34 Tex. Admin. Code § 3.34 - Exemption of Governmental Entities and Two-Year Inactive Wells
(a) Definitions. The following words and
terms, when used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1)
Casinghead gas--Gas or vapor indigenous to an oil stratum and produced from the
stratum with oil.
(2)
Commission--The Railroad Commission of Texas.
(3) Hydrocarbons--Any oil or gas produced
from a well, including hydrocarbon production.
(4) Two-year inactive well--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
only includes a well certified by the commission on or after September 1, 2019,
and does not include a well that is:
(A) part
of an enhanced oil recovery project, as defined by Natural Resources Code,
§
89.002
(Definitions); or
(B) drilled but not completed and that does
not have a record of hydrocarbon production reported to the commission.
(b)
Exemption of certain entities. The federal government and its subdivisions and
the State of Texas and its subdivisions are not subject to the oil production
tax.
(1) Subdivisions of the federal
government include, but are not limited to, the following:
(A) the Federal Land Bank;
(B) the Department of the Interior;
(C) the Bureau of Land Management;
and
(D) the Army Corps of
Engineers.
(2)
Subdivisions of the State of Texas include, but are not limited to, the
following:
(A) Texas cities, towns, and
villages;
(B) Texas counties;
(C) Texas independent and common
school districts; and
(D) Texas
public colleges and universities.
(c) Tax borne ratably. The tax shall be borne
ratably by all nonexempt interested parties in proportion to their interests.
(d) Two-year inactive wells.
(1) To apply for the exemption for a two-year
inactive well, taxpayers must submit to the comptroller a copy of the approved
certification letter provided by the commission and a completed Texas Well
Exemption Application (AP-217), or any successor to that form promulgated by
the comptroller.
(2) The exemption
for the two-year inactive well extends for five years beginning with the month
following the date certified by the commission.
(3) If the tax is paid at the full rate
provided by Tax Code, §
202.052(a)
(Rate of Tax) before the comptroller approves an application for an exemption
provided for in this subsection (d) of this section, the operator is entitled
to a credit against taxes imposed by Tax Code, §
202.052 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 Tax Code, §
111.104
(Refunds).
(e) Recompleted two-year inactive well. A
two-year inactive well that is recompleted shall only receive the five-year
exemption from the initial certification of the well. A taxpayer must file
another Texas Well Exemption Application (AP-217), or any successor to that
form promulgated by the comptroller, for the recompleted well identifying the
original commission lease number when that well meets the requirements:
(1) the commission certifies the recompleted
two-year inactive well;
(2) the
commission assigns a new lease number for the recompleted well; and
(3) the American Petroleum Institute number
for the well does not change.
(f) Oil-Field cleanup regulatory fee. The
exemption provided by subsection (d) of this section does not extend to the
oil-field cleanup regulatory fee.
(g) Penalty. On notice from the commission
that the certification for 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 person who claims the exemption is liable to the state for a
civil penalty if the person applies or attempts to apply the tax exemption
allowed by subsection (d) of this section after the certification for a
two-year inactive well is revoked. The amount of the penalty may not exceed the
sum of:
(1) $10,000; or
(2) the difference between the amount of
taxes paid or attempted to be paid and the amount of taxes due.
Notes
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