By: Darby H.B. No. 3201
A BILL TO BE ENTITLED
AN ACT
relating to the designation of a well as a two-year inactive well or
three-year inactive well for purposes of the oil and gas severance
tax exemption.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
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.
(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.
SECTION 2. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect on the 91st day after the last day of the
legislative session.