Introduced Version
Senate Bill 372 History
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Key: Green = existing Code. Red = new code to be enacted
Senate Bill No. 372
(By Senators Tomblin (Mr. President) and Caruth,
By Request of the Executive)
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[Introduced February 25, 2009; referred to the Committee on
Energy, Industry and Mining; and then to the Committee on
Finance.]
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A BILL to amend and reenact §11-13A-3a, §11-13A-10 and §11-13A-17
of the Code of West Virginia, 1931, as amended; and to amend
said code by adding thereto a new section, designated
§11-13V-4b, all relating generally to severance taxes on
natural gas and oil; specifying that the tax shall be
collected and remitted by the first purchaser of natural gas
or oil after it has been severed or severed and processed;
requiring the filing of a refund to receive certain tax
exemptions; providing for a phased reduction of the rate of
tax; providing for a phased elimination of certain credits
against tax; providing for assessments against severors who
owe but have not paid the tax; specifying due dates and
payment requirements; specifying persons subject to applicable
bonding requirements; providing for certain exceptions to the first purchaser requirement; authorizing the Tax Commissioner
to promulgate emergency rules; and requiring certain reports
to the Tax Commissioner.
Be it enacted by the Legislature of West Virginia:
That §11-13A-3a, §11-13A-10 and §11-13A-17 of the Code of West
Virginia, 1931, as amended, be amended and reenacted; and that said
code be amended by adding thereto a new section, designated
§11-13V-4b, all to read as follows:
ARTICLE 13A. SEVERANCE AND BUSINESS PRIVILEGE TAX ACT.
§11-13A-3a. Imposition of tax on privilege of severing natural
gas or oil.
(a) Imposition of tax. -- For the privilege of engaging or
continuing within this state in the business of severing natural
gas or oil for sale, profit or commercial use, there is hereby
levied and shall be collected from every person exercising such
privilege an annual privilege tax: Provided, That effective for
all taxable periods beginning on or after January 1, 2000, there is
an exemption from the imposition of the tax provided in this
article on the following:
(1) Free natural gas provided to any surface owner;
(2) Natural gas produced from any well which produced an
average of less than five thousand cubic feet of natural gas per
day during the calendar year immediately preceding a given taxable
period: Provided, That beginning on or after January 1, 2011, natural gas producers claiming this exemption must first pay the
severance tax on natural gas produced in accordance with this
article. At the end of the tax year the natural gas producer may
apply for a refund of the severance tax paid for all wells
producing an average of less than five thousand cubic feet of
natural gas per day during the taxable period: Provided, however,
That the Tax Commissioner may provide for monthly or quarterly
refunds in accordance with such procedures as the Tax Commissioner
may establish;
(3) Oil produced from any oil well which produced an average
of less than one-half barrel of oil per day during the calendar
year immediately preceding a given taxable period: Provided, That
beginning on or after January 1, 2011, oil producers claiming this
exemption must first pay the severance tax on oil produced in
accordance with this article. At the end of the tax year the oil
producer may apply for a refund of the severance tax paid for all
wells producing an average of less than one-half barrel of oil per
day during the taxable period: Provided, however, That the Tax
Commissioner may provide for monthly or quarterly refunds in
accordance with such procedures as the Tax Commissioner may
establish; and
(4) For a maximum period of ten years, all natural gas or oil
produced from any well which has not produced marketable quantities
of natural gas or oil for five consecutive years immediately preceding the year in which a well is placed back into production
and thereafter produces marketable quantities of natural gas or
oil: Provided, That beginning on or after January 1, 2011, natural
gas producers or oil producers claiming this exemption must first
pay the severance tax on natural gas and oil produced in accordance
with this article. At the end of the tax year the natural gas
producer or oil producer may apply for a refund of the severance
tax paid for all wells which have not produced marketable
quantities of natural gas or oil for five consecutive years
immediately preceding the year in which a well is placed back into
production and thereafter produces marketable quantities of natural
gas or oil: Provided, however, That the Tax Commissioner may
provide for monthly or quarterly refunds in accordance with such
procedures as the Tax Commissioner may establish.
(b) Rate and measure of tax. -- The tax imposed in subsection
(a) of this section shall be five percent of the gross value of the
natural gas or oil produced, as shown by the gross proceeds derived
from the sale thereof by the producer, except as otherwise provided
in this article: Provided, That for tax years beginning on and
after January 1, 2010, the rate of tax imposed in subsection (a) of
this section shall be four and seventy-five hundredths percent of
the gross value of the natural gas or oil produced: Provided,
however, That for tax years beginning on and after January 1, 2011,
the rate of tax imposed in subsection (a) of this section shall be four and five tenths percent of the gross value of the natural gas
or oil produced.
(c) Tax in addition to other taxes. -- The tax imposed by this
section shall apply to all persons severing natural gas or oil in
this state, and shall be in addition to all other taxes imposed by
law.
(d)(1) The Legislature finds that in addition to the
production reports and financial records which must be filed by oil
and gas producers with the State Tax Commissioner in order to
comply with this section, oil and gas producers are required to
file other production reports with other agencies, including, but
not limited to, the office of oil and gas, the Public Service
Commission and county assessors. The reports required to be filed
are largely duplicative, the compiling of the information in
different formats is unnecessarily time consuming and costly, and
the filing of one report or the sharing of information by agencies
of government would reduce the cost of compliance for oil and gas
producers.
(2) On or before the first day of July, two thousand three,
the Tax Commissioner shall design a common form that may be used
for each of the reports regarding production that are required to
be filed by oil and gas producers, which form shall readily permit
a filing without financial information when such information is
unnecessary. The commissioner shall also design such forms so as to permit filings in different formats, including, but not limited
to, electronic formats.
(3) Effective the first day of July, two thousand six, this
subsection shall have no force or effect.
(d) Purchaser of natural gas or oil to withhold tax;
remittance of withheld tax by purchaser. -- On or after January 1,
2011, the first person to purchase the natural gas or oil after it
has been severed, or in the event that the natural gas or oil has
been severed and processed before the first sale, the first person
to purchase natural gas or oil after it has been severed and
processed, shall be liable for the collection of the taxes imposed
by this article from the severor (or severor and processor) of the
natural gas or oil, and shall remit the taxes to the Tax
Commissioner. Taxes so collected by the purchaser are held in
trust for the state, and the purchaser is liable for any failure to
collect or remit the tax in accordance with the provisions of
articles nine and ten of this chapter.
(1) No profit shall accrue to any person as a result of the
collection of the tax levied by this article notwithstanding that
the total amount of the taxes collected may be in excess of the
amount for which the severor (or severor and processor) would be
liable by the application of the rate of tax levied by this
article. The total amount of all taxes collected by the purchaser
shall be returned and remitted to the Tax Commissioner as provided in this article.
(2) If any severor (or severor and processor) refuses to pay
or otherwise does not pay to the purchaser the tax imposed by this
article, or a severor (or severor and processor) refuses to present
to the purchaser a valid direct severance payment authorization
number indicating that the purchaser is not required to collect and
remit the taxes imposed by this article, or a severor (or severor
and processor) presents to the purchaser a false direct severance
payment authorization number or a false document, the severor (or
severor and processor) shall be personally liable for the amount of
tax applicable, and the purchaser shall not be liable for such tax.
(3) Nothing in this section relieves any severor (or severor
and processor) who owes the tax and who has not paid the tax
imposed by this article from liability for payment of the tax. In
those cases the Tax Commissioner has authority to make an
assessment against the severor (or severor and processor), based
upon any information within his or her possession or that may come
into his or her possession. This assessment and notice thereof
shall be made and given in accordance with article ten of this
chapter. The severor (or severor and processor) shall not be
liable for tax withheld by the purchaser, but not remitted to this
state by the purchaser.
(4) The due dates and payment requirements of this article
apply to the payment and remittance of tax by purchasers of natural gas or oil under this section.
(5) Exceptions. -- The requirement that the purchaser shall
withhold and remit the tax imposed by this article on production of
natural gas or oil shall not apply:
(A) Where the severor (or severor and processor) of the
natural gas or oil sells the natural gas or oil to the ultimate
consumer, the severor (or severor and processor) of the natural gas
or oil shall be liable for the taxes imposed by this article; or
(B) Where the Tax Commissioner determines that the collection
of the taxes due under this article or article thirteen-v of this
chapter, or both, from the severor (or severor and processor) would
be accomplished in a more efficient and effective manner through
the severor (or severor and processor) remitting the taxes, the Tax
Commissioner shall set out his or her determination in writing,
stating his or her reasons for so finding, and shall advise the
severor (or severor and processor) at least fifteen days in advance
of the first reporting period for which the commissioner's
determination is effective.
(6) Notwithstanding the provisions of this section, the
severor (or severor and processor) of the natural gas or oil is the
taxpayer for purposes of this article and is liable for the tax
imposed by this article. The first purchaser that is responsible
for withholding and remittance of the tax is subject to the bonding
requirements as applicable under section sixteen of this article, and severors (or severors and processors) from whom the tax is
withheld shall not be subject to the bond specified in section
sixteen of this article. However, a severor (or severor and
processor) who has been issued a direct severance payment
authorization number or who is otherwise subject to a requirement
to pay the natural gas or oil severance tax directly to the state
rather than through withholding by the first purchaser is subject
to the bonding requirements as applicable under section sixteen of
this article. This article shall not be interpreted to relieve any
person of a bonding requirement other than the bonding requirement
set forth in section sixteen of this article and shall not be
interpreted as addressing any bonding requirement other than the
bonding requirement set forth in section sixteen of this article.
(7) Severors (or severors and processors) that pay the tax
directly on production of oil or natural gas pursuant to the
provisions of this section shall deliver to the purchaser a direct
severance payment authorization number issued by the Tax
Commissioner. The purchaser shall not withhold and remit the tax
imposed by this article on production of natural gas or oil sold to
a severor (or severor and processor) who delivers to the purchaser
a direct severance payment authorization number.
(8) The Tax Commissioner may promulgate emergency rules
addressing collection and remittance of the severance tax by the
first purchaser or the severor (or severor and processor) or both, taxation of oil and natural gas and coal bed methane and such
administrative matters as may relate to the filing, reporting and
payment of the tax imposed by this article and by article
thirteen-v of this chapter, and such interpretive and legislative
rules as the Tax Commissioner may find appropriate relating
thereto.
(9) Notwithstanding other provisions of this code to the
contrary, if the Tax Commissioner determines that a transaction
between a first purchaser and a severor (or severor and processor)
is not an arm's length transaction or is otherwise a transaction
for which price manipulation appears to have affected the amount of
tax collected or remitted under this article, the Tax Commissioner
may determine the applicable tax base on which such tax should have
been imposed and issue an assessment of tax accordingly.
(e) Elimination of annual tax credit. -- For the tax year
beginning on and after January 1, 2010, only one annual credit
allowed under section ten of this article is allowed in the amount
of $250 for tax imposed by this section. For tax years beginning
on and after January 1, 2011, the tax credit set forth in section
ten of this article shall not apply against the tax imposed by this
section.
§11-13A-10. Paying tax; annual tax credit.
Every taxpayer subject to any tax imposed under this article
shall be allowed one annual credit of $500 against the taxes due under this article, to be applied at the rate of $41.67 per month
for each month the taxpayer was engaged in business in this state
during the taxable year exercising a privilege taxable under this
article. Persons providing health care items or services who
become subject to the tax imposed by section three of this article
beginning June 1, 1993, shall be allowed a proportional credit
under this section based on the number of months in their tax year
that begin on or after June 1, 1993: Provided, That for the tax
year beginning on and after January 1, 2010, any credit claimed for
tax paid under section three-a of this article shall be limited to
one annual credit which shall not exceed $250, to be applied at the
rate of $20.83 per month for each month the taxpayer was engaged in
business in this state during the taxable year exercising a
privilege taxable under this article: Provided, however, That for
tax years beginning on and after January 1, 2011, no credit shall
be claimed for tax paid under section three-a of this article.
§11-13A-17. Collection of tax; agreement for processor to pay tax
due from severor (or severor and processor);
reporting by first purchaser of oil and gas.
(a) General. -- In the case of natural resources, other than
natural gas and oil, where the Tax Commissioner finds that it would
facilitate and expedite the collection of the taxes imposed under
this article, the Tax Commissioner may authorize the taxpayer
processing the natural resource to report and pay the tax which would be due from the taxpayer severing the natural resources. The
agreement shall be in such form as the Tax Commissioner may
prescribe. The agreement must be signed: by the owners, if the
taxpayers are natural persons; in the case of a partnership or
association, by a partner or member; in the case of a corporation,
by an executive officer or some person specifically authorized by
the corporation to sign the application. The agreement may be
terminated by any party to the agreement upon giving thirty days
written notice to the other parties to the agreement: Provided,
That the Tax Commissioner may terminate the agreement immediately
upon written notice to the other parties when either the taxpayer
processing the natural resource or the taxpayer severing the
natural resource fails to comply with the terms of the agreement.
(b) Natural gas and oil. --
(1) In the case of natural gas, except for those cases
(A) Where the person severing (or both severing and
processing) the natural gas will sell the gas to the ultimate
consumer, or
(B) Where the Tax Commissioner determines that the collection
of taxes due under this article would be accomplished in a more
efficient and effective manner through the severor, or severor and
processor, remitting the taxes; the first person to purchase the
natural gas after it has been severed, or in the event that the
natural gas has been severed and processed before the first sale, the first person to purchase the natural gas after it has been
severed and processed, shall be liable for the collection of the
taxes imposed by this article. He shall collect the taxes imposed
from the person severing (or severing and processing) the natural
gas, and he shall remit the taxes to the Tax Commissioner. In
those cases where the person severing (or severing and processing)
the natural gas sells the gas to the ultimate consumer, the person
so severing (or severing and processing) the natural gas shall be
liable for the taxes imposed by this article. In those cases where
the Tax Commissioner determines that the collection of the taxes
due under this article from the severance (or severance and
processing) of natural gas would be accomplished in a more
efficient and effective manner through the severor (or severor and
processor) remitting the taxes, the Tax Commissioner shall set out
his determination in writing, stating his reasons for so finding,
and so advise the severor (or severor and processor) at least
fifteen days in advance of the first reporting period for which
such action would be effective.
(2) (1) On or before the last day of the month following each
taxable calendar month, each person first purchasing natural gas or
oil as described in this article or in this subdivision (1) above,
shall report the purchases of natural gas and the purchases of oil
during the taxable month, showing the quantities of gas purchased,
the quantities of oil purchased, the price paid, the date of purchase, and any other information deemed necessary by the Tax
Commissioner for the administration of the tax imposed by this
article, and shall pay the amount of tax due, on forms prescribed
by the Tax Commissioner.
(3) (2) On or before the last day of the month following each
taxable calendar month, each person severing (or severing and
processing) natural gas or oil, shall report the sales of the
natural gas or oil, showing the name and address of the person to
whom sold, the quantity of gas or oil sold, the date of sale, and
the sales price on forms prescribed by the Tax Commissioner.
ARTICLE 13V. WORKERS' COMPENSATION DEBT REDUCTION ACT.
§11-13V-4b. Purchaser of natural gas to withhold tax.
(a) Remittance of withheld tax by purchaser. -- On or after
January 1, 2011, the first person to purchase the natural gas after
it has been severed, or in the event that the natural gas has been
severed and processed before the first sale, the first person to
purchase natural gas after it has been severed and processed, shall
be liable for the collection of the taxes imposed by this article
from the severor (or severor and processor) of the natural gas and
shall remit the taxes to the Tax Commissioner. Taxes so collected
by the purchaser are held in trust for the state, and the purchaser
is liable for any failure to collect or remit the tax in accordance
with the provisions of articles nine and ten of this chapter. The
severor (or severor and processor) shall not be liable for tax withheld by the purchaser but not remitted to this state by the
purchaser.
(1) No profit shall accrue to any person as a result of the
collection of the tax levied by this article notwithstanding that
the total amount of the taxes collected may be in excess of the
amount for which the severor (or severor and processor) would be
liable by the application of the rate of tax levied by this
article. The total amount of all taxes collected by the purchaser
shall be returned and remitted to the Tax Commissioner as provided
in this article.
(2) If any severor (or severor and processor) refuses to pay
or otherwise does not pay to the purchaser the tax imposed by this
article, or a severor (or severor and processor) refuses to present
to the purchaser a valid direct severance payment authorization
number indicating that the purchaser is not required to collect and
remit the taxes imposed by this article, or a severor (or severor
and processor) presents to the purchaser a false direct severance
payment authorization number or a false document, the severor (or
severor and processor) shall be personally liable for the amount of
tax applicable, and the purchaser shall not be liable for such tax.
(3) Nothing in this section relieves any severor (or severor
and processor) who owes the tax and who has not paid the tax
imposed by this article from liability for payment of the tax. In
those cases the Tax Commissioner has authority to make an assessment against the severor (or severor and processor), based
upon any information within his or her possession or that may come
into his or her possession. This assessment and notice thereof
shall be made and given in accordance with article ten of this
chapter. The severor (or severor and processor) shall not be
liable for tax withheld by the purchaser, but not remitted to this
state by the purchaser.
(4) The due dates and payment requirements of this article
apply to the payment and remittance of tax by purchasers of natural
gas under this section.
(5) Exceptions. -- The requirement that the purchaser shall
withhold and remit the tax imposed by this article on production of
natural gas shall not apply:
(A) Where the severor (or severor and processor) of natural
gas sells the gas to the ultimate consumer, the severor (or severor
and processor) of the natural gas shall be liable for the taxes
imposed by this article; or
(B) Where the Tax Commissioner determines that the collection
of the taxes due under this article or article thirteen-a of this
chapter, or both, from the severor (or severor and processor) of
the natural gas would be accomplished in a more efficient and
effective manner through the severor (or severor and processor)
remitting the taxes, the Tax Commissioner shall set out his or her
determination in writing, stating his or her reasons for so finding, and so advise the severor (or severor and processor) at
least fifteen days in advance of the first reporting period for
which the commissioner's determination is effective.
(6) Notwithstanding the provisions of this section, the
severor (or severor and processor) of the natural gas is the
taxpayer for purposes of this article and is liable for the tax
imposed by this article. The taxpayer is subject to the bonding
requirements as applicable under section thirteen of this article.
The first purchaser that is responsible for withholding and
remittance of the tax is subject to the bonding requirements as
applicable under section thirteen of this article, and severors (or
severors and processors) from whom the tax is withheld shall not be
subject to the bond specified in section thirteen of this article.
However, a severor (or severor and processor) who has been issued
a direct severance payment authorization number or who is otherwise
subject to a requirement to pay the tax imposed by this article
directly to the state rather than through withholding by the first
purchaser is subject to the bonding requirements as applicable
under section thirteen of this article. This article shall not be
interpreted to relieve any person of a bonding requirement other
than the bonding requirement set forth in section thirteen of this
article, and shall not be interpreted as addressing any bonding
requirement other than the bonding requirement set forth in section
thirteen of this article.
(7) On or before the last day of the month following each
taxable calendar month, each person first purchasing natural gas as
described in this section shall report the purchases of natural gas
during the taxable month, showing the quantities of gas purchased,
the price paid, the date of purchase and any other information
deemed necessary by the Tax Commissioner for the administration of
the tax imposed by this article, and shall pay the amount of tax
due on forms prescribed by the Tax Commissioner.
NOTE: The purpose of this bill is to clarify the taxation of
natural gas and oil; to set the rate of tax; to require the first
purchaser of natural gas or oil to collect and remit the severance
tax; to phase out an annual tax credit; to set forth bonding
requirements; and to specify that the severor (or severor and
processor) of natural gas or oil is liable for the severance tax.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
§11-13V-4b is new, therefore, strike-throughs and underscoring
have been omitted.