Natural Gas Tax
Reporting Requirements for Refund Requests
All refund requests are subject to verification prior to issuing a refund. The most important part of all refund requests submitted to the Comptroller’s office is the postmark and, if applicable, the received and signature date of an Assignment of Rights to Refund (Form 00-985). All types of refund requests must be submitted before the four-year statute of limitations of a report period elapses.
Reasons for Filing a Refund Request
Refund requests filed by taxpayers are based on one or more of the following reasons:
- marketing costs,
- any approved legislative exemption,
- exempt value for governmental entities,
- value reduction,
- tax reimbursement,
- credit interest earned,
- overpaid tax,
- waiver on penalty assessments and
- erroneous assessment on tax, penalty and/or interest.
Mailing Address for Refund Requests
In order to record the receipt of refund requests and track pertinent information submitted by taxpayers, consultants and/or service providers, the original refund request letter and required documents must initially be mailed to the following address:
Texas Comptroller of Public Accounts
Account Maintenance Division
Crude Oil and Natural Gas Tax Section
111 E. 17th Street
Austin, TX 78774-0100
Contact Account Maintenance Division for additional information.
Refund Request Package
Documents for a refund request must include the following:
- Statement on the letter from the taxpayer/consultant stating that credit-amended report(s) were filed electronically, or filed on paper,
- Attachment of summary schedules and/or detailed spreadsheets,
- Enclosure of a signed Limited Power of Attorney (Form 10-341), if applicable, and
- Enclosure of a signed Assignment of Rights to Refund (Form 00-985), if applicable.
Refund Request Letter
When submitting a refund claim, a taxpayer/consultant must state in detail each reason or ground the claim is based.
In order for correspondence from a taxpayer/consultant to meet the legal requirements to constitute a complete refund claim, Texas Tax Code 111.104(c) requires all of the following:
- the refund claim must be written,
- state fully and in detail each reason or ground the refund claim is founded and
- must be filed before the expiration of the applicable statute-of-limitation period.
If any of the three requirements indicated above are not met, then the refund request is deemed an incomplete refund claim. Tolling of the four-year statute-of-limitations will not occur for the report periods specified on the original refund claim until all of the three requirements indicated above are fulfilled.
Reporting Requirements for Approved Legislative Exemptions
Taxpayers are required to file credit-amended reports to recoup taxes previously paid on a lease for a specific report period for all approved legislative exemptions. These reports must be filed within four years from the due date of a report period. Examples of approved legislative exemptions are low-producing well exemption, reduced tax rate for high cost gas and two-year inactive well exemption.
Leases Approved for Reduced Tax Rate for High Cost Gas
All of the following criteria must be met to obtain a credit from leases approved for reduced tax rate for high cost gas:
- Four-Year Statute of Limitation: Credit-amended reports must be filed within four years from the due date of a production period.
- Ten Percent Penalty: Request for Approval of Reduced Tax Rate for High Cost Gas (Form AP-180) must be filed at the later of the 180th day after the date of first production or the 45th day after the date of approval by the commission. If Form AP-180 is not filed by the applicable deadline, the tax exemption or tax deduction is reduced by 10 percent for the period beginning on the 180th day after the first day of production and ending on the date on which Form AP-180 is filed with the Comptroller.
- One-Year Window Requirement: Credit-amended reports containing approved exempt high cost gas wells which have production periods that are prior to the Comptroller’s signature date must be filed by the first anniversary from the Comptroller’s signature date.
- Two-Year Window Requirement: If the application for certification is submitted to the Texas Railroad Commission after Jan. 1, 2004, the total allowable credit for taxes paid for reporting periods before the date the application is filed may not exceed the total tax paid on the gas that otherwise qualified for the exemption or tax reduction and that was produced during the 24 consecutive calendar months immediately preceding the month in which the application for certification was filed with the Texas Railroad Commission.
Reporting Requirements for Marketing Cost Refund Claims Filed by Natural Gas Producers
Establishing the producer's actual marketing costs and subtracting these costs from the producer's gross cash receipts from the sale of the gas determines the market value at the mouth of the well, or wellhead value.
Detailed Information on Marketing Costs
Visit our Natural Gas Severance Taxes Audit Policy on Marketing Costs webpage for general concepts on marketing cost deductions and a list of allowable and not allowable marketing costs claimed.
Two Methods of Filing Marketing Cost Credits by a Producer
- When a producer reports and pays their own natural gas tax on a lease in a specific report period, a producer is required to file an amended report to claim a marketing cost credit.
- When a producer reports as not being liable for the natural gas tax on a lease in a specific report period, a producer is required to file an amended report on the purchaser’s account to claim a marketing cost credit.
Marketing Cost Credits Claimed by a Producer When a Purchaser Paid the Tax on a Lease
Whenever producers submit a refund claim for marketing cost credits and purchasers have paid the tax for specific leases, reporting requirements have been established for tracking and reporting these refund claims.
To accurately post refund claims for marketing costs on the Comptroller’s records, the producer (or consultant who has filed a Limited Power of Attorney) must file credit-amended reports on the purchaser’s account, when all or a portion of the refund, comes from purchaser-paid taxes. This process ensures all credits for marketing costs reported by producers are recorded on the Comptroller’s computer system.
Producer Requirements When Filing Credit-Amended Reports for Marketing Cost Credits on the Purchaser's Account
To receive a refund of purchaser-paid taxes, producers or consultants must submit the following documents for all pending and future refund claims for marketing costs:
- letter requesting a refund for the marketing cost credits,
- Limited Power of Attorney (Form 10-341), signed by each purchaser,
- Assignment of Right to Refund (Form 00-985), signed by each purchaser and
- schedule(s) listing credit amounts for each report period and each purchaser.
After these credit-amended reports are filed to a purchaser’s account and provided the credit-amended reports do not contain critical errors, the credit amounts will be validated, deemed refundable and then transferred to the producer’s account for refund purposes. Examples of when a credit amount is not refundable from a purchaser’s account:
- a purchaser’s account has delinquent liabilities in other report periods and/or
- the credit amount generated from a credit-amended report is not available in the corresponding report period. In this case, a reduction of the credit amount occurred because a previous liability existed.
Credit-amended reports filed by a producer for marketing cost credits and processed to a purchaser’s account must include all of the following:
- commodity code,
- lease type,
- lease number,
- county number,
- exemption type, if applicable,
- producer taxpayer number,
- “Yes” block marked in the report field titled, “Are you liable for the tax?,”
- marketing cost amount and
- credit amount in the report field titled, “Net Taxable Value.”