injected into the earth in this state, unless sold
1-11 for that purpose;
1-12 (2) produced from oil wells with oil and lawfully
1-13 vented or flared; or
1-14 (3) used for lifting oil, unless sold for that
1-15 purpose<; or>
1-16 <(4) produced in this state from a well that qualifies
1-17 under Section 202.056>.
1-18 SECTION 2. Chapter 201, Tax Code, is amended by adding
1-19 Section 201.056 to read as follows:
1-20 Sec. 201.056. TAX EXEMPTIONS. The exemptions described by
1-21 Section 202.056 and Chapter 206 apply to the taxes imposed by this
1-22 chapter as authorized by and subject to the certifications and
1-23 approvals required by those exemption provisions.
1-24 SECTION 3. Section 202.052(c), Tax Code, is amended to read
2-1 as follows:
2-2 (c) The exemptions described by Section 202.056 and Chapter
2-3 206 apply to <For> oil produced in this state from a well that
2-4 qualifies under Section 202.056 or Chapter 206 subject to the
2-5 certifications and approvals required by those exemption
2-6 provisions<, the rate of tax imposed by this chapter shall be
2-7 reduced to zero>.
2-8 SECTION 4. Subtitle I, Title 2, Tax Code, is amended by
2-9 adding Chapter 206 to read as follows:
2-10 CHAPTER 206. TAX EXEMPTION FOR HYDROCARBONS FROM INACTIVE OIL
2-11 AND GAS LEASES
2-12 Sec. 206.001. DEFINITIONS. In this chapter:
2-13 (1) "Commission" means the Railroad Commission of
2-14 Texas.
2-15 (2) "Hydrocarbons" means any gas, oil, condensate, or
2-16 other liquid hydrocarbons produced from a well.
2-17 (3) "Lease" means one or more gas or oil wells for
2-18 which the commission has assigned the same lease or identification
2-19 number.
2-20 Sec. 206.002. TAX EXEMPTION. Hydrocarbon production from an
2-21 inactive lease is exempt from the taxes imposed by Chapters 201 and
2-22 202 if the comptroller has approved the tax exemption under Section
2-23 206.005.
2-24 Sec. 206.003. CERTIFICATION. The commission shall identify
2-25 each inactive lease that qualifies for certification under Section
2-26 206.004 and shall issue a certificate to each operator of a well
2-27 producing from that lease. The certificate must:
3-1 (1) include identification of the qualifying lease;
3-2 and
3-3 (2) state the date on which the tax exemption takes
3-4 effect, subject to the comptroller's approval of the exemption
3-5 under Section 206.005.
3-6 Sec. 206.004. QUALIFICATION FOR CERTIFICATION. A lease is
3-7 eligible for certification as an inactive lease if:
3-8 (1) during any 24 consecutive month period beginning
3-9 on or after September 1, 1993, hydrocarbon production from the
3-10 lease occurs for not more than one month;
3-11 (2) production from the lease:
3-12 (A) resumes before September 1, 1997; or
3-13 (B) is from a well that was completed after
3-14 August 31, 1995, and before September 1, 1997, and a completion
3-15 report for that well was filed with the commission before January
3-16 1, 1998; and
3-17 (3) the operator files with the commission a well
3-18 completion report or other report verifying that a well test was
3-19 performed after production from the lease resumed.
3-20 Sec. 206.005. APPLICATION FOR AND APPROVAL OF TAX EXEMPTION.
3-21 (a) To qualify for the tax exemption provided by this chapter, the
3-22 person responsible for paying the tax must apply to the comptroller
3-23 for the exemption and include with the application the certificate
3-24 issued under Section 206.003 by the commission.
3-25 (b) The comptroller may require a person applying for the
3-26 tax exemption to provide any information necessary to administer
3-27 this section.
4-1 (c) The comptroller shall approve a person's application if
4-2 the hydrocarbons are eligible for the tax exemption.
4-3 (d) The comptroller may establish procedures as necessary to
4-4 comply with this section and Section 206.008.
4-5 Sec. 206.006. REVOCATION OF CERTIFICATION. (a) The
4-6 commission may revoke an inactive lease certificate if the
4-7 commission finds that the lease was not eligible for that
4-8 designation at the time of certification.
4-9 (b) The commission shall notify the operator and the
4-10 comptroller that the certificate has been revoked.
4-11 (c) A tax exemption granted under this chapter is
4-12 automatically revoked on the date the inactive lease certificate is
4-13 revoked, and hydrocarbons produced from that lease on or after the
4-14 day after the date of revocation are not eligible for the tax
4-15 exemption.
4-16 Sec. 206.007. COMMISSION DISCRETION AND RULES. The
4-17 commission has broad discretion in administering this chapter and
4-18 may adopt and enforce any appropriate rules or orders that the
4-19 commission finds necessary to administer this chapter.
4-20 Sec. 206.008. TAX CREDIT. (a) If the tax is paid at the
4-21 full rate provided by Chapter 201 or 202 on hydrocarbons produced
4-22 on or after the effective date of the tax exemption contained in
4-23 the lease certificate, but before the date the comptroller approves
4-24 the application for the tax exemption, the operator is entitled to
4-25 a credit on taxes due under Chapter 201 or 202 in an amount equal
4-26 to the tax paid during that period.
4-27 (b) To receive a credit, the operator must apply to the
5-1 comptroller for the credit not later than the first anniversary of
5-2 the date the commission certifies the well as an inactive lease.
5-3 Sec. 206.009. PENALTIES. (a) A person is subject to the
5-4 penalties that may be imposed under Chapters 85 and 91, Natural
5-5 Resources Code, if the person makes and submits to the commission
5-6 or the comptroller an application, report, or other document that
5-7 is used or intended to be used for a certification, tax exemption,
5-8 or a tax credit under this chapter and the person knows that the
5-9 application, report, or other document contains a false or untrue
5-10 material fact.
5-11 (b) A person is liable to the state for a civil penalty if
5-12 the person, after receiving notice from the commission that the
5-13 person's certificate for an inactive lease has been revoked,
5-14 applies or attempts to apply for a tax exemption for that lease
5-15 using the revoked certificate. The amount of the penalty may not
5-16 exceed the sum of:
5-17 (1) $10,000; and
5-18 (2) the difference between the amount of taxes paid or
5-19 attempted to be paid and the amount of taxes due.
5-20 (c) The attorney general may recover a penalty under
5-21 Subsection (b) in a suit brought on behalf of the state. Venue for
5-22 the suit is in Travis County.
5-23 SECTION 5. This Act takes effect September 1, 1995.
5-24 SECTION 6. The importance of this legislation and the
5-25 crowded condition of the calendars in both houses create an
5-26 emergency and an imperative public necessity that the
5-27 constitutional rule requiring bills to be read on three several
6-1 days in each house be suspended, and this rule is hereby suspended.