Second Regular Session
               Seventieth General Assembly
                    STATE OF COLORADO
                                                 INTRODUCED
                                                           
                                                           
 LLS NO. 16-1286.01 Ed DeCecco x4216     HOUSE BILL 16-1468
                    HOUSE SPONSORSHIP
 Becker K. and Hullinghorst, 
 
                   SENATE SPONSORSHIP
 Steadman, 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 House Committees
 Senate Committees
 
 
 State, Veterans, & Military Affairs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                         A BILL FOR AN ACT
       Concerning costs that may be deducted by a taxpayer as
            transportation, manufacturing, and processing costs
            for purposes of calculating the net amount realized by
            the taxpayer for the sale of oil and gas.
       
       
                           Bill Summary
       
            (Note:  This summary applies to this bill as introduced and does
       not reflect any amendments that may be subsequently adopted. If this bill
       passes third reading in the house of introduction, a bill summary that
       applies to the reengrossed version of this bill will be available at
       http://www.leg.state.co.us/billsummaries.)
       
            The bill limits the costs that may be deducted by a taxpayer for
       transportation, manufacturing, and processing costs for purposes of
       calculating the net amount realized by the taxpayer for the sale of oil and
       gas for purposes of calculating the excise tax on the severance of oil and
       gas.
       
       
       
       Be it enacted by the General Assembly of the State of Colorado:
            SECTION 1.  In Colorado Revised Statutes, 39-29-102, amend
       (3) (a); and repeal (7) as follows:
            39-29-102.  Definitions. As used in this article, unless the context
       otherwise requires:
            (3)  "Gross income" means:
            (a)  For oil and gas, the net amount realized by the taxpayer for
       sale of the oil or gas, whether the sale occurs at the wellhead or after
       transportation, manufacturing, and processing of the product. Net amount
       shall be calculated on the basis of the gross lease revenues, less
       deductions for any transportation, manufacturing, and processing costs
       borne by the taxpayer the direct costs actually paid by the
       taxpayer for transporting, manufacturing, and processing
       identifiable, measurable oil or gas, including gas that is not in
       need of initial separation, from the point at which it is first
       identifiable and measurable to the sales point or other point
       where value is established. Any compression downstream of the
       meter or measurement point is deductible as a component of
       transportation. "Gathering" means the movement of an
       unseparated, bulk production stream to a point, on or off the
       lease, where the production stream undergoes initial separation
       into identifiable oil, gas, or free water and is not deductible as
       transportation. This definition shall not be construed to affect
       the legal relationship between royalty owners and lessees.
       Where the parties to the sale are related parties and the sales price is
       lower than the price for which that oil or gas could otherwise have been
       sold to a ready, willing, and able buyer and where the taxpayer was
       legally able to sell the oil or gas to such a buyer, gross income shall be
       determined by reference to comparable arms-length sales of like kind,
       quality, and quantity in the same field or area, less deductions for
       transportation, manufacturing, and processing done prior to the sale. For
       purposes of this paragraph (a), "related parties" shall be defined by the
       department of revenue pursuant to rules and regulations.
            (7)  "Transportation" means the cost of moving identifiable,
       measurable oil or gas, including gas that is not in need of initial
       separation, from the point at which it is first identifiable and measurable
       to the sales point or other point where value is established. Any
       compression downstream of the meter or measurement point is deductible
       as a component of transportation. "Gathering" means the movement of an
       unseparated, bulk production stream to a point, on or off the lease, where
       the production stream undergoes initial separation into identifiable oil,
       gas, or free water and is not deductible as transportation. This definition
       shall not be construed to affect the legal relationship between royalty
       owners and lessees.
            SECTION 2.  Act subject to petition - effective date -
       applicability. (1)  This act takes effect at 12:01 a.m. on the day following
       the expiration of the ninety-day period after final adjournment of the
       general assembly (August 10, 2016, if adjournment sine die is on May 11,
       2016); except that, if a referendum petition is filed pursuant to section 1
       (3) of article V of the state constitution against this act or an item, section,
       or part of this act within such period, then the act, item, section, or part
       will not take effect unless approved by the people at the general election
       to be held in November 2016 and, in such case, will take effect on the
       date of the official declaration of the vote thereon by the governor.
            (2)  This act applies to severance tax years that begin on or after
       January 1, 2016.