Oklahoma ~ Severance Tax: Gross Production Tax Incentives Modified and Extended

Oklahoma Gov. Fallin recently signed into law a permanent, lowered tax rate that will provide a gross production tax (GPT) drilling incentive for all new oil and/or natural gas wells that are spudded on or after July 1, 2015. Under the forthcoming incentive, all eligible production from any new spudded well will be taxed at a reduced 2% rate for the first 36 months. After that initial 36-month period, the general standard GPT rate of 7% will apply.

The newly enacted GPT regime will follow and replace the current incentives, which are scheduled to expire next year as of July 1, 2015. Without the new enactment, the GPT rate would have risen to the usual 7% rate on that date.

In addition to the above, and among other beneficial GPT provisions, the new enactment extends numerous drilling incentives, such as the following:

— five-year secondary recovery project exemption (extended to July 1, 2020);

— 10-year tertiary recovery project exemption (extended to July 1, 2020);

— four-year horizontally-drilled well reduced rate (extended to July 1, 2015);

— 28-month inactive well exemption (extended to July 1, 2020);

— 28-month production enhancement project exemption (extended to July 1, 2020);

— 28-month deep well exemption and the related 48- or 60-month reduced rate (extended to July 1, 2015);

— 28-month new discovery well exemption (extended to July 1, 2015);

— 28-month three-D seismic shoot well exemption (extended to July 1, 2015); and

— tax refund available to an economically at-risk oil or gas lease (extended to July 1, 2020).

Chap. 346 (H.B. 2562), Laws 2014, effective as noted above

 

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Wolters Kluwer Tax and Accounting

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