Verifying and processing the Natural Gas Credit Transfer Form by the Crude Oil and Natural Gas Tax Section in Account Maintenance Division has taken the same protocol as refund requests. Just like refund requests, all credit amounts listed on a transfer form are subject to verification prior to processing. After verification by an examiner and/or field auditor, the potential of a disallowance of a credit amount listed on a Credit Transfer form could occur. If any credit amount is disallowed, a 30 day letter indicating the reason for the disallowed amount will be sent to the taxpayer, consultant and/or service provider.
The Credit Transfer form is only used to designate where the credit amounts are to be applied and it distributes:
- credits to reporting periods with liabilities within the same taxpayer account and tax subtype,
- payments for prior report periods when a lump sum electronic fund transfer (EFT) method of payment was submitted to one particular report period and tax subtype and
- credits from one taxpayer account and tax subtype to another taxpayer account and subtype by attaching a signed Assignment of Rights to Refund Form (#00-985).
When To File a Credit Transfer Form
- If an EFT payment contains a payment for a particular report period and this lump sum payment includes payments for prior report periods, then a Credit Transfer form must be filed to process the payment to the prior report periods. However, the report period where the payment was originally sent must be clear of report error prior to transferring the payment amount to prior periods.
- If an amended report reflects a credit amount, then the credit may be used to pay a liability reflected on another report period by filing the Credit Transfer form.
- If a taxpayer has both a producer and purchaser account, or tax subtype, then a Credit Transfer form must be used to transfer a credit from one tax subtype to another.
- If a taxpayer (assignor) wants to relinquish their credit amount to another taxpayer (assignee), then the Credit Transfer form must be filed along with the Assignment of Rights to Refund Form (#00-985).
- Whenever a credit amount is entered on Line 9 of totals page of the monthly, annual, and amended report forms, then the Credit Transfer form must also be filed. If the Credit Transfer form is not filed, the credit transfer from one report period to another will not occur.
Errors Causing Credit Transfer Form To Not Process
Whenever one or more errors (listed on the next page) exists on the Credit Transfer form, a 30 day letter will be sent to the taxpayer listing the reason(s) why the credit transfer was not processed. The Credit Transfer form will be placed in a pending status for 30 days. If the error is corrected within 30 days, the pending status will be removed and the credit transfer will process accordingly. If no action is taken after 30 days, a letter will be sent to the taxpayer saying that the credit transfer was not processed. The taxpayer has the option to re-submit the credit transfer once the errors are corrected.
Reasons Causing a Credit Transfer Form To Not Process
- One or more "critical" report errors exist on the report period listed in Column A.
- The taxpayer number in block "c" is not set up on Comptroller's taxpayer records.
- The tax subtype in Column B for the report period indicated in Column A is not active on Comptroller's taxpayer records.
- The amount in Column C is not available because the Comptroller's records indicate the current balance is zero for the report period indicated in Column A.
- The amount in Column C is more than the available credit amount on Comptroller's records. The Comptroller's records indicate a lesser credit amount for the report period indicated in Column A.
- The reason code in Column F is blank, or the code is not 1 through 6.
- A letter was not attached to the Credit Transfer form indicating the specific grounds on which the credit is based for marketing costs and tax reimbursement reasons whereby a Comptroller's field auditor has verified the credits. The letter must indicate the lease name(s) and number(s) and the specific reason(s) that created each credit amount listed on Column C.
- Box is checked indicating an Assignment of Rights to Refund Form (#00-985) is attached, but this form was not submitted, or this form is missing.
- The Credit Transfer form cannot be used to transfer credits from natural gas tax to crude oil tax account. A letter must be submitted when transferring credits from a natural gas tax to crude oil account listing the report periods, taxpayer name, 11-digit taxpayer number, tax type, tax subtype, credit amounts to be transferred and reason.
- The report period in Column A is out of statute period and the previously filed credit amended report and/or overpaid tax or credit interest amount has not been verified and approved by an examiner and/or field auditor.
- No name, signature, telephone and/or date are provided.
Credit Interest Earned on Credit Transfers
When a report period has no "critical" report errors, the credit amount listed in Column C will be transferred and credit interest will be paid on the transferred amount, if applicable. Credit interest earned is reflected in the report period the overpayment was transferred to, as listed in Column D.
Credit interest created by a payment or transfer of payment from one period to another of an eligible report period used to satisfy some, or all, of a liability is referred to as credit interest earned.
An overpayment in a report period exists when the total amount of payments, money transferred-into a report period and/or credit interest earned, exceeds the liability. The overpayment could consist of multiple payments received, payments transferred-in and/or credit interest earned.
The postmarks of payment received and postmarks of payments transferred into a report period are posted in chronological order. If a report period has a payment transferred-in and this payment resulted in credit interest earned, then the process date of the credit interest earned is posted chronologically along with the postmarks of payments received and payments transferred-in.
The method of processing refunds issued in a report period and transferring out an overpayment from one report period to another is the "last in first out" (LIFO) method. The postmarks of a payment received and/or payment being transferred-out determines the eligibility and calculation of credit interest earned.
Based on the preceding information and using existing eligibility and calculation rules for credit interest, the following rules apply:
- Any overpayment comprised entirely of tax accrues credit interest on the full amount of the overpayment.
- Any overpayment comprised of tax and credit interest earned accrues credit interest only on the full amount of the tax portion of the overpayment. The portion for credit interest earned does not accrue credit interest.
- Any overpayment comprised entirely of credit interest does not accrue credit interest.