HBA-RBT H.B. 1310 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1310 By: Merritt Ways & Means 4/8/1999 Introduced BACKGROUND AND PURPOSE Currently, severance taxes must be collected for each barrel of oil and each thousand cubic feet of gas produced in this state. As the price for oil and gas declines, "stripper wells" producing minimal amounts of oil or gas are often shut down until more favorable conditions arise. The oil and gas industry is the only industry in Texas paying a tax on producing a product. The severance tax was established in 1901 and Senate Bill 290, recently signed into law, provides temporary emergency relief of the severance tax through the end of fiscal year 1999. H.B. 1310 permanently waives the severance tax imposed on oil wells that produce no more than 10 barrels per day. This bill allows domestic producers to compete on a level playing field with multi-national oil companies who import over 50 percent of the oil used in the United States. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter B, Chapter 202, Tax Code, by adding Section 202.058, as follows: Sec. 202.058. EXEMPTION FOR LOW-PRODUCING OIL WELLS. Defines "commission" and "qualifying lease." Provides that oil produced from a qualifying lease is exempt from the severance tax imposed by this chapter. Provides that a person filing a report under this chapter must include the number of barrels of oil purchased or produced during the period covered by the report that are exempt under this section. Provides that if the tax is paid on a barrel of oil exempt under this section at the full rate provided by Section 202.052(a) or (b) (Rate of Tax), the person paying the tax is entitled to a credit against taxes imposed by this chapter for the amount paid. Provides that to receive the credit, the person must apply to the comptroller for the credit not later than the expiration of the applicable period for filing a tax refund under Section 111.104 (Refunds). Provides that to qualify for an exemption the person responsible for paying the tax must apply to the comptroller. Requires the comptroller to approve the application of a person who demonstrates that the oil production is eligible for a tax exemption. Authorizes the comptroller to require a person applying for the tax exemption to provide any relevant information necessary to administer this section. Authorizes the comptroller to establish procedures to comply with this section. SECTION 2. Amends Section 202.052(c), Tax Code, to make conforming changes. SECTION 3. Effective date: September 1, 1999. Makes application of this Act prospective. SECTION 4. Emergency clause.