HOUSE BILL No. 4084 January 28, 1997, Introduced by Rep. McBryde and referred to the Committee on Tax Policy. A bill to amend 1929 PA 48, entitled "An act levying a specific tax to be known as the severance tax upon all producers engaged in the business of severing oil and gas from the soil; prescribing the method of collecting the tax; requiring all producers of such products or purchasers thereof to make reports; to provide penalties; to provide exemptions and refunds; to prescribe the disposition of the funds so collected; and to exempt those paying such specific tax from certain other taxes," by amending sections 3 and 15 (MCL 205.303 and 205.315), section 3 as amended by 1996 PA 135. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 3. (1) Except as provided in subsections (2) and (3), 2 the severance tax required to be paid by each producer at the 3 time of rendering each monthly report, or by a pipeline company, 4 common carrier, or common purchaser, for and on behalf of a 5 producer,shall be in the amount of 5%IS 2.5% of the gross 6 cash market value of the total production of gas or6.6%3.3% 00109'97 JLB 2 1 of the gross cash market value of the total production of oil 2 during the preceding monthly period, exclusive of the production 3 or proceeds from the production attributable totheTHIS state, 4the government ofthe United States, or a political subdivision 5 oftheTHIS state orgovernment ofthe United States. The 6 value of all production shall be computed as of the time when and 7 at the place where the production was severed or taken from the 8 soil immediately after the severance. Except as otherwise pro- 9 vided in this section, the payment of the severance tax shall be 10 required of each producer. If the production is sold or deliv- 11 ered to a pipeline company and is transported by the pipeline 12 company through lines connected with the oil or gas well of the 13 owner, or of a common purchaser, the pipeline company, or common 14 purchaser shall receive and accept all the oil and gas, subject15to a lien as prescribed in section 8,and the pipeline company 16 shall withhold out of the proceeds or price to be paid for the 17 products severed, the proportionate parts of the tax due by the 18 respective owners of the oil and gas at the time of severance 19 and, at the time required for the filing of the monthly reports 20 required in section 2, shall pay to the department ofrevenue21 TREASURY all the tax money collected or withheld. Each pipeline 22 company, common carrier, or common purchaser shall deduct from 23 the purchase price paid to a producer from whom it may receive 24 the oil or gas the amount of the severance tax levied in this 25 section before making the payment. If under the terms of a con- 26 tract the pipeline company, common carrier, or common purchaser 27 is required to reimburse a producer of oil or gas for the amount 00109'97 3 1 of the severance tax or a part of the severance tax, the tax 2 reimbursement shall not be considered a part of the gross cash 3 market value of the total production of the oil or gas. 4 (2) The severance tax required to be paid by each producer 5 at the time of rendering each monthly report, or by a pipeline 6 company, common carrier, or common purchaser, for and on behalf 7 of a producer, on stripper well crude oil, as defined in section 8 8 of the emergency petroleum allocation act of 1973, PUBLIC LAW 9 93-159, 15 U.S.C. 757 and on crude oil from marginal properties 10 as defined in FORMER part 212, subpart D, of chapter II of title 11 10 of the code of federal regulations 10CFRC.F.R. 212.72 to 12 212.77,shall be in the amount of 4%IS 2% of the gross cash 13 market value of the total production of the oil, during the pre- 14 ceding monthly period, exclusive of the production or proceeds 15 from the production attributable totheTHIS state,the gov-16ernment ofthe United States, or a political subdivision of 17theTHIS state orgovernment ofthe United States. The value 18 of all production shall be computed as of the time when and at 19 the place where the production was severed or taken from the soil 20 immediately after the severance. 21 (3) A producer is not required to pay a severance tax on 22 income received from the hydrocarbons produced from devonian or 23 antrim shale qualifying for the nonconventional fuel credit con- 24 tained in section 29 of the internal revenue code of 1986, 26 25 U.S.C. 29 and acquired pursuant to a royalty interest sold by the 26 state under section 503 OF PART 5 (DEPARTMENT OF NATURAL 00109'97 4 1 RESOURCES GENERAL POWERS AND DUTIES) OF THE NATURAL RESOURCES AND 2 ENVIRONMENTAL PROTECTION ACT, 1994 PA 451, MCL 324.503. 3 Sec. 15. The severance taxhereinprovidedfor shall be4 IN THIS ACT IS in lieu of allotherAD VALOREM PROPERTY taxes, 5 state or local, upon the oil or gas, the property rights attached 6theretoTO or inherentthereinIN THE OIL OR GAS, or the 7 values createdtherebyIN THE OIL OR GAS; upon all leases or 8 the rights to develop and operate any lands of this state for oil 9 or gas, the values createdtherebyIN THE OIL OR GAS and the 10 property rights attached to or inherenttherein: Provided, how-11ever, Nothing herein contained shall in anywiseIN THE OIL OR 12 GAS. THIS SECTION DOES NOT exempt the machinery, appliances, 13 pipe lines, tanks, and other equipment used in the development or 14 operation ofsaidTHE leases, or used to transmit or transport 15 thesaidoil or gas.: And provided further, That nothing16herein contained shall in anywiseTHIS SECTION DOES NOT relieve 17 any corporation or association from the payment of any franchise 18 or privilege taxes required bythe provisions of the state cor-19poration lawsLAW. 00109'97 Final page. JLB