By Bivins S.B. No. 126 75R2736 CBH-D 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. A well 1-19 previously designated as a three-year inactive well is not eligible 1-20 for designation as a two-year inactive well. The commission may 1-21 designate a well without an application, or an application may be 1-22 made to the commission for approval under this section. The 1-23 commission may require an applicant to provide the commission with 1-24 any relevant information required to administer this section. The 2-1 commission may require additional well tests to determine well 2-2 capability as it deems necessary. The commission shall notify the 2-3 comptroller in writing immediately if it determines that the 2-4 operation of the three-year inactive well or two-year inactive well 2-5 has been terminated or if it discovers any information that affects 2-6 the taxation of the production from the designated well. 2-7 (c) If the commission designates a three-year inactive well 2-8 under this section, it shall issue a certificate designating the 2-9 well as a three-year inactive well as defined by Subsection (a)(3) 2-10 of this section. The commission may not designate a three-year 2-11 inactive well under this section after February 29, 1996. If the 2-12 commission designates a two-year inactive well under this section, 2-13 it shall issue a certificate designating the well as a two-year 2-14 inactive well as defined by Subsection (a)(4) of this section. The 2-15 commission may not designate a two-year inactive well under this 2-16 section after February 29, 2000. 2-17 (d) An application for three-year inactive well 2-18 certification shall be made during the period of September 1, 1993, 2-19 through August 31, 1995, to qualify for the tax exemption under 2-20 this section. An application for two-year inactive well 2-21 certification shall be made during the period of September 1, 1997, 2-22 through August 31, 1999, to qualify for the tax exemption under 2-23 this section. Hydrocarbons sold after the date of certification 2-24 are eligible for the tax exemption. 2-25 (e) The commission may revoke a certificate if information 2-26 indicates that a certified well was not a three-year inactive well 2-27 or a two-year inactive well, as appropriate, or if other lease 3-1 production is credited to the certified well. Upon notice to the 3-2 operator from the commission that the certificate for tax exemption 3-3 under this section has been revoked, the tax exemption may not be 3-4 applied to hydrocarbons sold from that well from the date of 3-5 revocation. 3-6 (h) If the tax is paid at the full rate provided by Section 3-7 201.052(a), 201.052(b), 202.052(a), or 202.052(b) before the 3-8 comptroller approves an application for an exemption provided for 3-9 in this chapter, the operator is entitled to a credit against taxes 3-10 imposed by this chapter in an amount equal to the tax paid. To 3-11 receive a credit, the operator must apply to the comptroller for 3-12 the credit not later than the first anniversary after the date the 3-13 commission certifies that the well is a three-year inactive well or 3-14 a two-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.