CO Code § 39-29-102 (2021)
2021 Colorado Code|Title 39 - Taxation|Article 29 - Severance Tax|§ 39-29-102. Definitions

 [ ] As used in this article, unless the context otherwise requires:  Editor's note: This version of the introductory portion to this section is effective until January 1, 2022.  [ ] As used in this article 29, unless the context otherwise requires:  Editor's note: This version of the introductory portion to this section is effective January 1, 2022.   “Coal” means coal which has been processed into the form in which it is sold or otherwise used. Such processing includes, but is not limited to, cleaning and washing. (1.5) “Commercial production”, for a commercial oil shale facility, means production from such facility in excess of the first fifteen thousand tons per day of oil shale or ten thousand barrels per day of shale oil, whichever is greater. The calculation of the daily production shall be determined by dividing the total production of a calendar month by the total number of days in such month.    “Executive director” means the executive director of the department of revenue. (2.5) For tax years commencing on or after January 1, 2000, “gas” means natural gas, coalbed methane, and carbon dioxide.    “Gross income” means:   [ ] For oil and gas, the net amount realized by the taxpayer for sale of the oil or gas, whether the sale occurs at the wellhead or after transportation, manufacturing, and processing of the product. Net amount shall be calculated on the basis of the gross lease revenues, less deductions for any transportation, manufacturing, and processing costs borne by the taxpayer. Where the parties to the sale are related parties and the sales price is lower than the price for which that oil or gas could otherwise have been sold to a ready, willing, and able buyer and where the taxpayer was legally able to sell the oil or gas to such a buyer, gross income shall be determined by reference to comparable arms-length sales of like kind, quality, and quantity in the same field or area, less deductions for transportation, manufacturing, and processing done prior to the sale. For purposes of this paragraph (a), “related parties” shall be defined by the department of revenue pursuant to rules and regulations.    For metallic minerals, the value of ore immediately after its removal from the mine, and does not include any value added subsequent to mining by any treatment processes, such as crushing, grinding or concentration, by transportation from the mine, or by marketing of such ore or any products derived therefrom, but does not include income from the extraction or processing of ores or minerals from mine waste or residue of previously processed ores.       “Gross proceeds”, for oil shale, means the value of the oil shale at the point of severance. Such value shall be determined by deducting from the first sales price of the shale oil all costs, including direct and indirect expenditures, for:   Equipment and machinery;    Fragmenting, crushing, conveying, beneficiating, pyrolysis, retorting, refining, and transporting; and    Royalty payments. (4.5) “Local units of government locally impacted” means units of government in the geographic area wherein reside employees of the operation producing the minerals and mineral fuels taxed pursuant to this article. The geographic area shall be determined on the basis of residence as reported in accordance with section 39-29-110 (1)(d) .       “Metallic minerals” means all minerals except molybdenum, oil and gas, carbon dioxide, coal, oil shale, rock, sand, gravel, stone products, earths, limestone, and dolomite.    “Molybdenum ore” means ore which is mined primarily for the extraction of molybdenum therefrom. (6.5) For tax years commencing on or after January 1, 2000, “oil” means crude oil and condensate.    “Transportation” means the cost of moving identifiable, measurable oil or gas, including gas that is not in need of initial separation, from the point at which it is first identifiable and measurable to the sales point or other point where value is established. Any compression downstream of the meter or measurement point is deductible as a component of transportation. “Gathering” means the movement of an unseparated, bulk production stream to a point, on or off the lease, where the production stream undergoes initial separation into identifiable oil, gas, or free water and is not deductible as transportation. This definition shall not be construed to affect the legal relationship between royalty owners and lessees.    Editor's note: This version of subsection (3)(a) is effective until January 1, 2022.  (a) [ ] For oil and gas, the net amount realized by the taxpayer for sale of the oil or gas, whether the sale occurs at the wellhead or after transportation, manufacturing, and processing of the product. Net amount shall be calculated pursuant to rules promulgated by the department of revenue on the basis of the gross lease revenues, less deductions for direct costs actually paid or accrued by the taxpayer for transportation, manufacturing, and processing of the product. For purposes of this subsection (3)(a), direct costs include depreciation. Where the parties to the sale are related parties and the sales price is lower than the price for which that oil or gas could otherwise have been sold to a ready, willing, and able buyer and where the taxpayer was legally able to sell the oil or gas to such a buyer, gross income shall be determined by reference to comparable arms-length sales of like kind, quality, and quantity in the same field or area, less deductions for transportation, manufacturing, and processing done prior to the sale. For purposes of this subsection (3)(a), “related parties” shall be defined by the department of revenue pursuant to rules and regulations.  Editor's note: This version of subsection (3)(a) is effective January 1, 2022.  History. Source: L. 77: Entire article added, p. 1845, § 1, effective January 1, 1978. L. 80: (4.5) added, p. 739, § 1, effective April 10. L. 82: (1.5) added, p. 576, § 1, effective April 2; (5) amended, p. 578, § 1, effective January 1, 1983. L. 85: (3)(a) R&RE, p. 1287, § 1, effective July 1. L. 95: (3)(a) amended and (7) added, p. 979, § 2, effective May 25. L. 2000: (2.5) and (6.5) added, p. 1442, § 1, effective July 1. L. 2021: IP and (3)(a) amended,(HB 21-1312), ch. 299, p. 1797, § 11, effective January 1, 2022.    Cross references:    For the legislative declaration contained in the 1995 act amending this section, see section 1 of chapter 202, Session Laws of Colorado 1995.    For the legislative declaration in HB 21-1312, see section 1 of chapter 299, Session Laws of Colorado 2021.     ANNOTATION   The plain language of the definition of “gross income” authorizes a deduction for any transportation, manufacturing, and processing costs. BP Am. Prod. v. Colo. Dept. of Rev., 2016 CO 23, 369 P.3d 281 .   Cost of capital is a deductible cost that resulted from investment in transportation and processing facilities for oil and gas. Cost of capital is the amount of money that an investor could have earned on a different investment of similar risk. BP Am. Prod. v. Colo. Dept. of Rev., 2016 CO 23, 369 P.3d 281 .