PART 1. COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3. TAX ADMINISTRATION
SUBCHAPTER B. NATURAL GAS
The Comptroller of Public Accounts adopts amendments to §3.27, concerning exemption of certain interest owners from gas occupation taxes, without changes to the proposed text as published in the September 11, 2020, issue of the Texas Register (45 TexReg 6318). The rule will not be republished. The amendments implement Senate Bill 533, 86th Legislature, 2019, effective September 1, 2019, which amends Tax Code, §202.056 (Exemption for Oil and Gas from Wells Previously Inactive), relating to the severance tax exemption for oil and gas production from certain inactive oil wells. The comptroller changes the name of the section to "Exemptions of Governmental Entities and Two-Year Inactive Oil Wells" to better reflect the content of the section.
Despite the fact that this rule is in the Natural Gas subchapter, it includes an exemption for casinghead gas produced from two-year inactive oil wells. The comptroller adds new subsection (a), providing definitions of "casinghead gas," "commission," "condensate," and "hydrocarbons," using the definitions of these terms found in Tax Code, Chapter 201 (Gas Production Tax) and Chapter 202 (Oil Production Tax). The comptroller adds a definition for the term "two-year inactive well," deriving the language for this term from Tax Code, §202.056(a)(4). The language provides that the definition of two-year inactive well applies to an oil well certified on or after September 1, 2019.
The comptroller reletters subsection (a) as subsection (b) and amends the subsection to add a title, to recognize that governmental entities are not subject to the gas occupation tax, and to delete the language relating to mineral ownership since the state of Texas cannot tax the federal government or itself, whether they are the mineral owners or not.
The comptroller deletes original subsection (b) and adds language based on that subsection to new subsection (c) to better address tax imposed on nonexempt parties.
The comptroller adds new subsection (c) to include a title and the language of Tax Code, §201.205 (Tax Borne Ratably), which provides that the tax shall be borne ratably by all "interested parties," which are determined "without regard to title to the oil either before or after severance; and without regard to any arbitrary classification or nomenclature." See Sheppard v. Stanolind Oil & Gas Co., 125 S.W.2d 643, 648 (Tex. Civ. App. - Austin 1939, writ ref'd). The comptroller deletes the example and graphic since they apply to mineral ownership information removed from this section. The comptroller removes original subsection (c) and the graphic to improve the readability of the subsection.
The comptroller adds new subsection (d), which provides information regarding two-year inactive oil wells, including the comptroller's approval process for the exemption for a two-year inactive oil well in paragraph (1). New subsection (d) is derived from Tax Code, §202.056. Tax Code Chapter 202 applies to oil wells and oil wells do not produce condensate. Since oil wells do not produce condensate, condensate does not qualify for the exemption for a two-year inactive oil well. The comptroller adds new paragraph (2) which provides that casinghead gas produced from a certified two-year inactive oil well is exempt from the natural gas tax; the beginning date and duration of the exemption in paragraph (3); and the process to receive a tax credit for payments made at the full rate under the Tax Code in paragraph (4).
In new subsection (e), the comptroller provides information regarding recompleted certified two-year inactive oil wells, including the duration of the exemption and the application process for the exemption.
The comptroller adds new subsection (f), which explains that the exemption for a two-year inactive oil well does not extend to the oil-field regulatory cleanup fee. The oil-field regulatory cleanup fee is due on casinghead gas sold, even if that gas is otherwise exempt under subsection (d).
The comptroller adds new subsection (g), which outlines penalties regarding two-year inactive oil wells.
The comptroller did not receive any comments regarding adoption of the amendment.
The comptroller adopts the amendments under Tax Code, §111.002 (Comptroller's Rules; Compliance; Forfeiture), which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement provisions of Tax Code, Title 2 (State Taxation), and taxes, fees, or other charges which the comptroller administers under other law.
The amendments implement Tax Code, §202.056 (Exemption for Oil and Gas from Wells Previously Inactive).
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on October 14, 2020.
TRD-202004260
William Hamner
Special Counsel for Tax Administration
Comptroller of Public Accounts
Effective date: November 3, 2020
Proposal publication date: September 11, 2020
For further information, please call: (512) 475-2220
SUBCHAPTER I. VALUATION PROCEDURES
The Comptroller of Public Accounts adopts amendments to §9.4001, concerning valuation of open-space and agricultural lands, without changes to the proposed text as published in the August 28, 2020, issue of the Texas Register (45 TexReg 6050). The rule will not be republished. These amendments are to reflect updates and revisions to the manual for the appraisal of agricultural land. The amended manual may be viewed at https://comptroller.texas.gov/taxes/property-tax/rules/index.php.
The amendments update and revise the November 2018 (Adopted May 2019) manual for the appraisal of agricultural land. The manual sets forth the methods to apply and the procedures to use in qualifying and appraising land used for agriculture and open-space land under Tax Code, Chapter 23, Subchapters C and D.
Generally, the substantive changes to the manual reflect statutory changes. Updates to the manual throughout reflect changes to the rollback period and interest rate in House Bill 1743, 86th Legislature, 2019. The manual includes a new subsection in the "Cessation of Agricultural Use" section and adds a new section for 1-d to address the specific circumstances for which special appraisal does not end when the land ceases to be devoted principally to agricultural use to the degree of intensity generally accepted in the area, based on changes made in House Bill 3348, 86th Legislature, 2019. The comptroller also adds to the requirements to qualify as an ecological laboratory based on changes made in House Bill 639, 86th Legislature, 2019.
The update includes changes to the section on federal farm programs based on the 2018 Federal Farm Bill. Years throughout the text have been updated in the examples without changes to the values or figures.
Pursuant to Tax Code, §23.52(d), these rules have been approved by the Comptroller with the review and counsel of the Department of Agriculture.
The comptroller received one comment from the public regarding these amendments.
Peggy Wardlaw of Wardlaw Appraisal Group commented that the proposed manual does not specifically address situations where hunting is not allowed due to deed restrictions within the manual's application of Tax Code, §23.51(4). Specifically, Ms. Wardlaw suggested that the manual should state that the hunting income applied to ordinary non-deed restricted land should not be applied when deed restrictions do not allow hunting. The comptroller declines to make this change. Tax Code, §23.51(3), which is addressed on pages 20 and 21 of the manual, accounts for categories of land and allows the chief appraiser to address a situation such as specific deed restrictions. The ability of the chief appraiser to establish land categories or classes based on the factors that influence the productive capacity of the category is not restricted by this manual.
These amendments are adopted under Tax Code, §§5.05 (Appraisal Manuals and Other Materials); 23.41 (Appraisal); and 23.52 (Appraisal of Qualified Agricultural Land), which provide the comptroller with the authority to prepare and issue publications relating to the appraisal of property and to promulgate rules specifying methods to apply and the procedures to use in appraising qualified agricultural and open-space land for ad valorem tax purposes.
These amendments implement Tax Code, §23.41 (Appraisal) and §23.52 (Appraisal of Qualified Agricultural Land).
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on October 15, 2020.
TRD-202004275
Victoria North
General Counsel for Fiscal and Agency Affairs
Comptroller of Public Accounts
Effective date: November 4, 2020
Proposal publication date: August 28, 2020
For further information, please call: (512) 475-2220