Illinois Administrative Code › Title 86 - REVENUE › Part 475 - ILLINOIS HYDRAULIC FRACTURING TAX ACT › Section 475.100 - Nature of the Tax

Current through Register Vol. 48, No. 28, July 12, 2024
a) The Illinois
			 Hydraulic Fracturing Tax Act (Tax Act) imposes a tax on the severance and
			 production of oil and gas removed from oil and gas wells in this State that are
			 permitted, or required to be permitted, under the Hydraulic Fracturing
			 Regulatory Act (Regulatory Act) [ 225 ILCS 732 ]. The Tax Act does not impose a
			 tax on the severance and production of oil and gas from oil and gas wells that
			 commenced production prior to July 1, 2013, unless the wells are subsequently
			 required to be permitted under the Regulatory Act, or were completed on and
			 after July 1, 2013, and were not permitted, or required to be permitted under
			 the Illinois Hydraulic Fracturing Regulatory Act. Purchasers and operators are
			 not required to withhold and remit tax for oil and gas severed or produced from
			 these latter two classes of wells.
b)
If a well is required to be
			 permitted under the Regulatory Act, the tax imposed by the Tax Act applies,
			 whether or not a permit was obtained
[
			 35 ILCS
			 450/2-15(a) ]. The failure of an
			 operator to obtain a permit for a well subject to the tax imposed by that Tax
			 Act does not change a producer's liability for the tax imposed by the Tax
			 Act.
c) The tax is imposed upon the
			 producers of oil or gas severed from a well subject to the tax imposed by the
			 Tax Act. The purchaser of any oil or gas sold from these wells must collect the
			 tax from the producers by deducting and withholding the tax from any payments
			 made by the purchaser to the producers for oil or gas removed from the well.
			 The first purchaser is responsible for remitting the tax to the Department.
			 (See Section 2-30(a) of the Tax Act.) If oil or gas is transported off the
			 production unit by the operator, used on the production unit, or refined on the
			 production unit, the operator is responsible for registering with the
			 Department, withholding the tax from any payments made by the operator to the
			 producers and remitting the tax to the Department. (See Section 2-50(a) of the
			 Tax Act.)
d) For wells that
			 commenced production prior to July 1, 2013 that are not subject to the tax
			 imposed by the Tax Act, the obligation to obtain the exemption certificate
			 required by Section 475.130(b) only applies when a first purchaser enters into
			 a new contract with an operator to purchase oil or gas from those wells on or
			 after January 1, 2019. If the first purchaser meets this obligation for wells
			 that commenced production prior to July 1, 2013, no further obligations are
			 imposed on the first purchaser or the operator with respect to those
			 wells.
e) First purchasers shall
			 not be required to obtain exemption certificates from the operator pursuant to
			 Section 475.130(b)(2) until the first high volume horizontal hydraulic
			 fracturing permit has been approved by the Department of Natural Resources on
			 or after January 1, 2019.
f) The
			 first purchaser is required to obtain an exemption certificate required by
			 Section 475.130(b):
1) when subsection (d)
			 applies; and
2) for wells the first
			 purchaser begins purchasing oil or gas on or after January 1, 2019.