By Craddick H.B. No. 655
75R2318 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 a well that has not
1-11 produced oil or gas in more than one month in the two years
1-12 preceding the date of application for severance tax exemption under
1-13 this section.
1-14 SECTION 2. Sections 202.056(b)-(e) and (h), Tax Code, are
1-15 amended to read as follows:
1-16 (b) Hydrocarbons produced from a well qualify for a 10-year
1-17 severance tax exemption if the commission designates the well as a
1-18 three-year inactive well or a two-year inactive well. The
1-19 commission may designate a well without an application, or an
1-20 application may be made to the commission for approval under this
1-21 section. The commission may require an applicant to provide the
1-22 commission with any relevant information required to administer
1-23 this section. The commission may require additional well tests to
1-24 determine well capability as it deems necessary. The commission
2-1 shall notify the comptroller in writing immediately if it
2-2 determines that the operation of the three-year inactive well or
2-3 two-year inactive well has been terminated or if it discovers any
2-4 information that affects the taxation of the production from the
2-5 designated well.
2-6 (c) If the commission designates a three-year inactive well
2-7 under this section, it shall issue a certificate designating the
2-8 well as a three-year inactive well as defined by Subsection (a)(3)
2-9 of this section. The commission may not designate a three-year
2-10 inactive well under this section after February 29, 1996. If the
2-11 commission designates a two-year inactive well under this section,
2-12 it shall issue a certificate designating the well as a two-year
2-13 inactive well as defined by Subsection (a)(4) of this section. The
2-14 commission may not designate a two-year inactive well under this
2-15 section after February 29, 2000.
2-16 (d) An application for three-year inactive well
2-17 certification shall be made during the period of September 1, 1993,
2-18 through August 31, 1995, to qualify for the tax exemption under
2-19 this section. An application for two-year inactive well
2-20 certification shall be made during the period of September 1, 1997,
2-21 through August 31, 1999, to qualify for the tax exemption under
2-22 this section. Hydrocarbons sold after the date of certification
2-23 are eligible for the tax exemption.
2-24 (e) The commission may revoke a certificate if information
2-25 indicates that a certified well was not a three-year inactive well
2-26 or a two-year inactive well, as appropriate, or if other lease
2-27 production is credited to the certified well. Upon notice to the
3-1 operator from the commission that the certificate for tax exemption
3-2 under this section has been revoked, the tax exemption may not be
3-3 applied to hydrocarbons sold from that well from the date of
3-4 revocation.
3-5 (h) If the tax is paid at the full rate provided by Section
3-6 201.052(a), 201.052(b), 202.052(a), or 202.052(b) before the
3-7 comptroller approves an application for an exemption provided for
3-8 in this chapter, the operator is entitled to a credit against taxes
3-9 imposed by this chapter in an amount equal to the tax paid. To
3-10 receive a credit, the operator must apply to the comptroller for
3-11 the credit before the expiration of the applicable period for
3-12 filing a tax refund claim under Section 111.104 [not later than the
3-13 first anniversary after the date the commission certifies that the
3-14 well is a three-year inactive well].
3-15 SECTION 3. Section 202.056(i)(2), Tax Code, is amended to
3-16 read as follows:
3-17 (2) Upon notice from the commission that the
3-18 certification for a three-year inactive well or a two-year
3-19 inactive well has been revoked, the tax exemption shall not apply
3-20 to oil or gas production sold after the date of notification. Any
3-21 person who violates this subsection is liable to the state for a
3-22 civil penalty if the person applies or attempts to apply the tax
3-23 exemption allowed by this chapter after the certification for a
3-24 three-year inactive well or a two-year inactive well is revoked.
3-25 The amount of the penalty may not exceed the sum of:
3-26 (A) $10,000; and
3-27 (B) the difference between the amount of taxes
4-1 paid or attempted to be paid and the amount of taxes due.
4-2 SECTION 4. This Act takes effect September 1, 1997.
4-3 SECTION 5. The importance of this legislation and the
4-4 crowded condition of the calendars in both houses create an
4-5 emergency and an imperative public necessity that the
4-6 constitutional rule requiring bills to be read on three several
4-7 days in each house be suspended, and this rule is hereby suspended.