2023 Texas Statutes › Tax Code › Title 2 - State Taxation › Subtitle I - Severance Taxes › Chapter 202 - Oil Production Tax › Subchapter B. Tax Imposed › Section 202.059. Exemption for Hydrocarbons From Terra Wells

Sec. 202.059.  EXEMPTION FOR HYDROCARBONS FROM TERRA WELLS.  (a)  Hydrocarbons produced from a well subject to an agreement under Chapter 93, Natural Resources Code, and under a license issued under that chapter qualify for an exemption from the taxes imposed by this chapter and Chapter 201 if the comptroller approves the tax exemption under Subsection (g).
(b)  Hydrocarbons produced from a well formerly subject to an agreement under Chapter 93, Natural Resources Code, and a license issued under that chapter resuming production after participation in TERRA for two years qualify for an exemption from the taxes imposed by this chapter and Chapter 201 if the comptroller approves the tax exemption under Subsection (g).
(c)  The commission may certify a well eligible for a tax exemption or an application may be made to the commission for certification under this section.  The commission may require an applicant to provide the commission with any relevant information required to administer this section.  The commission shall issue a certificate to each operator of the well.  The certificate must:
(1)  include identification of the well;  and
(2)  state the date on which the tax exemption takes effect, subject to the comptroller's approval of the exemption under Subsection (g).
(d)  The commission shall furnish to the comptroller a copy of a certificate of exemption for each well qualifying under this section.
(e)  The commission may revoke a certificate for a tax exemption if information indicates that a well was not eligible for that designation at the time of certification or if a license issued under Chapter 93, Natural Resources Code, is revoked by the commission.  The commission shall notify the operator and the comptroller that a certificate has been revoked.  A tax exemption granted under this section is automatically revoked on the date the certificate is revoked, and hydrocarbons produced from the well after the date of revocation are not eligible for the tax exemption.
(f)  The commission may adopt and enforce any rules or orders that the commission finds necessary to administer this section.
(g)  To qualify for the tax exemption, the person responsible for paying the tax must apply to the comptroller for the exemption and include with the application the certificate issued by the commission under Subsection (c).  The comptroller shall approve the application of a person if the hydrocarbons are eligible for the tax exemption.  The comptroller may require a person applying for the tax exemption to provide any relevant information necessary to administer this section.  The comptroller may establish procedures to comply with this subsection and Subsection (h).
(h)  If the tax is paid at the full rate provided by this chapter and Chapter 201 on hydrocarbons produced on or after the effective date of the tax exemption but before the date the comptroller approves an application for the tax exemption, the operator is entitled to a credit on taxes due under Chapter 201 or this chapter in the amount equal to the tax paid during that period.  To receive a credit, the operator must apply to the comptroller for the credit not later than one year after the date the commission certifies the well for a tax exemption.
(i)  A person is subject to the penalties that may be imposed under Chapters 85 and 91, Natural Resources Code, if the person makes and submits to the commission or comptroller an application, report, or other document used or intended to be used for a certification, tax exemption, or tax credit under this section and the person knows that the application, report, or other document contains a false or untrue material fact.
(j)  A person is liable to the state for a civil penalty if the person, after receiving notice from the commission that the person's tax exemption certificate for a TERRA well or a former TERRA well has been revoked, applies or attempts to apply for a tax exemption for hydrocarbons produced from the well under the revoked certificate.  The amount of the penalty may not exceed the sum of:
(1)  $10,000;  and
(2)  the difference between the amount of taxes paid or attempted to be paid and the amount of taxes due.
(k)  The attorney general may recover a penalty under Subsection (j) in a suit brought on behalf of the state.  Venue for the suit is in Travis County.
(l)  In this section:
(1)  "Commission" means the Railroad Commission of Texas.
(2)  "Hydrocarbons" means any oil, gas, condensate, and other liquid hydrocarbons produced from a well.
(3)  "TERRA" means the Texas Experimental Research and Recovery Activity under Chapter 93, Natural Resources Code.
Added by Acts 1995, 74th Leg., ch. 989, Sec. 5, eff. Jan. 1, 1996.