03-03 15:13 3rd Sub. (Ivory) S.B. 207
R. Neil Walter proposes the following substitute bill:
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Local Impact Mitigation Amendments
2025 GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Ronald M. Winterton
House Sponsor: R. Neil Walter
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LONG TITLE
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General Description:
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This bill enacts a local impact mitigation tax for oil and gas production.
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Highlighted Provisions:
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This bill:
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▸ defines terms;
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▸ imposes a local impact mitigation tax on oil and gas that is produced within the state
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within a certain period and is saved, sold, or transported;
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▸ provides for certain exemptions from the tax;
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▸ requires quarterly payment of the tax from oil and gas producers;
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▸ requires the State Tax Commission to distribute tax revenue within a certain time to the
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counties from which the revenue was collected;
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▸ provides for certain tax revenue distribution requirements for a county that receives tax
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revenue;
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▸ limits the use of tax revenue to certain transportation-related mitigation projects;
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▸ requires the State Tax Commission to collect an administrative charge from the collected
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tax revenue;
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▸ prohibits counties from imposing certain oil or gas mitigation fees;
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▸ requires any county that receives tax revenue to report to the Legislature regarding the
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county's use of the tax revenue; and
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▸ makes technical and conforming changes.
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Money Appropriated in this Bill:
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None
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Other Special Clauses:
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None
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Utah Code Sections Affected:
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AMENDS:
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59-1-306, as last amended by Laws of Utah 2024, Chapter 35
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ENACTS:
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59-32-101, Utah Code Annotated 1953
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59-32-102, Utah Code Annotated 1953
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59-32-103, Utah Code Annotated 1953
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59-32-104, Utah Code Annotated 1953
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Be it enacted by the Legislature of the state of Utah:
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Section 1. Section 59-1-306 is amended to read:
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59-1-306 . Definition -- State Tax Commission Administrative Charge Account --
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Amount of administrative charge -- Deposit of revenue into the restricted account --
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Interest deposited into General Fund -- Expenditure of money deposited into the
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restricted account.
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(1) As used in this section, "qualifying tax, fee, or charge" means a tax, fee, or charge the
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commission administers under:
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(a) Title 10, Chapter 1, Part 3, Municipal Energy Sales and Use Tax Act;
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(b) Title 10, Chapter 1, Part 4, Municipal Telecommunications License Tax Act;
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(c) Section 19-6-714;
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(d) Section 19-6-805;
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(e) Chapter 12, Sales and Use Tax Act, other than a tax under Chapter 12, Part 1, Tax
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Collection, or Chapter 12, Part 18, Additional State Sales and Use Tax Act;
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(f) Section 59-27-105;
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(g) Chapter 31, Cannabinoid Licensing and Tax Act;
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(h) Chapter 32, Local Impact Mitigation Tax Act;
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[(h)] (i) Section 63H-1-205; or
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[(i)] (j) Title 69, Chapter 2, Part 4, Prepaid Wireless Telecommunications Service
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Charges.
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(2) There is created a restricted account within the General Fund known as the "State Tax
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Commission Administrative Charge Account."
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(3) Subject to the other provisions of this section, the restricted account shall consist of
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administrative charges the commission retains and deposits in accordance with this
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section.
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(4) For purposes of this section, the administrative charge is a percentage of revenue the
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commission collects from each qualifying tax, fee, or charge of not to exceed the lesser
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of:
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(a) 1.5%; or
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(b) an equal percentage of revenue the commission collects from each qualifying tax,
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fee, or charge sufficient to cover the cost to the commission of administering the
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qualifying taxes, fees, or charges.
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(5) The commission shall deposit an administrative charge into the restricted account.
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(6) Interest earned on the restricted account shall be deposited into the General Fund.
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(7) The commission shall expend money appropriated by the Legislature to the commission
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from the restricted account to administer qualifying taxes, fees, or charges.
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Section 2. Section 59-32-101 is enacted to read:
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CHAPTER 32. LOCAL IMPACT MITIGATION TAX ACT
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59-32-101 . Definitions.
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As used in this chapter:
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(1) "Barrel" means an amount equal to 42 gallons of oil at atmospheric pressure and at a
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temperature of 60 degrees Fahrenheit.
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(2) "Condensate" means hydrocarbons, regardless of gravity, that occur naturally in the
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gaseous phase in the reservoir and are separated from the natural gas as liquids through
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the process of condensation either in the reservoir, in the wellbore, or at the surface in
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field separators.
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(3) "Crude oil" means hydrocarbons, regardless of gravity, that occur naturally in the liquid
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phase in the reservoir and are produced at the wellhead in liquid form.
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(4) "Development well" means the same at that term is defined in Section 59-5-101.
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(5)(a) "Gas" means:
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(i) natural gas;
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(ii) natural gas liquids; or
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(iii) any mixture of natural gas and natural gas liquids.
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(b) "Gas" does not include any gaseous or liquid substance processed from coal, oil
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shale, tar sands, or any other hydrocarbon substance that occurs naturally in solid
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form.
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(6) "MCF" means an amount equal to 1,000 cubic feet of gas at a pressure of 14.73 pounds
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per square inch and at a temperature of 60 degrees Fahrenheit.
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(7) "Natural gas" means hydrocarbons, other than oil and natural gas liquids, that occur
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naturally in the gaseous phase in the reservoir and are produced and recovered at the
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wellhead in gaseous form.
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(8) "Natural gas liquids" means hydrocarbons, regardless of gravity, that are separated from
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natural gas as liquids in gas processing plants through the process of condensation,
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absorption, adsorption, or other methods.
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(9)(a) "Oil" means:
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(i) crude oil;
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(ii) condensate; or
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(iii) any mixture of crude oil and condensate.
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(b) "Oil" does not include any gaseous or liquid substance processed from coal, oil
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shale, tar sands, or any other hydrocarbon substance that occurs naturally in solid
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form.
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(10)(a) "Oil or gas mitigation fee" means any fee or tax, whether one-time or ongoing,
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that is imposed by a county on oil or gas producers for purposes of mitigating the
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direct impacts of oil or gas production on county roads.
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(b) "Oil or gas mitigation fee" includes:
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(i) a transportation service fee or other fee established under Chapter 27a, County
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Land Use, Development, and Management Act, meeting the requirements of
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Subsection (10)(a); and
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(ii) an impact fee established under Title 11, Chapter 36a, Impact Fees Act, meeting
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the requirements of Subsection (10)(a).
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(c) "Oil or gas mitigation fee" does not include the tax imposed by this chapter.
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(11) "Produced" means extracted at the wellhead.
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(12) "Producer" means the operator of the well from which oil or gas is produced.
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(13) "Qualifying road" means a paved public road that is:
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(a) a class B road as described in Section 72-3-103; or
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(b) a class C road as described in Section 72-3-104.
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(14) "Qualifying special service district" means a special service district under Title 17D,
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Chapter 1, Special Service District Act, that provides construction, repair, maintenance,
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or improvements for public roads.
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(15) "Recipient county" means a county that receives revenue collected from the tax
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imposed by this chapter.
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(16) "Stripper well" means the same as that term is defined in Section 59-5-101.
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(17) "Wildcat well" means the same as that term is defined in Section 59-5-101.
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Section 3. Section 59-32-102 is enacted to read:
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59-32-102 . Imposition of local impact mitigation tax -- Rate -- Exemptions --
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Shipment out-of-state -- Stockpiling -- Relation to other taxes -- Prohibition on county
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imposition of oil or gas mitigation fee.
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(1)(a) Except as provided in Subsection (2), a local impact mitigation tax is imposed at
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the rate specified in Subsection (1)(b) on the total volume of oil and gas that is:
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(i) produced within the state on or after January 1, 2026, and before January 1, 2029;
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and
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(ii)(A) saved;
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(B) sold; or
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(C) transported from the field from which the oil or gas was produced.
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(b) The rate of the tax under this chapter is:
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(i) 5 cents per barrel of oil described in Subsection (1)(a); and
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(ii) 1/4 cent per MCF of gas described in Subsection (1)(a).
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(2) The tax under this chapter does not apply to:
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(a) oil or gas produced by the United States;
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(b) oil or gas produced by the state or a political subdivision of the state;
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(c) oil or gas produced by an Indian or Indian tribe as defined in Section 9-9-101 from
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land under the jurisdiction of the United States;
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(d) oil or gas produced from a stripper well;
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(e) oil or gas produced from a wildcat well during the first 12 months of well production;
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(f) oil or gas produced from a development well during the first six months of well
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production; or
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(g) gas produced or consumed for the purpose of processing oil or gas to a marketable
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state by removing natural gas liquids or contaminants.
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(3) If oil or gas is shipped outside the state:
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(a) the shipment constitutes a sale; and
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(b) the oil or gas is subject to the tax imposed by this chapter.
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(4)(a) Except as provided in Subsection (4)(b), if oil or gas is stockpiled, the tax under
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this chapter is not imposed until the oil or gas is:
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(i) sold;
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(ii) transported; or
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(iii) delivered.
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(b) If oil or gas is stockpiled for more than two years, the oil or gas is subject to the tax
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imposed by this chapter.
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(5) The tax under this chapter:
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(a) is separate from and in addition to all other taxes provided by law, including the
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severance tax imposed under Chapter 5, Part 1, Oil and Gas Severance Tax;
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(b) does not affect the requirements applicable to the severance tax imposed under
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Chapter 5, Part 1, Oil and Gas Severance Tax, including the requirements for the
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disposition of severance tax revenue under Sections 59-5-116 and 59-5-119; and
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(c) is not a severance tax for purposes of Utah Constitution, Article XIII, Section 5,
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Subsection (9).
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(6) Unless specifically authorized by statute, a county may not impose an oil or gas
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mitigation fee.
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Section 4. Section 59-32-103 is enacted to read:
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59-32-103 . Payment of tax -- Revenue distribution -- Expenditure of tax revenue
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-- Administration.
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(1)(a) The tax imposed by this chapter shall be paid:
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(i) by the producer of oil or gas subject to the tax to the commission; and
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(ii) on a quarterly basis on or before the last day of the month following each
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calendar quarterly period electronically in a manner prescribed by the commission.
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(b) For purposes of this Subsection (1), the commission may require necessary
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information from producers regarding oil or gas production.
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(2) The commission shall distribute the revenue collected from the tax under this chapter:
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(a) to the county within which the revenue is collected from oil or gas production; and
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(b) within 60 days from the date on which the tax is paid.
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(3)(a)(i) If a county has created a qualifying special service district, the county
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treasurer shall transfer the revenue distributed to the county under Subsection (2)
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to the qualifying special service district.
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(ii) A qualifying special service district described in Subsection (3)(a)(i) shall expend
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the revenue as provided in Subsection (4).
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(b)(i) If a county has not created a qualifying special service district, the county
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treasurer shall deposit the revenue distributed to the county under Subsection (2)
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into a special revenue fund that is created to hold the revenue and is separate from
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the county's general fund.
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(ii) A county described in Subsection (3)(b)(i) shall expend the revenue as provided
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in Subsection (4).
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(4) The revenue collected from the tax under this chapter may only be expended for
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transportation projects that mitigate the direct impacts of oil or gas production on
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qualifying roads located within the recipient county.
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(5) The commission shall:
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(a) administer, collect, and enforce the tax under this chapter in accordance with Chapter
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1, General Taxation Policies; and
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(b) retain and deposit an administrative charge in accordance with Section 59-1-306
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from the revenue the commission collects from the tax under this chapter.
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Section 5. Section 59-32-104 is enacted to read:
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59-32-104 . County report to Legislature.
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(1) Each recipient county shall submit a written report to the Natural Resources,
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Agriculture, and Environment Interim Committee on or before September 1, 2029.
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(2) The report described in Subsection (1) shall include:
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(a) an accounting of the county's use of revenue received by the county from the tax
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under this chapter, including information regarding each transportation project for
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which the revenue has provided funding;
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(b) for each transportation project described under Subsection (2)(a):
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(i) an explanation as to how the transportation project mitigates the direct impacts of
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oil or gas production on qualifying roads located within the county; and
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(ii) a description of any other funding sources in addition to the revenue from the tax
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under this chapter; and
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(c) any recommendations for legislative action to reauthorize the tax for the purpose
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described in Subsection 59-32-103(4).
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(3) The Natural Resources, Agriculture, and Environment Interim Committee shall:
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(a) study any recommendations provided by a recipient county under Subsection (2)(c);
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and
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(b) if the Natural Resources, Agriculture, and Environment Interim Committee decides
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to recommend legislative action to the Legislature, prepare legislation for
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consideration by the Legislature in the next general session.
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Section 6. Effective Date.
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This bill takes effect on May 7, 2025.
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