1-1 By: Bivins S.B. No. 126
1-2 (In the Senate - Filed December 11, 1996; January 14, 1997,
1-3 read first time and referred to Committee on Finance;
1-4 April 28, 1997, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 12, Nays 0; April 28, 1997,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 126 By: Bivins
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to a tax exemption for hydrocarbon production from certain
1-11 inactive oil and gas leases returned to production.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Subsection (a), Section 202.056, Tax Code, is
1-14 amended by amending Subdivision (2) and adding Subdivision (4) to
1-15 read as follows:
1-16 (2) "Hydrocarbons" means any oil or gas produced from
1-17 a well, including hydrocarbon production.
1-18 (4) "Two-year inactive well" means a well that has not
1-19 produced oil or gas in more than one month in the two years
1-20 preceding the date of application for severance tax exemption under
1-21 this section.
1-22 SECTION 2. Subsections (b), (c), (d), (e), and (h), Section
1-23 202.056, Tax Code, are amended to read as follows:
1-24 (b) Hydrocarbons produced from a well qualify for a 10-year
1-25 severance tax exemption if the commission designates the well as a
1-26 three-year inactive well or a two-year inactive well. [The
1-27 commission may designate a well without an application, or an
1-28 application may be made to the commission for approval under this
1-29 section.] The commission may require an applicant to provide the
1-30 commission with any relevant information required to administer
1-31 this section. The commission may require additional well tests to
1-32 determine well capability as it deems necessary. The commission
1-33 shall notify the comptroller in writing immediately if it
1-34 determines that the operation of the three-year inactive well or
1-35 two-year inactive well has been terminated or if it discovers any
1-36 information that affects the taxation of the production from the
1-37 designated well.
1-38 (c) If the commission designates a three-year inactive well
1-39 under this section, it shall issue a certificate designating the
1-40 well as a three-year inactive well as defined by Subsection (a)(3)
1-41 of this section. The commission may not designate a three-year
1-42 inactive well under this section after February 29, 1996. If the
1-43 commission designates a two-year inactive well under this section,
1-44 it shall issue a certificate designating the well as a two-year
1-45 inactive well as defined by Subsection (a)(4) of this section. The
1-46 commission may not designate a two-year inactive well under this
1-47 section after February 29, 2000.
1-48 (d) An application for three-year inactive well
1-49 certification shall be made during the period of September 1, 1993,
1-50 through August 31, 1995, to qualify for the tax exemption under
1-51 this section. An application for two-year inactive well
1-52 certification shall be made during the period September 1, 1997,
1-53 through August 31, 1999, to qualify for the tax exemption under
1-54 this section. Hydrocarbons sold after the date of certification
1-55 are eligible for the tax exemption.
1-56 (e) The commission may revoke a certificate if information
1-57 indicates that a certified well was not a three-year inactive well
1-58 or a two-year inactive well, as appropriate, or if other lease
1-59 production is credited to the certified well. Upon notice to the
1-60 operator from the commission that the certificate for tax exemption
1-61 under this section has been revoked, the tax exemption may not be
1-62 applied to hydrocarbons sold from that well from the date of
1-63 revocation.
1-64 (h) If the tax is paid at the full rate provided by Section
2-1 201.052(a), 201.052(b), 202.052(a), or 202.052(b) before the
2-2 comptroller approves an application for an exemption provided for
2-3 in this chapter, the operator is entitled to a credit against taxes
2-4 imposed by this chapter in an amount equal to the tax paid. To
2-5 receive a credit, the operator must apply to the comptroller for
2-6 the credit before the expiration of the applicable period for
2-7 filing a tax refund claim under Section 111.104 [not later than the
2-8 first anniversary after the date the commission certifies that the
2-9 well is a three-year inactive well].
2-10 SECTION 3. Subdivision (2), Subsection (i), Section 202.056,
2-11 Tax Code, is amended to read as follows:
2-12 (2) Upon notice from the commission that the
2-13 certification for a three-year inactive well or a two-year inactive
2-14 well has been revoked, the tax exemption shall not apply to oil or
2-15 gas production sold after the date of notification. Any person who
2-16 violates this subsection is liable to the state for a civil penalty
2-17 if the person applies or attempts to apply the tax exemption
2-18 allowed by this chapter after the certification for a three-year
2-19 inactive well or a two-year inactive well is revoked. The amount
2-20 of the penalty may not exceed the sum of:
2-21 (A) $10,000; and
2-22 (B) the difference between the amount of taxes
2-23 paid or attempted to be paid and the amount of taxes due.
2-24 SECTION 4. This Act takes effect September 1, 1997.
2-25 SECTION 5. The importance of this legislation and the
2-26 crowded condition of the calendars in both houses create an
2-27 emergency and an imperative public necessity that the
2-28 constitutional rule requiring bills to be read on three several
2-29 days in each house be suspended, and this rule is hereby suspended.
2-30 * * * * *