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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to the severance tax exemption for oil and gas produced |
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| 8 | 8 | | from certain inactive wells. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. Section 202.056(a)(4), Tax Code, is amended to |
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| 11 | 11 | | read as follows: |
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| 12 | 12 | | (4) "Two-year inactive well" means a well that has not |
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| 13 | 13 | | produced oil or gas in more than one month in the two years |
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| 14 | 14 | | preceding the date of application for severance tax exemption under |
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| 15 | 15 | | this section. The term does not include a well that is: |
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| 16 | 16 | | (A) part of an enhanced oil recovery project, as |
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| 17 | 17 | | defined by Section 89.002, Natural Resources Code; or |
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| 18 | 18 | | (B) drilled but not completed and that does not |
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| 19 | 19 | | have a record of hydrocarbon production reported to the commission. |
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| 20 | 20 | | SECTION 2. Section 202.056, Tax Code, is amended by |
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| 21 | 21 | | amending Subsections (b), (c), (d), (e), (h), and (i) and adding |
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| 22 | 22 | | Subsections (j) and (k) to read as follows: |
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| 23 | 23 | | (b) Hydrocarbons produced from a well qualify for a |
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| 24 | 24 | | five-year [10-year] severance tax exemption if the commission |
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| 25 | 25 | | designates the well as a [three-year inactive well or a] two-year |
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| 26 | 26 | | inactive well. The commission may require an applicant to provide |
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| 27 | 27 | | the commission with any relevant information required to administer |
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| 28 | 28 | | this section. The commission may require additional well tests to |
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| 29 | 29 | | determine well capability as the commission [it] deems necessary. |
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| 30 | 30 | | The commission shall notify the comptroller in writing immediately |
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| 31 | 31 | | if the commission [it] determines that the operation of the |
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| 32 | 32 | | [three-year inactive well or] two-year inactive well has been |
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| 33 | 33 | | terminated or if the commission [it] discovers any information that |
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| 34 | 34 | | affects the taxation of the production from the designated well. |
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| 35 | 35 | | (c) [If the commission designates a three-year inactive |
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| 36 | 36 | | well under this section, it shall issue a certificate designating |
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| 37 | 37 | | the well as a three-year inactive well as defined by Subsection |
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| 38 | 38 | | (a)(3) of this section. The commission may not designate a |
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| 39 | 39 | | three-year inactive well under this section after February 29, |
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| 40 | 40 | | 1996.] If the commission designates a two-year inactive well under |
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| 41 | 41 | | this section, the commission [it] shall issue a certificate |
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| 42 | 42 | | designating the well as a two-year inactive well [as defined by |
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| 43 | 43 | | Subsection (a)(4) of this section. The commission may not |
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| 44 | 44 | | designate a two-year inactive well under this section after |
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| 45 | 45 | | February 28, 2010]. |
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| 46 | 46 | | (d) [An application for three-year inactive well |
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| 47 | 47 | | certification shall be made during the period of September 1, 1993, |
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| 48 | 48 | | through August 31, 1995, to qualify for the tax exemption under this |
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| 49 | 49 | | section.] An application for two-year inactive well certification |
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| 50 | 50 | | must be made to the commission [shall be made during the period |
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| 51 | 51 | | September 1, 1997, through August 31, 2009,] to qualify for the tax |
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| 52 | 52 | | exemption under this section. Hydrocarbons sold after the date of |
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| 53 | 53 | | certification are eligible for the tax exemption. |
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| 54 | 54 | | (e) The commission may revoke a certificate if information |
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| 55 | 55 | | indicates that a certified well was not a [three-year inactive well |
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| 56 | 56 | | or a] two-year inactive well[, as appropriate,] or if other lease |
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| 57 | 57 | | production is credited to the certified well. Upon notice to the |
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| 58 | 58 | | operator from the commission that the certificate for tax exemption |
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| 59 | 59 | | under this section has been revoked, the tax exemption may not be |
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| 60 | 60 | | applied to hydrocarbons sold from that well from the date of |
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| 61 | 61 | | revocation. |
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| 62 | 62 | | (h) If the tax is paid at the full rate provided by Section |
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| 63 | 63 | | 201.052(a) or [, 201.052(b),] 202.052(a)[, or 202.052(b)] before |
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| 64 | 64 | | the comptroller approves an application for an exemption provided |
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| 65 | 65 | | for in this chapter, the operator is entitled to a credit against |
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| 66 | 66 | | taxes imposed by this chapter in an amount equal to the tax paid. To |
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| 67 | 67 | | receive a credit, the operator must apply to the comptroller for the |
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| 68 | 68 | | credit before the expiration of the applicable period for filing a |
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| 69 | 69 | | tax refund claim under Section 111.104. |
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| 70 | 70 | | (i) A [Penalties |
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| 71 | 71 | | [(1) Any] person who makes or subscribes any |
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| 72 | 72 | | application, report, or other document and submits the application, |
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| 73 | 73 | | report, or other document [it] to the commission to form the basis |
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| 74 | 74 | | for an application for a tax exemption under this section, knowing |
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| 75 | 75 | | that the application, report, or other document is false or untrue |
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| 76 | 76 | | in a material fact, may be subject to the penalties imposed by |
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| 77 | 77 | | Chapters 85 and 91, Natural Resources Code. |
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| 78 | 78 | | (j) On [(2) Upon] notice from the commission that the |
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| 79 | 79 | | certification for a [three-year inactive well or a] two-year |
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| 80 | 80 | | inactive well has been revoked, the tax exemption shall not apply to |
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| 81 | 81 | | oil or gas production sold after the date of notification. A [Any] |
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| 82 | 82 | | person who violates this subsection is liable to the state for a |
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| 83 | 83 | | civil penalty if the person applies or attempts to apply the tax |
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| 84 | 84 | | exemption allowed by this chapter after the certification for a |
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| 85 | 85 | | [three-year inactive well or a] two-year inactive well is revoked. |
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| 86 | 86 | | The amount of the penalty may not exceed the sum of: |
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| 87 | 87 | | (1) [(A)] $10,000; and |
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| 88 | 88 | | (2) [(B)] the difference between the amount of taxes |
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| 89 | 89 | | paid or attempted to be paid and the amount of taxes due. |
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| 90 | 90 | | (k) [(3)] The attorney general may recover a penalty under |
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| 91 | 91 | | Subsection (j) [Subdivision (2) of this subsection] in a suit |
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| 92 | 92 | | brought on behalf of the state. Venue for the suit is in Travis |
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| 93 | 93 | | County. |
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| 94 | 94 | | SECTION 3. Section 202.056(a)(3), Tax Code, is repealed. |
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| 95 | 95 | | SECTION 4. The changes in law made by this Act apply only to |
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| 96 | 96 | | an oil or gas well designated by the Railroad Commission of Texas as |
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| 97 | 97 | | a two-year inactive well on or after the effective date of this Act. |
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| 98 | 98 | | An oil or gas well designated by the Railroad Commission of Texas as |
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| 99 | 99 | | a two-year inactive well, or as a three-year inactive well, before |
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| 100 | 100 | | the effective date of this Act is governed by the law in effect |
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| 101 | 101 | | immediately before that date, and the former law is continued in |
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| 102 | 102 | | effect for that purpose. |
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| 103 | 103 | | SECTION 5. This Act takes effect September 1, 2019. |
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