BILL NUMBER: AB 1604 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Nava
(Coauthors: Assembly Members Ammiano, Chesbro, Huffman, Jones,
Monning, and Salas)
JANUARY 5, 2010
An act to add Part 21 (commencing with Section 42001) to Division
2 of the Revenue and Taxation Code, relating to taxation, to take
effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1604, as introduced, Nava. Taxation: Oil Industry Fair Share
Act.
Existing law imposes various taxes, including taxes on the
privilege of engaging in certain activities. The Fee Collection
Procedures Law, the violation of which is a crime, provides
procedures for the collection of certain fees and surcharges.
This bill would impose a tax on and after January 1, 2011, upon
any producer for the privilege of severing oil from the earth or
water in this state for sale, transport, consumption, storage,
profit, or use, as provided, at the rate of 10% of the gross value of
each barrel of oil severed. The tax would be administered by the
Department of Conservation and would be collected pursuant to the
procedures set forth in the Fee Collection Procedures Law. The bill
would require the department to deposit all revenues collected
pursuant to these provisions into the General Fund.
Because this bill would expand the scope of the Fee Collection
Procedures Law, the violation of which is a crime, it would impose a
state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
This bill would result in a change in state taxes for the purpose
of increasing state revenues within the meaning of Section 3 of
Article XIII A of the California Constitution, and thus would require
for passage the approval of 2/3 of the membership of each house of
the Legislature.
This bill would take effect immediately as a tax levy.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Part 21 (commencing with Section 42001) is added to
Division 2 of the Revenue and Taxation Code, to read:
PART 21. OIL INDUSTRY FAIR SHARE ACT
42001. This part shall be known and may be cited as the Oil
Industry Fair Share Act.
42002. For purposes of this part, the following definitions shall
apply:
(a) "Barrel of oil" means 42 United States gallons of 231 cubic
inches per gallon computed at a temperature of 60 degrees Fahrenheit.
(b) "Department" means the Department of Conservation.
(c) "Gross value" means the sale price at the mouth of the well in
the case of oil, including any bonus, premium, or other thing of
value paid for the oil. If there is no sale at the time of severance,
"gross value" means the sale price when the oil is sold, including
any bonus, premium, or other thing of value paid for the oil. If oil
is exchanged for something other than cash, or if the relation
between the buyer and the seller is such that the consideration paid,
if any, is not indicative of the true value or market price, then
the department shall determine the value of the oil subject to the
tax based on the cash price paid to producers for like quality oil in
the vicinity of the well.
(d) "Oil" means petroleum, or other crude oil, condensate, casing
head gasoline, or other mineral oil that is mined, produced, or
withdrawn from below the surface of the soil or water in this state.
(e) "Producer" means any person or entity that takes oil from the
earth or water in this state in any manner; any person that owns,
controls, manages, or leases any oil well in the earth or water of
this state; any person that produces or extracts in any manner any
oil by taking it from the earth or water in this state; any person
that acquires the severed oil from a person or agency exempt from
property taxation under the United States Constitution or other laws
of the United States or under the California Constitution or other
laws of the State of California; and any person that owns an
interest, including a royalty interest, in oil or its value, whether
the oil is produced by the person owning the interest or by another
on the person's behalf by lease, contract, or other arrangement.
(f) "Production" means the total gross amount of oil produced,
including the gross amount attributable to a royalty or other
interest.
(g) "Severed" or "severing" means the extraction or withdrawing
from below the surface of the earth or water of any oil, regardless
of whether the extraction or withdrawal shall be by natural flow,
mechanical flow, forced flow, pumping, or any other means employed to
get the oil from below the surface of the earth or water, and shall
include the extraction or withdrawal by any means whatsoever of oil
upon which the tax has not been paid, from any surface reservoir,
natural or artificial, or from a water surface.
(h) "Stripper well" means a well that has been certified by the
department as an oil well incapable of producing an average of more
than 10 barrels of oil per day during the entire taxable month. Once
a well has been certified as a stripper well, that stripper well
shall remain certified as a stripper well until the well produces an
average of more than 10 barrels of oil per day during an entire
taxable month.
42003. On and after January 1, 2011, for the privilege of
severing oil from the earth or water in this state for sale,
transport, consumption, storage, profit, or use, a tax is hereby
imposed upon all producers at the rate of 10 percent of the gross
value of each barrel of oil severed. The tax shall be applied equally
to all portions of the gross value of each barrel of oil severed.
42004. Except as otherwise provided in this part, the tax shall
be upon the entire production in this state, regardless of the place
of sale or to whom sold or by whom used, or the fact that the
delivery may be made to points outside the state.
42005. The tax imposed by this part shall be in addition to any
ad valorem taxes imposed by the state, or any of its political
subdivisions, or any local business license taxes that may be
incurred as a privilege of severing oil from the earth or water or
doing business in that locality. There shall be no exemption from the
payment of an ad valorem tax related to equipment, material, or
property by reason of the payment of the gross severance tax pursuant
to this part.
42006. The tax imposed by this part shall not be passed through
to consumers by way of higher prices for oil, natural gas, gasoline,
diesel, or other oil or gas consumable byproducts, such as propane
and heating oil. The department may monitor and investigate any
instance where producers or purchasers of the oil or gas have
attempted to gouge consumers by using the tax as a pretext to
materially raise the price of oil, natural gas, gasoline, diesel, or
other oil or gas consumable byproducts, such as propane and heating
oil.
42007. Two or more producers that are corporations and are owned
or controlled directly or indirectly, as defined in Section 25105, by
the same interests shall be considered as a single producer for
purposes of application of the tax prescribed in this part.
42008. (a) There shall be exempted from the imposition of the tax
imposed pursuant to this part oil produced by a stripper well in
which the average value of oil as of January 1 of the prior year is
less than thirty dollars ($30) per barrel.
(b) For oil produced in this state from a well that qualifies
under Section 3251 of the Public Resources Code or which has been
inactive for a period of at least the preceding five consecutive
years, the imposition of the tax imposed pursuant to this part shall
be reduced to zero for a period of 10 years.
(c) There shall be exempted from the imposition of the tax imposed
pursuant to this part all oil owned or produced by the state and any
political subdivision's (including any local public entity (as
defined by Section 900.4 of the Government Code)) proprietary share
of oil produced under any unit, cooperative, or other pooling
agreement.
42009. The tax imposed by this part is due and payable to the
department quarterly on or before the last day of the month next
succeeding each calendar quarter.
42010. (a) Any person that fails to pay any tax within the time
required shall pay, in addition to the amount of tax owed, interest
at the rate of 11/2 percent per month, or fraction thereof, from the
date on which the tax became due and payable to and including the
date of payment.
(b) Every payment on a delinquent tax owed pursuant to this part
shall be applied as follows:
(1) First, to any interest due on the tax.
(2) Second, to any penalty imposed by this part.
(3) Third to the balance, if any, of the tax due.
42011. Each producer shall prepare and file with the department a
return in the form prescribed by the department containing
information as the department deems necessary or appropriate for the
proper administration of this part. The return shall be filed on or
before the last day of the calendar month following the calendar
quarter to which it relates, together with a remittance payable to
the department for the amount of tax due for that period.
42012. The department may prescribe those forms and reporting
requirements as necessary to implement the tax, including, but not
limited to, information regarding the location of the well by county,
the gross amount of oil produced, the quantity sold and the selling
price, the prevailing market price of oil, and the amount of tax due.
42013. The department shall administer and collect the tax
imposed by this part pursuant to the Fee Collection Procedures Law
(Part 30 (commencing with Section 55001) of Division 2). For purposes
of this part, the references in the Fee Collection Procedures Law to
"fee" shall include the tax imposed by this part, to "feepayer"
shall include a person required to pay the tax imposed by this part,
and to "board" shall mean the Department of Conservation.
42014. The department may prescribe, adopt, and enforce emergency
regulations relating to the administration and enforcement of this
part. Any emergency regulations prescribed, adopted, or enforced
pursuant to this section shall be adopted in accordance with Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code, and for purposes of that chapter, including
Section 11349.6 of the Government Code, the adoption of these
regulations is an emergency and shall be considered by the Office of
Administrative Law as necessary for the immediate preservation of the
public peace, health and safety, and general welfare.
Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code, including
subdivision (e) of Section 11346.1 of the Government Code, any
emergency regulations adopted pursuant to this section shall be filed
with, but not be repealed by, the Office of Administrative Law, and
shall remain in effect until revised by the director.
42015. The department shall deposit all taxes, penalties, and
interest collected pursuant to this part in the General Fund.
42016. The provisions of this part are severable. If any
provision of this part or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
SEC. 2. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 3. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.