Illinois Administrative Code › Title 86 - REVENUE › Part 475 - ILLINOIS HYDRAULIC FRACTURING TAX ACT › Section 475.115 - Average Daily Production for Wells or Production Units Subject to Tax

Current through Register Vol. 48, No. 28, July 12, 2024
a) For purposes of
			 determining average daily production for oil wells or production units subject
			 to the tax imposed by the Tax Act, oil is considered produced during the month
			 it is removed from the production unit by the purchaser. For operators
			 withholding and remitting tax, oil is produced during the month oil is
			 transported off the production unit where severed by the operator, used on the
			 production unit where severed, or manufactured and converted into refined
			 products on the production unit where severed. Average daily production for a
			 month is determined by dividing the number of the total barrels produced in a
			 month by 30.
b) If an operator
			 commingles the production from multiple wells on a production unit, the
			 multiple wells shall be deemed one well for purposes of determining average
			 daily production. Average daily production for a month is determined by
			 dividing the number of the barrels removed by the first purchaser in a month by
			 30 and dividing the result by the number of wells in the production unit. If a
			 well on the production unit did not produce any oil during the month, it may
			 not be considered in calculating average daily production.
c) Operators must include the oil identified
			 in Section
			 475.120(a)
			 when calculating average daily production.
d) The average daily production shall be
			 calculated by the operator twice a year by taking the sum of the average daily
			 production for each well or production unit for the months of January,
			 February, March, April, May and June and dividing the number by 6, and for the
			 months of July, August, September, October, November and December and dividing
			 the number by 6. The purchaser shall use the average daily production
			 calculated by the operator for purposes of determining the tax to be withheld
			 and remitted to the Department in accordance with Sections 475.130 and 475.135.
			 If the operator fails to provide the average daily production for a well or
			 production unit to the first purchaser, the first purchaser shall withhold tax
			 at the rate of 6%. After providing an initial certification, the operator is
			 required to provide the first purchaser with a new certification only when the
			 average daily production for a 6-month period would cause the rate of tax to
			 change. When tax is being withheld at the rate of 6%, the operator has no
			 obligation to calculate and report average daily production.
e) If a purchaser and its employees have no
			 actual knowledge that the average daily production reported to it by the
			 operator is incorrect, and the Department later determines the operator
			 provided to the purchaser an incorrect figure resulting in an underpayment of
			 tax, the Department will collect any underpayment from the operator and
			 producers. Prior to the purchaser or its employees obtaining actual knowledge
			 that the average daily production reported to it by the operator for the
			 purpose of withholding and remitting the tax imposed by the Tax Act is
			 incorrect, a first purchaser has no obligation to calculate the average daily
			 production on a well or production unit to verify an operator's certification.
			 If the Department provides a purchaser or an operator required to withhold and
			 remit the tax with a lien in the amount of any assessment for underpayment of
			 tax, penalty and interest, the purchaser or operator shall suspend payment of
			 oil proceeds from the well to the producers until such time as the purchaser or
			 operator receives a release of lien. A purchaser and an operator 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.