Modifications To Severance Tax

The act 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, 2025, the credit is calculated on a per-well basis for wells that are not exempt from taxation and is equal to 76.56% of the gross income of the well multiplied 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 plan 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. The group must submit the implementation plan to the joint budget committee by January 15, 2024.

(Note: This summary applies to this bill as enacted.)