HOUSE BILL 548

57th legislature - STATE OF NEW MEXICO - first session, 2025

INTRODUCED BY

Nathan P. Small and Meredith A. Dixon

 

 

 

 

 

AN ACT

RELATING TO TAXATION; ENACTING THE OIL AND GAS EQUALIZATION TAX ACT.

 

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

     SECTION 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 11 of this act may be cited as the "Oil and Gas Equalization Tax Act".

     SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Oil and Gas Equalization Tax Act:

          A. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

          B. "production unit" means a unit of property designated by the department from which products of common ownership are severed;

          C. "severance" means the taking from the soil of any product in any manner whatsoever;

          D. "value" means the actual price received from products at the production unit, except as otherwise provided in the Oil and Gas Equalization Tax Act;

          E. "product" or "products" means oil, including crude, slop or skim oil and condensate; liquid hydrocarbon, including ethane, propane, isobutene, normal butane and pentanes plus, individually or any combination thereof; and non-hydrocarbon gases, including carbon dioxide and helium;

          F. "operator" means any person:

                (1) engaged in the severance of products from a production unit; or

                (2) owning an interest in any product at the time of severance who receives a portion or all of such product for the person's interest;

          G. "purchaser" means a person who is the first purchaser of a product after severance from a production unit, except as otherwise provided in the Oil and Gas Equalization Tax Act;

          H. "person" means any individual, estate, trust, receiver, business trust, corporation, firm, copartnership, cooperative, joint venture, association, limited liability company or other group or combination acting as a unit, and the plural as well as the singular number;

          I. "interest owner" means a person owning an entire or fractional interest of whatsoever kind or nature in the products at the time of severance from a production unit or who has a right to a monetary payment that is determined by the value of such products;

          J. "taxable value" means the average of the taxable value per barrel, determined pursuant to Section 4 of the Oil and Gas Equalization Tax Act, of all oil produced in New Mexico for the specified calendar year as determined by the department;

          K. "tax" means the oil and gas equalization tax; and

          L. "volume" means the quantity of product severed reported using:

                (1) oil, condensate and slop oil in barrels; and

                (2) liquid hydrocarbons, helium and carbon dioxide in thousand cubic feet at a pressure base of fifteen and twenty-five thousandths pounds per square inch.

     SECTION 3. [NEW MATERIAL] PRIVILEGE TAX LEVIED--COLLECTED BY DEPARTMENT--RATE--INTEREST OWNER'S LIABILITY TO STATE--INDIAN LIABILITY.--

          A. There is imposed and shall be collected by the department a privilege tax on all products that are severed and sold. The measure of the tax is eighty-five hundredths percent of the taxable value of oil and on oil and other liquid hydrocarbons removed from natural gas at or near the wellhead.

          B. Every interest owner, for the purpose of levying this tax, is deemed to be in the business of severing products and is liable for the tax to the extent of the owner's interest in the value of the products or to the extent of the owner's interest as may be measured by the value of the products.

          C. Any Indian tribe, Indian pueblo or Indian is liable for the tax to the extent authorized or permitted by law.

     SECTION 4. [NEW MATERIAL] TAXABLE VALUE--METHOD OF DETERMINING.--To determine the taxable value, there shall be deducted from the value of products:

          A. royalties paid or due to the United States or the state of New Mexico;

          B. royalties paid or due to any Indian tribe, Indian pueblo or Indian that is a ward of the United States of America; and

          C. the reasonable expense of trucking any product from the production unit to the first place of market.

     SECTION 5. [NEW MATERIAL] VALUE MAY BE DETERMINED BY DEPARTMENT--STANDARD.--

          A. The department may determine the value of products severed from a production unit when:

                (1) the operator and purchaser are affiliated persons;

                (2) the sale and purchase of products are not an arm's length transaction; or

                (3) products are severed and removed from a production unit and a value as defined in the Oil and Gas Equalization Tax Act is not established for such products.

          B. The value determined by the department shall be commensurate with the actual price received for products of like quality, character and use that are severed in the same field or area.

     SECTION 6. [NEW MATERIAL] PRICE INCREASE SUBJECT TO APPROVAL OF AGENCY OF UNITED STATES OF AMERICA, STATE OF NEW MEXICO OR COURT--REFUND.--When an increase in the value of any product is subject to the approval of any agency of the United States of America or the state of New Mexico or any court, the increased value shall be subject to the tax. In the event the increase in value is disapproved, either in whole or in part, then the amount of tax that has been paid on the disapproved part of the value shall be considered excess tax. A person who has paid excess tax may apply for a refund of that excess tax in accordance with the provisions of Section 7-1-26 NMSA 1978.

     SECTION 7. [NEW MATERIAL] PRODUCTS ON WHICH TAX HAS BEEN LEVIED--DEPARTMENT RULE.--The tax shall not be levied more than once on the same product. Reporting of products on which the tax has been paid is subject to department rule.

     SECTION 8. [NEW MATERIAL] OPERATOR OR PURCHASER TO WITHHOLD INTEREST OWNER'S TAX--DEPARTMENT MAY REQUIRE WITHHOLDING OF TAX--TAX WITHHELD TO BE REMITTED TO THE STATE--OPERATOR OR PURCHASER TO BE REIMBURSED.--

          A. A operator making a monetary payment to an interest owner for the operator's portion of the value of products from a production unit shall withhold from the payment the amount of tax due from the interest owner.

          B. A purchaser who, by express or implied agreement with the operator, makes a monetary payment to an interest owner for the purchaser's portion of the value of products from a production unit shall withhold from the payment the amount of tax due from the interest owner.

          C. The department may require a purchaser making a monetary payment to an interest owner for the purchaser's portion of the value of products from a production unit to withhold from the payment the amount of tax due from the interest owner.

          D. An operator or purchaser who pays tax due from an interest owner shall be entitled to reimbursement from the interest owner for the tax paid and may take credit for the amount from any monetary payment to the interest owner for the value of products.

     SECTION 9. [NEW MATERIAL] OPERATOR'S REPORT--TAX REMITTANCE--ADDITIONAL INFORMATION.--Each operator shall, in the form and manner required by the department, file a return with the department showing the total value, volume and kind of products sold from each production unit for each calendar month. All taxes due or to be remitted by the operator shall accompany the return. The return shall be filed on or before the twenty-fifth day of the second month after the calendar month for which the return is required. Any additional report or information the department may deem necessary for the proper administration of the Oil and Gas Equalization Tax Act may be required.

     SECTION 10. [NEW MATERIAL] PURCHASER'S REPORT--TAX REMITTANCE--ADDITIONAL INFORMATION.--Each purchaser shall, in the form and manner required by the department, file a return with the department showing the total value, volume and kind of products purchased by the purchaser from each production unit for each calendar month. All taxes due or to be remitted by the purchaser shall accompany the return. The return shall be filed on or before the twenty-fifth day of the second month after the calendar month for which the return is required. Any additional reports or information the department may deem necessary for the proper administration of the Oil and Gas Equalization Tax Act may be required.

     SECTION 11. [NEW MATERIAL] ADVANCE PAYMENT REQUIRED.--

          A. A person required to make payment of tax pursuant to Section 9 of the Oil and Gas Equalization Tax Act shall make the advance payment required by this section.

          B. For the purposes of this section:

                (1) "advance payment" means the payment required to be made by this section in addition to any oil and gas equalization tax, penalty or interest due; and

                (2) "average tax" means the aggregate amount of tax, less any refunds or credits, paid by a person for the twelve-month period ending the last day of February pursuant to the Oil and Gas Equalization Tax Act divided by the number of months during that period for which the person made payment.

          C. Each year, prior to July 1, the department shall compute the advance payment required to be made pursuant to this section, compute the average tax for the filing periods February through January of the subsequent year for each person required to pay tax pursuant to the Oil and Gas Equalization Tax Act and provide a tax statement to each person required to pay tax pursuant to the Oil and Gas Equalization Tax Act. The average tax calculated for a year shall be used during the twelve-month period beginning in July of that year and ending in June of the following year as the basis for making the advance payments required by Subsection D of this section.

          D. Annually, by the twenty-fifth day of the month in which a person files or amends that person's first return pursuant to the Oil and Gas Equalization Tax Act and after receiving the tax statement provided by the department, a person required to pay tax in a month pursuant to the Oil and Gas Equalization Tax Act shall pay, in addition to any amount of tax, interest or penalty due, an advance payment in an amount equal to the applicable average tax, except:

                (1) if the person is making a final return under the Oil and Gas Equalization Tax Act, no advance payment pursuant to this subsection is due for that return; and

                (2) as provided in Subsection F of this section.

          E. Annually, by the twenty-fifth day of the month in which a person files or amends that person's first return pursuant to the Oil and Gas Equalization Tax Act and after receiving the tax statement provided by the department, a person required to pay tax pursuant to the Oil and Gas Equalization Tax Act may claim a credit equal to the amount of advance payment made in the previous year, except as provided in Subsection F of this section.

          F. If, in a year, a person is not required to pay tax pursuant to the Oil and Gas Equalization Tax Act, that person is not required to pay the advance payment and shall not claim a credit pursuant to Subsection E of this section; provided that, in any succeeding month when the person has liability under the Oil and Gas Equalization Tax Act, the person may claim a credit for any advance payment made and not credited.

          G. In the event that the date by which a person is required to pay the tax pursuant to the Oil and Gas Equalization Tax Act is accelerated to a date earlier than the twenty-fifth day of the second month following the month of production, the advance payment provision contained in this section is void and any money held as advance payments shall be credited to the taxpayers' accounts.

     SECTION 12. Section 7-1-2 NMSA 1978 (being Laws 1965, Chapter 248, Section 2, as amended) is amended to read:

     "7-1-2. APPLICABILITY.--The Tax Administration Act applies to and governs:

          A. the administration and enforcement of the following taxes or tax acts as they now exist or may hereafter be amended:

                (1) Income Tax Act;

                (2) Withholding Tax Act;

                (3) Oil and Gas Proceeds and Pass-Through Entity Withholding Tax Act;

                (4) Gross Receipts and Compensating Tax Act, Interstate Telecommunications Gross Receipts Tax Act and Leased Vehicle Gross Receipts Tax Act;

                (5) Liquor Excise Tax Act;

                (6) Local Liquor Excise Tax Act;

                (7) any municipal local option gross receipts tax or municipal compensating tax;

                (8) any county local option gross receipts tax or county compensating tax;

                (9) Special Fuels Supplier Tax Act;

                (10) Gasoline Tax Act;

                (11) petroleum products loading fee, which fee shall be considered a tax for the purpose of the Tax Administration Act;

                (12) Alternative Fuel Tax Act;

                (13) Cigarette Tax Act;

                (14) Estate Tax Act;

                (15) Railroad Car Company Tax Act;

                (16) Investment Credit Act, rural job tax credit, Laboratory Partnership with Small Business Tax Credit Act, Technology Jobs and Research and Development Tax Credit Act, Film Production Tax Credit Act, Affordable Housing Tax Credit Act and high-wage jobs tax credit;

                (17) Corporate Income and Franchise Tax Act;

                (18) Uniform Division of Income for Tax Purposes Act;

                (19) Multistate Tax Compact;

                (20) Tobacco Products Tax Act;

                (21) the telecommunications relay service surcharge imposed by Section 63-9F-11 NMSA 1978, which surcharge shall be considered a tax for the purposes of the Tax Administration Act;

                (22) the Insurance Premium Tax Act;

                (23) the Health Care Quality Surcharge Act;

                (24) the Cannabis Tax Act; and

                (25) the Health Care Delivery and Access Act;

          B. the administration and enforcement of the following taxes, surtaxes, advanced payments or tax acts as they now exist or may hereafter be amended:

                (1) Resources Excise Tax Act;

                (2) Severance Tax Act;

                (3) any severance surtax;

                (4) Oil and Gas Severance Tax Act;

                (5) Oil and Gas Conservation Tax Act;

                (6) Oil and Gas Emergency School Tax Act and the Oil and Gas Equalization Tax Act;

                (7) Oil and Gas Ad Valorem Production Tax Act;

                (8) Natural Gas Processors Tax Act;

                (9) Oil and Gas Production Equipment Ad Valorem Tax Act;

                (10) Copper Production Ad Valorem Tax Act;

                (11) any advance payment required to be made by any act specified in this subsection, which advance payment shall be considered a tax for the purposes of the Tax Administration Act;

                (12) Enhanced Oil Recovery Act;

                (13) Natural Gas and Crude Oil Production Incentive Act; and

                (14) intergovernmental production tax credit and intergovernmental production equipment tax credit;

          C. the administration and enforcement of the following taxes, surcharges, fees or acts as they now exist or may hereafter be amended:

                (1) Weight Distance Tax Act;

                (2) the workers' compensation fee authorized by Section 52-5-19 NMSA 1978, which fee shall be considered a tax for purposes of the Tax Administration Act;

                (3) Uniform Unclaimed Property Act (1995);

                (4) 911 emergency surcharge and the network and database surcharge, which surcharges shall be considered taxes for purposes of the Tax Administration Act;

                (5) the solid waste assessment fee authorized by the Solid Waste Act, which fee shall be considered a tax for purposes of the Tax Administration Act;

                (6) the water conservation fee imposed by Section 74-1-13 NMSA 1978, which fee shall be considered a tax for the purposes of the Tax Administration Act; and

                (7) the gaming tax imposed pursuant to the Gaming Control Act; and

          D. the administration and enforcement of all other laws, with respect to which the department is charged with responsibilities pursuant to the Tax Administration Act, but only to the extent that the other laws do not conflict with the Tax Administration Act."

     SECTION 13. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2025.

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