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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER CCRUDE OIL PRODUCTION TAX
RULE §3.39Credits for Qualifying Low Producing Oil Leases

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

  (1) Commission--The Railroad Commission of Texas.

  (2) Operator--The person responsible under law or commission rules for the physical operation of a lease.

  (3) Average Taxable Price of Oil--The previous three month average price of oil using a price index listed in Tax Code, §202.058(c). The average will be computed by taking the closing price of each market day and dividing it by the total market days in the three-month period. This average price will then be adjusted to 2005 dollars.

  (4) Qualified Low Producing Lease--An oil lease that produces no more than 15 barrels of oil per day of production per well during the three-month period prior to the beginning date of the exemption. For purposes of qualifying the lease, the production per day is determined by using the monthly well production report made to the commission and dividing the sum of the production reported on the lease by the sum number of well days, where a well day is one well producing for one day. The calculation will use the three-month period prior to the beginning date of the exemption. The lease may also qualify if the recoverable oil for a 90-day period prior to qualifying is 5.0% or less per barrel of produced water.

(b) For each lease qualifying under this section, the comptroller will require the following information from the operator of the lease.

  (1) A copy of the monthly production report made to the commission for the lease for the three-month period prior to the exemption beginning date.

  (2) A list of the producing wells on the lease and supporting documentation to show the number of days each well was producing during the three-month period.

  (3) A completed comptroller exemption application for the lease.

  (4) The starting date that the lease met the three-month production limitations qualifying the well as a low-producing well.

  (5) A statement as to whether tax has been paid on the crude oil for periods after the effective date of the exemption, and the name of the party paying the tax.

  (6) If the lease is being qualified under Tax Code, §202.058(a)(2)(B), the operator will need to send documentation that the well has a recoverable oil rate of 5.0% or less per barrel of produced water for the three-month period. An example of acceptable documentation is a production record showing the amount of water produced and the amount of oil produced for the three-month period. A taxpayer getting approval under this section must also send the $100 filing fee with the application.

(c) The monthly average taxable price of oil will be published in the Texas Register the month following the actual production month. This publication will notify the taxpayer of the availability of the exemption prior to the due date of the report. Tax Code, §202.058(c), (d), and (e) will be used to define the credit applicable for each reporting month.

  (1) If the monthly average taxable price of oil is more than $30 per barrel, there will be no exemption for that reporting month.

  (2) If the monthly average taxable price of oil is more than $25 per barrel, but not more than $30 per barrel, there will be a 25% credit for oil sold from a qualified lease for that reporting month.

  (3) If the monthly average taxable price of oil is more than $22 per barrel, but not more than $25 per barrel, there will be a 50% credit for oil sold from a qualified lease for that reporting month.

  (4) If the monthly average taxable price of oil is $22 per barrel or less, there will be a 100% credit for oil sold from a qualified lease for that reporting month.

(d) If the tax is paid at the full rate provided by Tax Code, Chapter 202, on oil 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 Tax Code, Chapter 202, in an amount equal to the credit approved for that period. To receive a credit, the operator or the party remitting the tax must apply to the comptroller by filing amended reports. If a party other than the operator has remitted the tax, the operator must provide the party remitting the tax a copy of the approved comptroller application form that provides that the lease qualifies for the tax exemption.


Source Note: The provisions of this §3.39 adopted to be effective December 27, 2006, 31 TexReg 10346

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