HOUSE ENERGY, ENVIRONMENT AND NATURAL RESOURCES

COMMITTEE SUBSTITUTE FOR

HOUSE BILL 350

56th legislature - STATE OF NEW MEXICO - first session, 2023

 

 

 

 

 

 

 

AN ACT

RELATING TO TAXATION; CREATING THE OIL AND GAS EMISSION REDUCTION CORPORATE INCOME TAX CREDIT.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

     "[NEW MATERIAL] OIL AND GAS EMISSION REDUCTION CORPORATE INCOME TAX CREDIT.--

          A. For taxable years prior to January 1, 2028, a taxpayer that, on or after January 1, 2023, installs a purchased or leased vapor recovery unit that causes a reduction in emissions from a stripper well property may apply for, and the department may allow, a credit against the taxpayer's tax liability imposed pursuant to the Corporate Income and Franchise Tax Act. The tax credit provided by this section may be referred to as the "oil and gas emission reduction corporate income tax credit".

          B. The amount of a tax credit allowed pursuant to

this section shall be in an amount up to twelve thousand dollars ($12,000) for the cost of a purchased or leased vapor recovery unit that is installed on a stripper well property; provided that installation of the vapor recovery unit causes a reduction in emissions from a stripper well property. Only one credit per vapor recovery unit installed on a stripper well property shall be allowed.

          C. A taxpayer shall apply for certification of eligibility for the credit provided by this section from the energy, minerals and natural resources department on forms and in the manner prescribed by that department. The aggregate amount of tax credits that may be certified as eligible in any calendar year is one hundred million dollars ($100,000,000). Completed applications shall be considered in the order received and shall include evidence to the satisfaction of that department that the installation of a vapor recovery unit has caused a reduction in emissions from a stripper well property. Applications for certification received after the aggregate amount of tax credits has been met in a calendar year shall not be approved. For taxpayers eligible to receive the credit, the energy, minerals and natural resources department shall issue a certificate of eligibility stating the amount of credit to which the taxpayer is entitled for the taxable year. The certificate of eligibility shall be numbered for identification and declare the date of issuance and the amount of the tax credit allowed.

          D. To receive the credit provided by this section, a taxpayer shall apply to the department on forms and in the manner prescribed by the department. The application shall include a certification made pursuant to Subsection C of this section.

          E. That portion of a credit that exceeds a taxpayer's tax liability in the taxable year in which the credit may be carried forward for up to seven consecutive years.

          F. A taxpayer allowed a tax credit pursuant to this section shall report the amount of the credit to the department in a manner required by the department.

          G. The department shall compile an annual report on the credit provided by this section that shall include the number of taxpayers approved by the department to receive the credit, the aggregate amount of credits approved and any other information necessary to evaluate the credit. The department shall present the report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the cost of the tax credit.

          H. As used in this section:

                (1) "reduction in emissions from a stripper well property" means a reduction in emissions from a stripper well property that would have been emitted if not for:

                     (a) the replacement, repair or retrofit of a stationary compressor engine of a well on a stripper well property;

                     (b) the installation of systems or equipment on a well on a stripper well property that reduce the loss of gas, venting of gas, flaring of gas or burning of gas using a combustion control device; or

                     (c) the installation of emissions-monitoring equipment on a well on a stripper well property;

                (2) "stripper well property" means, with respect to any calendar year, a property producing not more than ten barrel equivalents of domestic crude oil per day or sixty thousand cubic feet of domestic natural gas per day, determined by dividing the average daily production of domestic crude oil or domestic natural gas from producing wells on the property for such calendar year by the number of such wells on the property; and

                (3) "vapor recovery unit" means equipment that causes a reduction in emissions from a stripper well property by capturing fugitive natural gas vapors through a compressor at the wellhead and eliminates the need to vent or flare gas."

     SECTION 2. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2023.

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