By Bivins                                              S.B. No. 851
       74R7167 CBH-F
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to a tax exemption for hydrocarbon production from certain
    1-3  inactive oil and gas leases returned to production.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Section 202.056(a), Tax Code, is amended by
    1-6  amending Subdivision (2) and adding Subdivision (4) to read as
    1-7  follows:
    1-8              (2)  "Hydrocarbons" means any oil or gas produced from
    1-9  a well, including hydrocarbon production.
   1-10              (4)  "Two-year inactive well" means any well that has
   1-11  not produced in more than one month in the two years prior to the
   1-12  date of application for severance tax exemption under this section.
   1-13        SECTION 2.  Sections 202.056(b)-(e) and (h), Tax Code, are
   1-14  amended to read as follows:
   1-15        (b)  Hydrocarbons produced from a well qualify for a 10-year
   1-16  severance tax exemption if the commission designates the well as a
   1-17  three-year inactive well or a two-year inactive well.  The
   1-18  commission may designate a well without an application, or an
   1-19  application may be made to the commission for approval under this
   1-20  section.  The commission may require an applicant to provide the
   1-21  commission with any relevant information required to administer
   1-22  this section.  The commission may require additional well tests to
   1-23  determine well capability as it deems necessary.  The commission
   1-24  shall notify the comptroller in writing immediately if it
    2-1  determines that the operation of the three-year inactive well or
    2-2  two-year inactive well has been terminated or if it discovers any
    2-3  information that affects the taxation of the production from the
    2-4  designated well.
    2-5        (c)  If the commission designates a three-year inactive well
    2-6  under this section, it shall issue a certificate designating the
    2-7  well as a three-year inactive well as defined by Subsection (a)(3)
    2-8  of this section.  The commission may not designate a three-year
    2-9  inactive well under this section after August 31, 1995 <February
   2-10  29, 1996>.  If the commission designates a two-year inactive well
   2-11  under this section, it shall issue a certificate designating the
   2-12  well as a two-year inactive well as defined by Subsection (a)(4) of
   2-13  this section.  The commission may not designate a two-year inactive
   2-14  well under this section after February 28, 1998.
   2-15        (d)  An application for three-year inactive well
   2-16  certification shall be made during the period of September 1, 1993,
   2-17  through August 31, 1995, to qualify for the tax exemption under
   2-18  this section.  An application for two-year inactive well
   2-19  certification shall be made during the period of September 1, 1995,
   2-20  through August 31, 1997, to qualify for the tax exemption under
   2-21  this section.  Hydrocarbons sold after the date of certification
   2-22  are eligible for the tax exemption.
   2-23        (e)  The commission may revoke a certificate if information
   2-24  indicates that a certified well was not a three-year inactive well
   2-25  or a two-year inactive well, as appropriate, or if other lease
   2-26  production is credited to the certified well.  Upon notice to the
   2-27  operator from the commission that the certificate for tax exemption
    3-1  under this section has been revoked, the tax exemption may not be
    3-2  applied to hydrocarbons sold from that well from the date of
    3-3  revocation.
    3-4        (h)  If the tax is paid at the full rate provided by Section
    3-5  201.052(a), 201.052(b), 202.052(a), or 202.052(b) before the
    3-6  comptroller approves an application for an exemption provided for
    3-7  in this chapter, the operator is entitled to a credit against taxes
    3-8  imposed by this chapter in an amount equal to the tax paid.  To
    3-9  receive a credit, the operator must apply to the comptroller for
   3-10  the credit not later than the first anniversary after the date the
   3-11  commission certifies that the well is a three-year inactive well or
   3-12  a two-year inactive well.
   3-13        SECTION 3.  Section 202.056(i)(2), Tax Code, is amended to
   3-14  read as follows:
   3-15              (2)  Upon notice from the commission that the
   3-16  certification for a three-year inactive well or a two-year inactive
   3-17  well has been revoked, the tax exemption shall not apply to oil or
   3-18  gas production sold after the date of notification.  Any person who
   3-19  violates this subsection is liable to the state for a civil penalty
   3-20  if the person applies or attempts to apply the tax exemption
   3-21  allowed by this chapter after the certification for a three-year
   3-22  inactive well or a two-year inactive well is revoked.  The amount
   3-23  of the penalty may not exceed the sum of:
   3-24                    (A)  $10,000; and
   3-25                    (B)  the difference between the amount of taxes
   3-26  paid or attempted to be paid and the amount of taxes due.
   3-27        SECTION 4.  This Act takes effect September 1, 1995.
    4-1        SECTION 5.  The importance of this legislation and the
    4-2  crowded condition of the calendars in both houses create an
    4-3  emergency and an imperative public necessity that the
    4-4  constitutional rule requiring bills to be read on three several
    4-5  days in each house be suspended, and this rule is hereby suspended.