By: Darby (Senate Sponsor - Watson) H.B. No. 2277
(In the Senate - Received from the House May 8, 2017;
May 9, 2017, read first time and referred to Committee on Finance;
May 15, 2017, reported favorably by the following vote: Yeas 9,
Nays 0; May 15, 2017, sent to printer.)
Click here to see the committee vote
A BILL TO BE ENTITLED
AN ACT
relating to the temporary exemption or tax reduction for certain
high-cost gas.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 201.057(a)(2), Tax Code, is amended to
read as follows:
(2) "High-cost gas" means[:
[(A)] high-cost natural gas as described by
Section 107, Natural Gas Policy Act of 1978 (15 U.S.C. Section
3317), as that section existed [exists] on January 1, 1989, without
regard to whether that section is in effect or whether a
determination has been made that the gas is high-cost natural gas
for purposes of that Act[; or
[(B) all gas produced from oil wells or gas wells
within a commission approved co-production project].
SECTION 2. Section 201.057, Tax Code, is amended by
amending Subsections (c), (e), (f), (g), and (i) and adding
Subsection (g-1) to read as follows:
(c) High-cost gas [as defined in Subsection (a)(2)(A)]
produced from a well that is spudded or completed after August 31,
1996, is entitled to a reduction of the tax imposed by this chapter
for the first 120 consecutive calendar months beginning on the
first day of production, or until the cumulative value of the tax
reduction equals 50 percent of the drilling and completion costs
incurred for the well, whichever occurs first. The amount of tax
reduction shall be computed by subtracting from the tax rate
imposed by Section 201.052 the product of that tax rate times the
ratio of drilling and completion costs incurred for the well to
twice the median drilling and completion costs for high-cost wells
[as defined in Subsection (a)(2)(A)] spudded or completed during
the previous state fiscal year, except that the effective rate of
tax may not be reduced below zero.
(e) The operator of a proposed or existing gas well,
including a gas well that has not been completed, [or the operator
of any proposed or existing oil or gas well within a commission
approved co-production project,] may apply to the commission for
certification that the well produces or will produce high-cost gas.
The [Such] application[, if seeking certification as high-cost gas
according to Subsection (a)(2)(A),] may be made at any time after
the first day of production. The application may be made but is not
required to be made concurrently with a request for a determination
that gas produced from the well is high-cost natural gas for
purposes of the Natural Gas Policy Act of 1978 (15 U.S.C. Section
3301 et seq.) [or with a request for commission approval of a
co-production project]. The commission may require an applicant to
provide the commission with any relevant information required to
administer this section. For purposes of this section, a
determination that gas is high-cost natural gas for purposes of the
Natural Gas Policy Act of 1978 (15 U.S.C. Section 3301 et seq.)
[according to Subsection (a)(2)(A) or a determination that gas is
produced from within a commission approved co-production project]
is a certification that the gas is high-cost gas for purposes of
this section, and in that event additional certification is not
required to qualify for the [exemption or] tax reduction provided
by this section.
(f) To qualify for the [exemption or] tax reduction provided
by this section, the person responsible for paying the tax must
apply to the comptroller. The application must contain the
certification of the commission that the well produces high-cost
gas and[, if the application is for a well spudded or completed
after September 1, 1995,] must contain a report of drilling and
completion costs incurred for each well on a form and in the detail
as determined by the comptroller. Drilling and completion costs
for a recompletion shall only include current and contemporaneous
costs associated with the recompletion. Notwithstanding any other
provision of this section, to obtain the maximum [tax exemption or]
tax reduction [deduction], an application to the comptroller for
certification according to Subsection (a)(2) [(a)(2)(A)] must be
filed with the comptroller at the later of the 180th day after the
date of first production or the 45th day after the date of approval
by the commission. If the application is not filed by the
applicable deadline, the [tax exemption or] tax reduction
[deduction] is reduced by 10 percent for the period beginning on the
180th day after the first day of production and ending on the date
on which the application is filed with the comptroller. [An
application to the comptroller for certification according to
Subsection (a)(2)(B) may not be filed before January 1, 1990, or
after December 31, 1998.] The comptroller shall approve the
application of a person who demonstrates that the gas is eligible
for the [exemption or] tax reduction. The comptroller may require a
person applying for the [exemption or] tax reduction to provide any
relevant information in the person's monthly report that the
comptroller considers necessary to administer this section. The
commission shall notify the comptroller in writing immediately if
it determines that a [an oil or gas] well previously certified as
producing high-cost gas does not produce high-cost gas or if it
takes any action or discovers any information that affects the
eligibility of gas for a [an exemption or] tax reduction under this
section.
(g) As soon as practicable after March 1 of each year, the
comptroller shall determine [from reports containing drilling and
completion cost data as required on applications to the comptroller
under Subsection (f),] the median drilling and completion cost for
all high-cost wells [as defined in Subsection (a)(2)(A)] for which
an application for a tax reduction [exemption or reduced tax] was
made during the previous state fiscal year. In making the
determination, the comptroller shall use the drilling and
completion cost data required to be reported to the comptroller
under Subsection (f). The [Those] median drilling and completion
cost [costs] shall be used to compute the reduced tax under
Subsection (c) and is fixed on the date of the comptroller's
determination under this subsection.
(g-1) The report of drilling and completion costs required
under Subsection (f) may not be amended after March 1 of the year
following the state fiscal year in which the application was made.
(i) If, before the commission certifies that a well produces
high-cost gas or before the comptroller approves an application for
a [an exemption or] tax reduction under this section, the tax
imposed by this chapter is paid on high-cost gas that otherwise
qualifies for the [exemption or] tax reduction provided by this
section, the person who remitted the tax is [producer or producers
of the gas are] entitled to a refund [credit against other taxes
imposed by this chapter] in an amount equal to the difference
between the amount of the tax paid on the gas and the amount of tax
that would have been paid on the gas if it had received a [that
otherwise qualified for the exemption or] tax reduction under this
section [on or after the first day of the next month after the month
in which the application for certification under this section was
filed with the commission]. The [If the application for
certification is submitted to the commission after January 1, 2004,
the] total allowable refund [credit] for taxes paid for reporting
periods before the date the application is filed may not exceed the
total tax paid on the gas that otherwise qualified for the
[exemption or] tax reduction and that was produced during the 24
consecutive calendar months immediately preceding the month in
which the application for certification under this section that the
comptroller approved was filed with the commission. [The credit is
allocated to each producer according to the producer's
proportionate share in the gas.] To receive a refund [credit], the
person entitled to the refund [one or more of the producers] must
apply to the comptroller for the refund [credit] not later than the
first anniversary after the date the comptroller approves the
application for a [an exemption or] tax reduction under this
section. [If a producer demonstrates that the producer does not
have sufficient tax liability under this chapter to claim the
credit within five years from the date the application for the
credit is made, the producer is entitled to a refund in the amount
of any credit the comptroller determines may not be claimed within
that five years. Nothing in this subsection shall relieve the
obligation imposed by Subsection (b) to pay tax when due on
high-cost gas produced from co-production projects on or before
July 31, 1995.]
SECTION 3. Sections 201.057(a)(3), (a)(4), (a)(5), (b),
(d), and (j), Tax Code, are repealed.
SECTION 4. The change in law made by this Act does not
affect tax liability accruing before the effective date of this
Act. That liability continues in effect as if this Act had not been
enacted, and the former law is continued in effect for the
collection of taxes due and for civil and criminal enforcement of
the liability for those taxes.
SECTION 5. This Act takes effect September 1, 2017.
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