S.B. No. 533
AN ACT
relating to the severance tax exemption for oil and gas produced
from certain inactive wells.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 202.056(a)(4), Tax Code, is amended to
read as follows:
(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.
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.
SECTION 3. Section 202.056(a)(3), Tax Code, is repealed.
SECTION 4. The changes in law made by this Act apply only to
an oil or gas well designated by the Railroad Commission of Texas as
a two-year inactive well on or after the effective date of this Act.
An oil or gas well designated by the Railroad Commission of Texas as
a two-year inactive well, or as a three-year inactive well, before
the effective date of this Act is governed by the law in effect
immediately before that date, and the former law is continued in
effect for that purpose.
SECTION 5. This Act takes effect September 1, 2019.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 533 passed the Senate on
March 27, 2019, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 533 passed the House on
April 24, 2019, by the following vote: Yeas 134, Nays 0, two
present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor