SECTION 1. Sections 202.056,
Tax Code, is amended to read as follows:
(a) In this section:
(1) "Commission"
means the Railroad Commission of Texas.
(2) "Hydrocarbons"
means any oil or gas produced from a well, including hydrocarbon
production.
(3) "Three-year
inactive well" means any well that has not produced in more than one
month in the three years prior to the date of application for severance tax
exemption under this section.
(4) "Two-year
inactive well" means a well that has not produced oil or gas in more
than one month in the two years preceding the date of application for
severance tax exemption under this section.
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SECTION 1. Section
202.056(a)(4), Tax Code, is amended to read as follows:
(See SECTION 3 below.)
(4) "Two-year inactive
well" means a well that has not produced oil or gas in more than one
month in the two years preceding the date of application for severance tax
exemption under this section. The
term does not include a well that is:
(A) part of an enhanced oil recovery project, as defined by
Section 89.002, Natural Resources Code; or
(B) drilled but not completed and that does not have a record
of hydrocarbon production reported to the commission.
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(b) Hydrocarbons produced
from a well qualify for a 10-year
severance tax exemption if the commission designates the well as a three-year
inactive well or a two-year inactive well. The commission may require
an applicant to provide the commission with any relevant information
required to administer this section. The commission may require additional
well tests to determine well capability as it deems necessary. The
commission shall notify the comptroller in writing immediately if it determines that the operation of the
three-year inactive well or two-year inactive well has been
terminated or if it discovers any information that affects the taxation of
the production from the designated well.
(c) If the commission
designates a three-year inactive well under this section, it shall issue a
certificate designating the well as a three-year inactive well as defined
by Subsection (a)(3) of this section. The commission may not designate a
three-year inactive well under this section after February 29, 1996.
If the commission designates a two-year inactive well under this section,
it shall issue a certificate designating the well as a two-year inactive
well as defined by Subsection (a)(4)(3)
of this section. The commission may not designate a two-year
inactive well under this section after February 28, 2010.
(d) An application for
three-year inactive well certification shall be made during the period of
September 1, 1993, through August 31, 1995, to qualify for the tax
exemption under this section. An application for two-year inactive
well certification shall be made during the period September 1, 1997,
through August 31, 2009, to qualify for the tax exemption under this
section. Hydrocarbons sold after the date of certification are eligible
for the tax exemption.
(e) The commission may
revoke a certificate if information indicates that a certified well was not
a three-year inactive well or a two-year inactive well, as appropriate, or if other lease
production is credited to the certified well. Upon notice to the operator
from the commission that the certificate for tax exemption under this
section has been revoked, the tax exemption may not be applied to
hydrocarbons sold from that well from the date of revocation.
(f) The commission shall
adopt all necessary rules to administer this section.
(g) To qualify for the tax
exemption provided by this section, the person responsible for paying the
tax must apply to the comptroller. The comptroller shall approve the
application of a person who demonstrates that the hydrocarbon production is
eligible for a tax exemption. The comptroller may require a person
applying for the tax exemption to provide any relevant information
necessary to administer this section. The comptroller shall have the power
to establish procedures in order to comply with this section.
(h) If the tax is paid at
the full rate provided by Section 201.052(a), 201.052(b),
202.052(a), or 202.052(b) before
the comptroller approves an application for an exemption provided for in
this chapter, the operator is entitled to a credit against taxes imposed by
this chapter in an amount equal to the tax paid. To receive a credit, the
operator must apply to the comptroller for the credit before the expiration
of the applicable period for filing a tax refund claim under Section
111.104.
(i) Penalties
(1) Any person who makes or
subscribes any application, report, or other document and submits it to the
commission to form the basis for an application for a tax exemption under
this section, knowing that the application, report, or other document is
false or untrue in a material fact, may be subject to the penalties imposed
by Chapters 85 and 91, Natural Resources Code.
(2) Upon notice from the
commission that the certification for a three-year inactive well or a
two-year inactive well has been revoked, the tax exemption shall not apply
to oil or gas production sold after the date of notification. Any person
who violates this subsection is liable to the state for a civil penalty if
the person applies or attempts to apply the tax exemption allowed by this
chapter after the certification for a three-year inactive well or a
two-year inactive well is revoked. The amount of the penalty may not
exceed the sum of:
(A) $10,000; and
(B) the difference between
the amount of taxes paid or attempted to be paid and the amount of taxes
due.
(3) The attorney general may
recover a penalty under Subdivision (2) of this subsection in a suit
brought on behalf of the state. Venue for the suit is in Travis County.
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SECTION 2. Section 202.056,
Tax Code, is amended by amending Subsections (b), (c), (d), (e), (h), and
(i) and adding Subsections (j) and (k) to read as follows:
(b) Hydrocarbons produced
from a well qualify for a five-year [10-year] severance tax exemption
if the commission designates the well as a [three-year inactive well or
a] two-year inactive well. The commission may require an applicant to
provide the commission with any relevant information required to administer
this section. The commission may require additional well tests to
determine well capability as the commission [it] deems
necessary. The commission shall notify the comptroller in writing
immediately if the commission [it] determines that the
operation of the [three-year inactive well or] two-year inactive
well has been terminated or if the commission [it] discovers
any information that affects the taxation of the production from the
designated well.
(c) [If the commission
designates a three-year inactive well under this section, it shall issue a
certificate designating the well as a three-year inactive well as defined
by Subsection (a)(3) of this section. The commission may not designate a
three-year inactive well under this section after February 29, 1996.]
If the commission designates a two-year inactive well under this section, the
commission [it] shall issue a certificate designating the well
as a two-year inactive well [as
defined by Subsection (a)(4) of this section. The commission may
not designate a two-year inactive well under this section after February
28, 2010].
(d) [An application for
three-year inactive well certification shall be made during the period of
September 1, 1993, through August 31, 1995, to qualify for the tax
exemption under this section.] An application for two-year inactive
well certification must be made to
the commission [shall be made during the period September 1,
1997, through August 31, 2009,] to qualify for the tax exemption under
this section. Hydrocarbons sold after the date of certification are eligible
for the tax exemption.
(e) The commission may
revoke a certificate if information indicates that a certified well was not
a [three-year inactive well or a] two-year inactive well[, as appropriate,] or if other
lease production is credited to the certified well. Upon notice to the
operator from the commission that the certificate for tax exemption under
this section has been revoked, the tax exemption may not be applied to
hydrocarbons sold from that well from the date of revocation.
(h) If the tax is paid at
the full rate provided by Section 201.052(a) or [, 201.052(b),] 202.052(a)[, or 202.052(b)] before the
comptroller approves an application for an exemption provided for in this
chapter, the operator is entitled to a credit against taxes imposed by this
chapter in an amount equal to the tax paid. To receive a credit, the
operator must apply to the comptroller for the credit before the expiration
of the applicable period for filing a tax refund claim under Section
111.104.
(i) A [Penalties
[(1) Any] person who
makes or subscribes any application, report, or other document and submits the
application, report, or other document [it] to the commission to
form the basis for an application for a tax exemption under this section,
knowing that the application, report, or other document is false or untrue
in a material fact, may be subject to the penalties imposed by Chapters 85
and 91, Natural Resources Code.
(j) On [(2) Upon]
notice from the commission that the certification for a [three-year
inactive well or a] two-year inactive well has been revoked, the tax
exemption shall not apply to oil or gas production sold after the date of
notification. A [Any] person who violates this subsection is
liable to the state for a civil penalty if the person applies or attempts
to apply the tax exemption allowed by this chapter after the certification
for a [three-year inactive well or a] two-year inactive well is
revoked. The amount of the penalty may not exceed the sum of:
(1) [(A)]
$10,000; and
(2) [(B)] the
difference between the amount of taxes paid or attempted to be paid and the
amount of taxes due.
(k) [(3)] The
attorney general may recover a penalty under Subsection (j) [Subdivision
(2) of this subsection] in a suit brought on behalf of the state.
Venue for the suit is in Travis County.
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