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Modifications To Severance Tax

Concerning the state severance tax on oil and gas, and, in connection therewith, making an appropriation.
2022 Regular Session
Fiscal Policy & Taxes
State Revenue & Budget
Bill Summary

Joint Budget Committee. The bill changes the calculation of the ad valorem credit allowed against the state severance tax on oil and gas. In tax years beginning on and after January 1, 2024, January 1, 2025, the credit for ad valorem taxes is calculated on a per-well basis for wells that are not exempt from taxation by applying the prior year's mill levy to the current year's gross income multiplied by an assessment rate of 87.5%, and taking 87.5% of that amount for the credit. This calculation is simplified to multiplying 76.56% of the gross income of the well by the mill levy fixed in the prior calendar year.

A working group consisting of the director of the office of state planning and budgeting and the executive directors of the departments of revenue, natural resources, education, and local affairs, or their designees, is required to develop an implementation plan for making additional changes to the state severance tax on oil and gas. The implementation plan must make recommendations concerning the steps necessary to change the legal incidence of tax from interest owners to operators while maintaining revenue neutrality, require electronic filing of returns for severance taxes, and require additional electronic data collection to the tax. The study must also include a quantitative fiscal analysis of the change in the calculation of the credit for ad valorem taxes and the change in the legal incidence of the tax and how they can be implemented while maintaining revenue neutrality.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)

(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)


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Bill Text