59-5-102 - Severance tax -- Rate -- Computation -- Annual exemption -- Tax credit -- Tax rate reduction -- Study by Tax Review Commission.
59-5-102. Severance tax -- Rate -- Computation -- Annual exemption -- Tax credit -- Tax rate reduction -- Study by Tax Review Commission.
(1) Each person owning an interest, working interest, royalty interest, payments out ofproduction, or any other interest, in oil or gas produced from a well in the state, or in theproceeds of the production, shall pay to the state a severance tax on the basis of the valuedetermined under Section 59-5-103.1 of the oil or gas:
(a) produced; and
(b) (i) saved;
(ii) sold; or
(iii) transported from the field where the substance was produced.
(2) (a) Subject to Subsection (2)(d), the severance tax rate for oil is as follows:
(i) 3% of the value of the oil up to and including the first $13 per barrel for oil; and
(ii) 5% of the value of the oil from $13.01 and above per barrel for oil.
(b) Subject to Subsection (2)(d), the severance tax rate for natural gas is as follows:
(i) 3% of the value of the natural gas up to and including the first $1.50 per MCF for gas;and
(ii) 5% of the value of the natural gas from $1.51 and above per MCF for gas.
(c) Subject to Subsection (2)(d), the severance tax rate for natural gas liquids is 4% of thevalue of the natural gas liquids.
(d) (i) On or before December 15, 2004, the Office of the Legislative Fiscal Analyst andthe Governor's Office of Planning and Budget shall prepare a revenue forecast estimating theamount of revenues that:
(A) would be generated by the taxes imposed by this part for the calendar year beginningon January 1, 2004 had 2004 General Session S.B. 191 not taken effect; and
(B) will be generated by the taxes imposed by this part for the calendar year beginning onJanuary 1, 2004.
(ii) Effective on January 1, 2005, the tax rates described in Subsections (2)(a) through (c)shall be:
(A) increased as provided in Subsection (2)(d)(iii) if the amount of revenues estimatedunder Subsection (2)(d)(i)(B) is less than the amount of revenues estimated under Subsection(2)(d)(i)(A); or
(B) decreased as provided in Subsection (2)(d)(iii) if the amount of revenues estimatedunder Subsection (2)(d)(i)(B) is greater than the amount of revenues estimated under Subsection(2)(d)(i)(A).
(iii) For purposes of Subsection (2)(d)(ii):
(A) subject to Subsection (2)(d)(iv)(B):
(I) if an increase is required under Subsection (2)(d)(ii)(A), the total increase in the taxrates shall be by the amount necessary to generate for the calendar year beginning on January 1,2005 revenues equal to the amount by which the revenues estimated under Subsection(2)(d)(i)(A) exceed the revenues estimated under Subsection (2)(d)(i)(B); or
(II) if a decrease is required under Subsection (2)(d)(ii)(B), the total decrease in the taxrates shall be by the amount necessary to reduce for the calendar year beginning on January 1,2005 revenues equal to the amount by which the revenues estimated under Subsection(2)(d)(i)(B) exceed the revenues estimated under Subsection (2)(d)(i)(A); and
(B) an increase or decrease in each tax rate under Subsection (2)(d)(ii) shall be in
proportion to the amount of revenues generated by each tax rate under this part for the calendaryear beginning on January 1, 2003.
(iv) (A) The commission shall calculate any tax rate increase or decrease required bySubsection (2)(d)(ii) using the best information available to the commission.
(B) If the tax rates described in Subsections (2)(a) through (c) are increased or decreasedas provided in this Subsection (2)(d), the commission shall mail a notice to each person requiredto file a return under this part stating the tax rate in effect on January 1, 2005 as a result of theincrease or decrease.
(3) If oil or gas is shipped outside the state:
(a) the shipment constitutes a sale; and
(b) the oil or gas is subject to the tax imposed by this section.
(4) (a) Except as provided in Subsection (4)(b), if the oil or gas is stockpiled, the tax isnot imposed until the oil or gas is:
(i) sold;
(ii) transported; or
(iii) delivered.
(b) Notwithstanding Subsection (4)(a), if oil or gas is stockpiled for more than two years,the oil or gas is subject to the tax imposed by this section.
(5) A tax is not imposed under this section upon:
(a) stripper wells, unless the exemption prevents the severance tax from being treated asa deduction for federal tax purposes;
(b) the first 12 months of production for wildcat wells started after January 1, 1990; or
(c) the first six months of production for development wells started after January 1, 1990.
(6) (a) Subject to Subsections (6)(b) and (c), a working interest owner who pays for all orpart of the expenses of a recompletion or workover may claim a nonrefundable tax credit equal to20% of the amount paid.
(b) The tax credit under Subsection (6)(a) for each recompletion or workover may notexceed $30,000 per well during each calendar year.
(c) If any amount of tax credit a taxpayer is allowed under this Subsection (6) exceedsthe taxpayer's tax liability under this part for the calendar year for which the taxpayer claims thetax credit, the amount of tax credit exceeding the taxpayer's tax liability for the calendar year maybe carried forward for the next three calendar years.
(7) A 50% reduction in the tax rate is imposed upon the incremental production achievedfrom an enhanced recovery project.
(8) The taxes imposed by this section are:
(a) in addition to all other taxes provided by law; and
(b) delinquent, unless otherwise deferred, on June 1 next succeeding the calendar yearwhen the oil or gas is:
(i) produced; and
(ii) (A) saved;
(B) sold; or
(C) transported from the field.
(9) With respect to the tax imposed by this section on each owner of oil or gas or in theproceeds of the production of those substances produced in the state, each owner is liable for thetax in proportion to the owner's interest in the production or in the proceeds of the production.
(10) The tax imposed by this section shall be reported and paid by each producer thattakes oil or gas in kind pursuant to agreement on behalf of the producer and on behalf of eachowner entitled to participate in the oil or gas sold by the producer or transported by the producerfrom the field where the oil or gas is produced.
(11) Each producer shall deduct the tax imposed by this section from the amounts due toother owners for the production or the proceeds of the production.
(12) (a) The Tax Review Commission shall review the applicability of the tax providedfor in this chapter to coal-to-liquids, oil shale, and tar sands technology on or before the October2011 interim meeting.
(b) The Tax Review Commission shall address in its review the cost and benefit of notapplying the tax provided for in this chapter to coal-to-liquids, oil shale, and tar sandstechnology.
(c) The Tax Review Commission shall report its findings and recommendations underthis Subsection (12) to the Revenue and Taxation Interim Committee on or before the November2011 interim meeting.
Amended by Chapter 323, 2010 General Session