TYH S.B. 290 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 290 By: Brown Ways & Means 2/19/1999 Engrossed BACKGROUND AND PURPOSE Currently, state law requires the State of Texas to collect severance taxes for each barrel of oil and each Mcf (thousand cubic feet) of gas produced in the 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. S.B. 290 sets forth a quarterly certification determination system which temporarily waives the severance tax imposed on certain oil and gas produced if either the monthly average closing price of gas is below $1.80 per MMBtu or the monthly average closing price of oil is below $15 per barrel, as recorded on the New York Mercantile Exchange. 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 201, Tax Code, by adding Section 201.059, as follows: Sec. 201.059. TEMPORARY EXEMPTION FOR GAS FROM CERTAIN WELLS UNDER CERTAIN MARKET CONDITIONS. (a) Defines the following terms for the purpose of this section: "commission,""Mcf," and "qualifying well." (b) Requires the comptroller of public accounts (comptroller) to certify the dates that the monthly average closing price of gas is below $1.80 per MMBtu, as recorded on the New York Mercantile Exchange (NYMEX), for three consecutive months beginning on November 1, 1998. (c) Provides that gas produced from a qualifying lease on or after February 1, 1999, and before August 1, 1999, is exempt from the severance tax imposed by this chapter for each calendar month following a three-month period certified by the comptroller under Subsection (b). (d) Provides that a person filing a report under this chapter must include the amount of the gas purchased or produced during the period covered by the report that is exempt under this section. (e) Provides that if the tax is paid on gas exempt under this section at the full rate provided by Section 201.052(a) or (b) (Rate of Tax), the person paying the tax is entitled to a credit against taxes imposed 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). (f) Provides that this section expires on the earlier of September 1, 1999, or the last day of the month in which the total taxes exempted under this section and Section 202.060 equal $45 million. Requires the comptroller to make a monthly determination of the total taxes that have been exempted under this section and Section 202.060, beginning on March 1, 1999. Requires the comptroller to certify the month in which this will occur and to prorate the amount of the exemption for that month, if the comptroller determines that the total taxes exempted under this section and Section 202.060 will exceed $45 million. (g) Requires the comptroller to publish certifications in the Texas Register. (h) Provides that the exemption from severance taxes does not exempt the gas subject to exemption from any other fees or taxes, including the fee imposed under Section 81.117, Natural Resources Code (Oil-Field Cleanup Regulatory Fee on Gas). SECTION 2. Amends Subchapter B, Chapter 202, Tax Code, by adding Section 202.060, as follows: Sec. 202.060. TEMPORARY EXEMPTION FOR OIL FROM CERTAIN WELLS UNDER CERTAIN MARKET CONDITIONS. (a) Defines the following terms for purpose of this section: "commission" and "qualifying lease." (b) Requires the comptroller to certify the dates that the monthly average closing price of West Texas Intermediate crude oil is below $15 per barrel, as recorded on the New York Mercantile Exchange (NYMEX), for three consecutive months beginning on November 1, 1998. (c) Provides that oil produced from a qualifying lease on or after February 1, 1999, and before August 1, 1999, is exempt from the severance tax imposed by this chapter for each calendar month following a three-month period certified by the comptroller under Subsection (b). (d) 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. (e) 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. (f) Provides that this section expires on the earlier of September 1, 1999, or the last day of the month in which the total taxes exempted under this section and Section 201.059 equal $45 million. Requires the comptroller to make a monthly determination of the total taxes that have been exempted under this section and Section 201.059, beginning on March 1, 1999. Requires the comptroller to certify the month in which this will occur and to prorate the amount of the exemption for that month, if the comptroller determines that the total taxes exempted under this section and Section 201.059 will exceed $45 million. (g) Requires the comptroller to publish certifications in the Texas Register. (h) Provides that the exemption from severance taxes does not exempt the oil subject to exemption from any other fees or taxes, including the fee imposed under Section 81.116, Natural Resources Code (Oil-Field Cleanup Regulatory Fee on Oil). SECTION 3. Emergency clause. Effective date: upon passage.