Illinois Administrative Code › Title 86 - REVENUE › Part 475 - ILLINOIS HYDRAULIC FRACTURING TAX ACT › Section 475.130 - Withholding of Tax

Current through Register Vol. 48, No. 28, July 12, 2024
a)
Any
			 purchaser who makes a monetary payment to a producer for his or her portion of
			 the value of oil and gas from a production unit shall withhold from that
			 payment the amount of tax due from the producer. Any purchaser who pays any tax
			 due from a producer shall be entitled to reimbursement from the producer for
			 the tax so paid and may take credit for that amount from any monetary payment
			 to the producer for the value of the oil and gas. To the extent that a
			 purchaser required to collect the tax imposed by the Tax Act has actually
			 collected that tax, the tax is held in trust for the benefit of the State of
			 Illinois.
[
			 35 ILCS
			 450/2-25 ]
b) Withholding of Tax by Purchasers
1)
The tax imposed by the Tax Act is
			 upon the producers of the oil or gas in the proportion to their respective
			 beneficial interests at the time of severance. The first purchaser of any oil
			 or gas sold shall collect the amount of the tax due from the producers by
			 deducting and withholding that amount from any payments made by the purchaser
			 to the producers and shall remit the tax imposed by the Tax Act to the
			 Department.
[
			 35
			 ILCS 450/2-30(a) ]
2)
The first purchaser is required to
			 withhold and remit the tax imposed by the Tax Act to the Department from the
			 oil and gas purchased from the production unit unless the first purchaser
			 obtains from the operator an exemption certificate signed by the operator
			 stating that the production unit is not subject to the tax imposed by the Tax
			 Act.
A) Wells Drilled Prior to July
			 1, 2013
i) For production units containing
			 wells drilled prior to July 1, 2013 and from which the first purchaser
			 commences purchasing oil or gas on or after January 1, 2019, the exemption
			 certificate must include the following information:
* name and address of the operator;
* common name of the production unit and the number assigned to
				the production unit by the prior first purchaser;
* a statement by the operator that he or she will promptly
				notify the first purchaser in the event that the well becomes subject to the
				tax imposed by the Tax Act; and
* a statement by the operator that the production unit is
				exempt from the tax imposed by the Tax Act.
ii) The first purchaser shall maintain in its
			 books and records the legal description of each production unit identified in
			 the exemption certificate. The operator may provide, and the first purchaser
			 may accept, one exemption certificate containing the name of the operator, the
			 common names and numbers of all the production units, and the statements
			 required by subsections (b)(2)(A)(i), third and fourth bullets.
B) For wells drilled on or after
			 January 1, 2019,
the exemption certificate must include the following
			 information:
i)
name and
			 address of the operator;
ii) common
name
of the well
			 on the permit issued by DNR;
iii)
number assigned to the production unit by the first purchaser, if
			 available;
iv)
legal description of the production unit;
v) well reference number on the permit issued
			 by DNR;
vi) a statement by the
			 operator that he or she will promptly notify the first purchaser in the event
			 that the well becomes subject to the Tax Act; and
vii)
a statement by the operator that
			 the production unit is exempt from the tax imposed by the Tax Act.
[
			 35
			 ILCS 450/2-30(b)
			 ]
3) An
			 operator must promptly notify the first purchaser in the event that a well
			 certified as exempt from the tax imposed by the Tax Act becomes subject to
			 tax.
4) The purchaser is not
			 required to obtain a new exemption certificate if the operator providing the
			 exemption certificate to the purchaser assigns or transfers operations and
			 management of the well to a new operator.
5)
If a first purchaser obtains an
			 exemption certificate that contains the required information and reasonably
			 relies on the exemption certificate and it is subsequently determined by the
			 Department that the production unit is subject to the tax imposed by the Tax
			 Act, the Department will collect any tax that is due from the operator and
			 producers, and the first purchaser is relieved of any liability
[
			 35
			 ILCS 450/2-30(b) ]. During any
			 determination by the Department of whether the first purchaser reasonably
			 relied on an exemption certificate, the Department will inquire whether the
			 purchaser had any information or knowledge that would lead a reasonable person
			 to believe the statement provided by the operator that the production unit is
			 exempt was false. If the Department provides a purchaser with a lien in the
			 amount of any assessment for underpayment of tax, penalty and interest, the
			 purchaser shall suspend payment of oil or gas proceeds from the well to the
			 producers until such time as the purchaser receives a release of lien. A
			 purchaser shall also honor any levy issued to it to collect amounts withheld
			 pursuant to a lien. The Department retains all other legal remedies to collect
			 the underpayment from the producers.
6)
When the title to any oil or gas
			 severed from the earth,
soil
, or water is in dispute and the
			 purchaser of that oil or gas is withholding payments on account of litigation,
			 or for any other reason, the purchaser is hereby authorized, empowered, and
			 required to deduct from the gross amount thus held the amount of the tax
			 imposed and to make remittance of the tax to the Department as provided in the
			 Tax Act
[
			 35
			 ILCS 450/2-55 ].
7) If a purchaser purchases oil or gas from
			 an operator or person claiming to be acting as a purchaser for purposes of the
			 Tax Act, or the operator or person requests payment for 100% of the value of
			 the oil or gas without withholding the tax imposed by the Tax Act, the
			 purchaser shall obtain a written withholding certification from the operator or
			 person for each well or production unit from which oil or gas is removed,
			 subject to the tax imposed by the Tax Act.
A)
			 The withholding certification shall contain the following information:
i) name and address of the operator or
			 person;
ii) common name of the well
			 on the permit issued by DNR;
iii)
			 number assigned to the production unit by the operator, if available;
iv) legal description of the production
			 unit;
v) well reference number on
			 the permit issued by DNR;
vi) the
			 certificate of registration number obtained by the operator or person from the
			 Department under Section 475.160; and
vii) a statement by the operator or person
			 stating that the tax imposed by the Tax Act will be withheld and paid by the
			 operator or person.
B)
			 The purchaser shall maintain the certification in its records. The purchaser is
			 prohibited from paying 100% of the value of the oil or gas removed from wells
			 subject to the tax imposed by the Tax Act to any operator or person without
			 withholding the tax imposed by the Tax Act unless the purchaser obtains from
			 the operator or person a certificate of registration number issued by the
			 Department under Section 475.160. A withholding certificate is not required if
			 the oil or gas purchased from the wells or production units by the purchaser is
			 not subject to the tax imposed by the Tax Act.