HLS 20RS-332 ORIGINAL
2020 Regular Session
HOUSE BILL NO. 506
BY REPRESENTATIVE DEVILLIER
TAX/SEVERANCE TAX: Reduces the severance tax rate for oil over a certain period of
time and clarifies the severance tax rate for oil produced from certain incapable wells
1 AN ACT
2To amend and reenact R.S. 47:633(7)(a), (b), and (c)(i)(aa), relative to severance tax; to
3 reduce the severance tax rate on oil over a certain period of time; to clarify the
4 severance tax rate on oil produced from certain wells; to provide for an effective
5 date; and to provide for related matters.
6Be it enacted by the Legislature of Louisiana:
7 Section 1. R.S. 47:633(7)(a), (b), and (c)(i)(aa) are hereby amended and reenacted
8to read as follows:
9 ยง633. Rates of tax
10 The taxes on natural resources severed from the soil or water levied by R.S.
11 47:631 shall be predicated on the quantity or value of the products or resources
12 severed and shall be paid at the following rates:
13 * * *
14 (7)(a)(i) On oil twelve and one-half percentum of its value at the time and
15 place of severance, at the following rate:
16 (aa) Beginning January 1, 2020, through June 30, 2021, twelve and one-half
17 percent of its value at the time and place of severance.
18 (bb) Beginning July 1, 2021, through June 30, 2022, twelve percent of its
19 value at the time and place of severance.
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HB NO. 506
1 (cc) Beginning July 1, 2022, through June 30, 2023, eleven and one-half
2 percent of its value at the time and place of severance.
3 (dd) Beginning July 1, 2023, through June 30, 2024, eleven percent of its
4 value at the time and place of severance.
5 (ee) Beginning July 1, 2024, through June 30, 2025, ten and one-half
6 percent of its value at the time and place of severance.
7 (ff) Beginning July 1, 2025, through June 30, 2026, ten percent of its value
8 at the time and place of severance.
9 (gg) Beginning July 1, 2026, through June 30, 2027, nine and one-half
10 percent of its value at the time and place of severance.
11 (hh) Beginning July 1, 2027, through June 30, 2028, nine percent of its value
12 at the time and place of severance.
13 (ii) Beginning July 1, 2028, and thereafter, eight and one-half percent of its
14 value at the time and place of severance.
15 (ii) Such The value shall be the higher of (1) the gross receipts received from
16 the first purchaser, less charges for trucking, barging and pipeline fees, or (2) the
17 posted field price. In the absence of an arms length transaction or a posted field
18 price, the value shall be the severer's gross income from the property as determined
19 by R.S. 47:158(C).
20 (b) On oil produced from a well classified by the commissioner of
21 conservation as an oil well, and determined by the collector of revenue that such well
22 is incapable of producing an average of more than twenty-five barrels of oil per
23 producing day during the entire taxable month, and which also produces at least fifty
24 percent salt water per day, the tax rate applicable to the oil severed from such well
25 shall be one-half of the rate set forth in Subparagraph (a) of this Paragraph six and
26 one-quarter percent of its value at the time and place of severance and such well shall
27 be defined, for severance tax purposes, as an incapable well, provided that such well
28 has been certified by the Department of Revenue as incapable of such production on
29 or before the twenty-fifth day of the second month following the month of
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HB NO. 506
1 production. Oil severed from a multiple well lease or property is not subject to the
2 reduced rate of tax provided for herein, unless all such wells are certified as
3 incapable.
4 (c)(i)(aa) On oil produced from a well classified by the commissioner of
5 conservation as an oil well, and certified by the Department of Revenue that such
6 well is incapable of producing an average of more than ten barrels of oil per
7 producing day during the entire taxable month, the tax rate applicable to the oil
8 severed from such well shall be one-quarter of the rate set forth in Subparagraph (a)
9 of this Paragraph three and one hundred twenty-five thousandths percent of its value
10 at the time and place of severance and such well shall be defined, for severance tax
11 purposes, as a stripper well, provided that such well has been certified by the
12 Department of Revenue as a stripper well on or before the twenty-fifth day of the
13 second month following the month of production. Once a well has been certified and
14 determined to be incapable of producing an average of more than ten barrels of oil
15 per producing day during an entire month, such stripper well shall remain certified
16 as a stripper well until the well produces an average of more than ten barrels of oil
17 per day during an entire calendar month.
18 * * *
19 Section 2. This Act shall become effective upon signature by the governor or, if not
20signed by the governor, upon expiration of the time for bills to become law without signature
21by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
22vetoed by the governor and subsequently approved by the legislature, this Act shall become
23effective on the day following such approval.
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 506 Original 2020 Regular Session DeVillier
Abstract: Reduces the severance tax rate on oil over an eight-year period from 12.5% to
8.5% of its value at the time and place of severance and clarifies the severance tax
rate for oil produced from certain incapable wells.
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HB NO. 506
Present law provides for the levy of an excise tax on natural resources severed from the soil
or water, the rate for which shall be predicated on the quantity or value of the products or
resources severed. Present law provides that the tax rate on oil is 12.5% of its value at the
time and place of severance. The value of the oil shall be the higher of the gross receipts
received from the first purchaser, less charges for trucking, barging and pipeline fees, or the
posted field price.
Proposed law reduces the tax rate on oil over an eight-year period from 12.5% as follows:
(1)Beginning July 1, 2021, through June 30, 2022, to 12%.
(2)Beginning July 1, 2022, through June 30, 2023, to 11.5%.
(3)Beginning July 1, 2023, through June 30, 2024, to 11%.
(4)Beginning July 1, 2024, through June 30, 2025, to 10.5%.
(5)Beginning July 1, 2025, through June 30, 2026, to 10%.
(6)Beginning July 1, 2026, through June 30, 2027, to 9.5%.
(7)Beginning July 1, 2027, through June 30, 2028, to 9%.
(8)Beginning July 1, 2028, and thereafter, to 8.5%.
Present law provides for a reduced severance tax rate of 6.25% for oil produced from a well
classified by the commissioner of conservation as an oil well, and determined by the Dept.
of Revenue (DOR) that the well is incapable of producing an average of more than 25 barrels
of oil per producing day during the entire taxable month, and which also produces at least
50% salt water per day. Further requires such a well to be defined, for severance tax
purposes, as an incapable well, provided that the well has been certified by DOR as
incapable of production on or before the 25th day of the second month following the month
of production.
Proposed law retains present law.
Present law provides for a reduced severance tax rate of 3.125% for oil produced from a well
classified by the commissioner of conservation as an oil well, and certified by DOR that the
well is incapable of producing an average of more than 10 barrels of oil per producing day
during the entire taxable month. Further requires such a well to be defined, for severance
tax purposes, as a stripper well, provided that the well has been certified by DOR as a
stripper well on or before the 25th day of the second month following the month of
production.
Proposed law retains present law.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Amends R.S. 47:633(7)(a), (b), and (c)(i)(aa))
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