HOUSE BILL 350
56th legislature - STATE OF NEW MEXICO - first session, 2023
James G. Townsend and Larry R. Scott and Candy Spence Ezzell
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. A taxpayer that, on or after January 1, 2023, installs a purchased or leased vapor recovery unit that reduces emissions from oil and gas activity 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 well or along the midstream sector; provided that installation of the vapor recovery unit reduces emissions from oil and gas activity that would have been emitted if not for the installation. Only one credit per vapor recovery unit installed on a well or along the midstream sector 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. 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 reduced emissions from oil and gas activity. 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) "completion" means making a well ready for production after drilling operations;
(2) "emissions from oil and gas activity" means emissions from upstream oil and gas exploration; midstream sector; production; completions; gathering and processing; storage; or transmission activities by:
(a) the replacement, repair or retrofit of a stationary compressor engine of a well;
(b) the installation of systems or equipment on a well that reduce the loss of gas, venting of gas, flaring of gas or burning of gas using a combustion control device; or
(c) installation of emission monitoring equipment on a well;
(3) "gathering and processing" means stripping out impurities and other hydrocarbons and fluids to produce pipeline-grade natural gas;
(4) "midstream sector" means the transportation, storage and trading of products;
(5) "production" means the taking of products from underground formations;
(6) "storage" means the storage of products until being distributed to refineries and retailers;
(7) "transmission activities" means delivery of natural gas from a wellhead and processing plant to end users;
(8) "upstream oil and gas exploration" means the exploration for products in underground formations for purposes of production, creating geological surveys and obtaining land rights and production activities, including drilling; and
(9) "vapor recovery unit" means equipment that reduces emissions from oil and gas activity by capturing fugitive natural gas vapors through a compressor at the wellhead or along the midstream sector 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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