AN ACT
1-1 relating to a tax exemption for hydrocarbon production from certain
1-2 inactive oil and gas leases returned to production.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsection (a), Section 202.056, Tax Code, is
1-5 amended by amending Subdivision (2) and adding Subdivision (4) to
1-6 read as follows:
1-7 (2) "Hydrocarbons" means any oil or gas produced from
1-8 a well, including hydrocarbon production.
1-9 (4) "Two-year inactive well" means a well that has not
1-10 produced oil or gas in more than one month in the two years
1-11 preceding the date of application for severance tax exemption under
1-12 this section.
1-13 SECTION 2. Subsections (b), (c), (d), (e), and (h), Section
1-14 202.056, Tax Code, are 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
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 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
3-1 or a two-year inactive well, as appropriate, or if other lease
3-2 production is credited to the certified well. Upon notice to the
3-3 operator from the commission that the certificate for tax exemption
3-4 under this section has been revoked, the tax exemption may not be
3-5 applied to hydrocarbons sold from that well from the date of
3-6 revocation.
3-7 (h) If the tax is paid at the full rate provided by Section
3-8 201.052(a), 201.052(b), 202.052(a), or 202.052(b) before the
3-9 comptroller approves an application for an exemption provided for
3-10 in this chapter, the operator is entitled to a credit against taxes
3-11 imposed by this chapter in an amount equal to the tax paid. To
3-12 receive a credit, the operator must apply to the comptroller for
3-13 the credit before the expiration of the applicable period for
3-14 filing a tax refund claim under Section 111.104 [not later than the
3-15 first anniversary after the date the commission certifies that the
3-16 well is a three-year inactive well].
3-17 SECTION 3. Subdivision (2), Subsection (i), Section 202.056,
3-18 Tax Code, is amended to read as follows:
3-19 (2) Upon notice from the commission that the
3-20 certification for a three-year inactive well or a two-year inactive
3-21 well has been revoked, the tax exemption shall not apply to oil or
3-22 gas production sold after the date of notification. Any person who
3-23 violates this subsection is liable to the state for a civil penalty
3-24 if the person applies or attempts to apply the tax exemption
3-25 allowed by this chapter after the certification for a three-year
4-1 inactive well or a two-year inactive well is revoked. The amount
4-2 of the penalty may not exceed the sum of:
4-3 (A) $10,000; and
4-4 (B) the difference between the amount of taxes
4-5 paid or attempted to be paid and the amount of taxes due.
4-6 SECTION 4. This Act takes effect September 1, 1997.
4-7 SECTION 5. The importance of this legislation and the
4-8 crowded condition of the calendars in both houses create an
4-9 emergency and an imperative public necessity that the
4-10 constitutional rule requiring bills to be read on three several
4-11 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 126 passed the Senate on
May 1, 1997, by a viva-voce vote.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 126 passed the House on
May 7, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor