By Bivins S.B. No. 851
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
1-8 (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 <
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
3-4 (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.