0001|         HOUSE TAXATION AND REVENUE COMMITTEE SUBSTITUTE FOR
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0002|                            HOUSE BILL 185
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0003|     43rd legislature - STATE OF NEW MEXICO - second session, 1998
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0004|                                   
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0005|     
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0006|     
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0007|                                   
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0008|     
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0009|                                   
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0010|     
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0011|                                AN ACT
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0012|     RELATING TO TAXATION; AMENDING THE NATURAL GAS PROCESSORS TAX
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0013|     ACT TO CHANGE THE BASIS ON WHICH THE TAX IS IMPOSED; AMENDING
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0014|     AND REPEALING SECTIONS OF THE NMSA 1978.
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0015|     
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0016|     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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0017|          Section 1.  Section 7-33-2 NMSA 1978 (being Laws 1963,
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0018|     Chapter 179, Section 2, as amended) is amended to read:
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0019|          "7-33-2.  DEFINITIONS.--As used in the Natural Gas
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0020|     Processors Tax Act:
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0021|               A.  "average annual taxable value" means the
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0022|     average of the taxable value per mcf, determined pursuant to
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0023|     Section 7-31-5 NMSA 1978, of all natural gas produced in New
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0024|     Mexico for the specified calendar year as determined by the
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0025|     department;
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<center>- 1 -</center>0001|               [A.  "commission"] B.  "department" ["division" or
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0002|     "oil and gas accounting division"] means the taxation and
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0003|     revenue department, the secretary of taxation and revenue or
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0004|     any employee of the department exercising authority lawfully
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0005|     delegated to that employee by the secretary;
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0006|               [B.  "processor" means a person who:
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0007|                    (1)  processes natural gas or processes
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0008|     hydrocarbons incidental to the processing of natural gas; or
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0009|                    (2)  extracts by-products from natural gas or
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0010|     other hydrocarbons incidental to the processing of natural
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0011|     gas, individually or any combination thereof.  "Processor"
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0012|     does not mean a person who refines or processes oil, natural
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0013|     gas or liquid hydrocarbons or extracts by-products therefrom
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0014|     through a process which is commonly considered a field or
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0015|     lease operation, such as well-head separation, dehydration,
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0016|     purification, desulfurization, compression or trapping;
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0017|               C.  "product" means natural gas or liquid
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0018|     hydrocarbons, individually or any combination thereof, which
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0019|     has been processed by the processor or any by-product which
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0020|     has been derived therefrom by the processor.  "Product" does
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0021|     not include distinct petrochemicals produced from hydrocarbons
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0022|     by chemical conversion in a petrochemical plant;
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0023|               D.  "value" means the actual price received for
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0024|     products by the processor at his plant; and]
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0025|               C.  "fiscal year" means the period starting July 1
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<center>- 2 -</center>0001|     and ending June 30 of the succeeding calendar year;
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0002|               D.  "mcf" means one thousand cubic feet;
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0003|               E.  "mmbtu" means one million British thermal units;
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0004|               F.  "natural gas" means any hydrocarbon that at
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0005|     atmospheric conditions of temperature and pressure is in a
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0006|     gaseous state, and includes non-hydrocarbon gases that are in
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0007|     combination with hydrocarbon gases;
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0008|               G.  "natural gas processing plant" means a facility
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0009|     used to extract liquid hydrocarbons and non-hydrocarbon gaseous
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0010|     or liquid substances, individually or in any combination, from
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0011|     natural gas, but does not include a facility that refines or
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0012|     processes oil, natural gas or liquid hydrocarbons or that
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0013|     extracts substances from natural gas through a field or lease
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0014|     operation;
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0015|               [E.] H.  "person" means any individual, estate, trust,
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0016|     receiver, business trust, corporation, firm, copartnership,
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0017|     cooperative, joint venture, association or other group or
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0018|     combination acting as a unit; 
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0019|               I.  "processor" means a person who operates a natural
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0020|     gas processing plant; and
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0021|               J.  "tax" means the natural gas processors tax."
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0022|          Section 2.  Section 7-33-4 NMSA 1978 (being Laws 1963,
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0023|     Chapter 179, Section 4, as amended) is amended to read:
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0024|          "7-33-4.  PRIVILEGE TAX LEVIED--COLLECTED BY [OIL AND GAS
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0025|     ACCOUNTING DIVISION OF THE TAXATION AND REVENUE] DEPARTMENT--
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<center>- 3 -</center>0001|     RATE.--
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0002|               A.  There is levied and shall be collected by the [oil
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0003|     and gas accounting division of the taxation and revenue]
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0004|     department a privilege tax on processors for the privilege of
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0005|     [engaging in the business of processing based on the value of
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0006|     their products.  The measure of the tax shall be forty-five one-
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0007|     hundredths of one percent of the value of the products.
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0008|               B.  This tax does not apply to the value of products:
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0009|                    (1)  used for plant fuel by the processor;
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0010|                    (2)  which are returned to the lease from which
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0011|     produced; or
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0012|                    (3)  sold to:
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0013|                         (a)  the government of the United States,
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0014|     its departments or agencies;
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0015|                         (b)  the state of New Mexico or any of its
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0016|     political subdivisions; or
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0017|                         (c)  nonprofit hospitals, religious or
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0018|     charitable organizations, when the products are used in the
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0019|     conduct of their regular functions.
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0020|               C.  Every interest owner is liable for this tax to the
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0021|     extent of his interest in the value of such products or to the
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0022|     extent of his interest as may be measured by the value of such
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0023|     products] operating a natural gas processing plant in New Mexico. 
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0024|     This tax may be referred to as the "natural gas processors tax".
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0025|               B.  The tax shall be imposed on the amount of mmbtus
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<center>- 4 -</center>0001|     of natural gas delivered to the processor at the inlet of the
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0002|     natural gas processing plant after subtracting the mmbtu
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0003|     deductions authorized in Subsection E of this section. The tax
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0004|     shall be imposed at the rate per mmbtu determined in Subsection C
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0005|     or D of this section, as applicable.
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0006|               C.  The tax rate for the six-month period beginning on
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0007|     January 1, 1999 shall be determined by multiplying the rate of
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0008|     sixty-five hundredths of one cent ($.0065) per mmbtu by a
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0009|     fraction, the numerator of which is the annual average taxable
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0010|     value per mcf of natural gas produced in New Mexico during the
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0011|     1997 calendar year and the denominator of which is one dollar
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0012|     thirty-three cents ($1.33) per mcf.  The resulting tax rate shall
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0013|     be rounded to the nearest one-hundredth of one cent per mmbtu.
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0014|               D.  The tax rate for each fiscal year beginning on or
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0015|     after July 1, 1999 shall be determined by multiplying the rate of
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0016|     sixty-five hundredths of one cent ($.0065) per mmbtu by a
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0017|     fraction, the numerator of which is the annual average taxable
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0018|     value per mcf of natural gas produced in New Mexico during the
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0019|     preceding calendar year and the denominator of which is one
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0020|     dollar thirty-three cents ($1.33) per mcf.  The resulting tax
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0021|     rate shall be rounded to the nearest one-hundredth of one cent
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0022|     per mmbtu.
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0023|               E.  A processor may deduct from the amount of mmbtus
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0024|     of natural gas subject to the tax the mmbtus of natural gas that
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0025|     are:
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<center>- 5 -</center>0001|                    (1)  used for natural gas processing by the
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0002|     processor;
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0003|                    (2)  returned to the lease from which it is
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0004|     produced;
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0005|                    (3)  legally flared by the processor; or
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0006|                    (4)  lost as a result of natural gas processing
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0007|     plant malfunctions or other incidences of force majeur.
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0008|               F.  On or before June 15, 1999 and June 15 of each
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0009|     succeeding year, the department shall inform each processor in
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0010|     writing of the tax rate applicable for the succeeding fiscal
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0011|     year.
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0012|               G.  Any Indian nation, tribe [Indian] or pueblo or
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0013|     Indian is liable for [this] the tax to the extent authorized or
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0014|     permitted by law."
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0015|          Section 3.  Section 7-33-6 NMSA 1978 (being Laws 1963,
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0016|     Chapter 179, Section 6, as amended) is amended to read:
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0017|          "7-33-6.  [PRICE INCREASE SUBJECT TO APPROVAL OF AGENCY OF
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0018|     UNITED STATES OF AMERICA, STATE OF NEW MEXICO OR COURT] REFUND.--
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0019|     [When an increase in the value of any product is subject to the
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0020|     approval of any agency of the United States of America or the
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0021|     state of New Mexico or any court, the increased value is subject
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0022|     to this tax.  In the event the increase in value is disapproved,
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0023|     either in whole or in part, then the amount of tax which has been
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0024|     paid on the disapproved part of the value shall be considered
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0025|     excess tax.]  Any person who has [paid any such excess tax]
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<center>- 6 -</center>0001|     overpaid the tax may apply for a refund of that [excess tax]
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0002|     overpayment in accordance with the provisions of Section 7-1-26
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0003|     NMSA 1978."
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0004|          Section 4.  Section 7-33-7 NMSA 1978 (being Laws 1963,
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0005|     Chapter 179, Section 7) is amended to read:
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0006|          "7-33-7.  [PRODUCTS] NATURAL GAS ON WHICH TAX HAS BEEN
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0007|     LEVIED--REGULATION BY [COMMISSION] DEPARTMENT.--[This] The tax
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0008|     shall not be levied more than once on the same [product] natural
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0009|     gas.  Reporting of [products] natural gas on which [this] the tax
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0010|     has been paid is subject to the regulation of the [commission]
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0011|     department."
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0012|          Section 5.  Section 7-33-8 NMSA 1978 (being Laws 1963,
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0013|     Chapter 179, Section 8, as amended) is amended to read:
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0014|          "7-33-8.  TAX [REPORT] RETURN--TAX REMITTANCE--ADDITIONAL
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0015|     INFORMATION.--[Within twenty-five days following the end of each
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0016|     calendar month, each processor shall in the form and manner
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0017|     required by the commission make a return to the commission
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0018|     showing the value, volume and kind of products sold from each
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0019|     plant for the calendar month.  All taxes due or to be remitted by
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0020|     the processor shall accompany this return.  Any additional report
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0021|     or information the commission may deem necessary for the proper
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0022|     administration of the Natural Gas Processors Tax Act may be
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0023|     required.]
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0024|               A.  Each processor shall submit a return monthly to
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0025|     the department in the form and manner required by the department
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<center>- 7 -</center>0001|     showing for the month the total mmbtus of natural gas received by
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0002|     the processor at the inlet of the natural gas processing plant
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0003|     and the total mmbtus of natural gas deducted pursuant to the
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0004|     Natural Gas Processors Tax Act.  All tax due or to be remitted by
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0005|     the processor shall accompany the return.
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0006|               B.  The return required by this section shall be filed
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0007|     on or before the twenty-fifth day of the month after the calendar
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0008|     month for which the return is required.
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0009|               C.  The department may require additional reports or
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0010|     information as necessary for the proper administration of the
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0011|     Natural Gas Processors Tax Act."
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0012|          Section 6.  TEMPORARY PROVISION--NOTICE.--On or before
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0013|     November 30, 1998, the taxation and revenue department shall
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0014|     inform each processor in writing of the natural gas processors
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0015|     tax rate applicable pursuant to the Natural Gas Processors Tax
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0016|     Act for the six-month period beginning January 1, 1999.
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0017|          Section 7.  REPEAL.--Section 7-33-5 NMSA 1978 (being Laws
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0018|     1963, Chapter 179, Section 5, as amended) is repealed.
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0019|          Section 8.  EFFECTIVE DATE.--The effective date of the
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0020|     provisions of Sections 1 through 5 and 7 of this act is January
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0021|     1, 1999.
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0022|                               
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