Gross Production Industry Meeting September 29, 2015

Gross Production Industry MeetingSeptember 29, 2015

OPENING REMARKS

Tony Mastin

Executive Director

Oklahoma Tax Commission

REPORTING

Jim Fourcade

Director, Compliance Division


New Gross Production Reporting System

All tax remitters must utilize the electronic reporting system or report on the new hardcopy forms.

Any reports completed on the old forms, EDI, or Magmedia, will be returned.

Test site is still available for a limited time for anyone that wishes to make the transition to the electronic system.

Public PUN Search

Allows taxpayers to search PUN details by county, merge number, PUN, API number, license number, or legal description.

Provides PUN details such as: operator, lease legal description, qualified exemptions, tax rate history with end dates, and 12 months of production history.

Tax Qualifying Rate Download

Allows for a search of wells by operator. Lists PUN, operator, lease name, well

name, and the tax rate with a start and end date.

Option to download list into a .CSV.

2% Tax Rate Effective July 1, 2015. The determination of the correct tax rate is

dependent upon the spud date not the production date.

If a well is spudded prior to July 1, 2015, it will not qualify for the 2% tax rate. It will either receive a 1%, 4%, or 7% tax rate depending on if the well qualifies for an incentive tax rate.

If the well is spudded on or after July 1, 2015, the well will qualify for a 2% tax rate for 36 months, beginning with the date of first sales.

2% Tax Rate (Industry Question)

“If a horizontal well is spudded prior to July 1, 2015, but does not start producing until July 2015, shouldn’t the incentive rate still be 1% and not the new 2%?”Yes, if the well is spudded prior to July 1,

2015, and it qualifies for a horizontal well incentive tax rate, then it will receive the 1% tax rate.

Incentive Tax Rates (Industry Question)

“Please explain how the 48 month term of the horizontal and deep well incentives work. Do I get the incentive for 48 months, plus whatever days it produces in the first month of production?”For tax purposes, the horizontal and deep well

incentive tax rates are not day specific, but rather month specific. Therefore, the incentive rate calculates out to 49 or 61 months to ensure that the tax remitter receives the full tax incentive term. This also applies to rebates.

Prior Period Adjustments

A tax remitter may report prior period adjustments two ways:A standalone 300RCombined with an original production 300R

○ If a company chooses to combine an original report with prior period adjustments, it is important to use the correct report type in the header.1 = original report3 = amended report

Example of Prior Period Adjustments

Production Unit Number

Purchaser/Producer Report Number

Gross Volume

Gross Value

Qualifying Tax Rate

%Exempt Code

Decimal Equivalent

Exempt Volume

Exempt Value

Taxable Volume

Taxable Value

Gross Production

Tax Due

Petroleum Excise Tax

Due

003-987654-0-0000 88887 -2000 -8000.00 7.00 0 0 0 0 -2000 -8000.00 -560.00 -7.60

003-987654-0-0000 88887 4000 16000.00 7.00 0 0 0 0 4000 16000.00 1120.00 15.20

005-654321-0-0000 88887 -1000 -4000.00 7.00 0 0 0 0 -1000 -4000.00 -280.00 -3.80

005-654321-0-0000 88887 5000 20000.00 7.00 0 0 0 0 5000 20000.00 1400.00 19.00

Adjustments/Claims for Refunds

If the report totals equal zero or more, a company may use the electronic reporting system to take the credit on the face of the report.

If the report total equals a negative, a company must complete a hardcopy 300R in order to claim a refund.

Phase three of the reporting system will allow for claims for refund and the Form 328 to be completed on the electronic reporting system.

Multiple Exemptions

When reporting multiple exemptions, use Exempt Code 12.

Exempt Code 12 may be used only for multiple exemptions.

A company may only use a combination of OTC approved exemptions. Please see the exemption list located on the back of the Form 300R.

Multiple Exemptions (Old Reporting Format)


Purchaser/Producer

Report Number

Gross Volume

Gross Value

Qualifying Tax Rate

%

Exempt Code

Decimal Equivalent

Exempt Volume

Exempt Value

Taxable Volume

Taxable Value

Gross Production Tax Due


Due

123-456789-0-0000 33221 66.77 6343.15 7.00 1 0.0625000 4.17 396.45 0 0 0 0

123-456789-0-0000 33221 0 0 7.00 6 0.0312500 2.09 198.22 0 0 0 0

123-456789-0-0000 33221 0 0 7.00 10 0.0312500 2.09 198.22 58.42 5550.26 388.52 5.27

Multiple Exemptions(New Reporting Format)


Purchaser/Producer

Report Number

Gross Volume

Gross Value

Qualifying Tax Rate

%

Exempt Code

Decimal Equivalent

Exempt Volume

Exempt Value

Taxable Volume

Taxable Value

Gross Production

Tax Due


Due

123-456789-0-0000 33221 66.77 6343.15 7.00 12 0.1250000 8.35 792.89 58.42 5550.26 388.52 5.27

Gas Marketing Deduction

“Producers of natural gas and casinghead gas who incur certain marketing costs of the gas produced may deduct such costs from the gross value when computing the gross value subject to gross production tax.” OAC 710:45-9-100.

Exempt Code 9 Product Code 5 – Natural Gas No Decimal Equivalent, No Exempt

Volume

Natural Gas Liquids Gross production tax for Natural Gas

Liquids (NGLs) is levied upon the gross proceeds realized that are attributable to the interest owners of the well.

When reporting gross production tax on NGLs, the gross value should be net of the processing costs, rather than reporting the processing costs as an exemption.

Product Code 6 No Volume

Natural Gas Liquids


Purchaser/Producer

Report Number

Gross Volume

Gross Value

Qualifying Tax Rate

%

Exempt Code

Decimal Equivalent

Exempt Volume

Exempt Value

Taxable Volume

Taxable Value

Gross Production

Tax Due


Due

001-123456-0-0000 12345 0 2000.00 7.00 1 0.1250000 0 250.00 0 1750.00 122.50 1.66

Price Variance

The price variance is a range of prices based on the average benchmark price for a month.

The message is a warning for the remitters to check the volumes and values for a specific PUN because the calculated price is outside the expected price range.

The warning message will not prevent a remitter from submitting a tax return.

Assignment of a PUN

“No person shall engage in the purchase of . . . oil or gas from a producing lease prior to obtaining from the Tax Commission a Tax Commission assigned purchaser reporting number and the Tax Commission assigned production unit number, subnumber and merge number, of the lease from which the production is to be purchased.” – 68 O.S. § 1010(C)

300R (Industry Question) “On the 300R, the Gross Production Tax System

only shows the amounts computed/due for the Gross Production Tax and the Petroleum Excise Tax. We would also like to see the amounts due for the OERB fee and the SOER fee before submitting the report.”The purpose of the 300R is to report production

information. The 300C is the payment summary. The electronic system has the ability to view the payment summary prior to submitting the form. This is discussed in the payment section of the presentation.

300R (Industry Question)

“Why can remitters remove certain 300C reports (or lines) but they cannot remove the associated 300R detail lines?”Reports cannot be edited or deleted once

they are submitted. A non-submitted 300R detail line may be

deleted under “edit form.”


“Could the data the OTC uses to populate the form 300R . . . be made available for download by the tax remitter?This functionality will be available in the

upcoming enhancement.Will be able to save 300R as a.pdf


“Will an exemption on a PUN that is reported on the 300R cause a fatal error in the future if that exemption is not reflected on that PUN on the OTC website?”No. Certain exemptions such as gas

marketing deductions are not required to be registered with the OTC.


“Will an operator number on a PUN that is reported on the 300R cause a fatal error in the future if the operator number on that PUN doesn’t match the OTC website?”No. However, the operator number must be

a registered number with the Corporation Commission.


“Will reporting under a plugged/abandoned PUN cause a fatal error in the future?”Not at this moment. However, this may

change in the future. Please continue to check the gross production webpage at www.tax.ok.gov for updates to the reporting system.

http://www.tax.ok.gov/

300R (Industry Question) “It is my understanding of the 3 year statute, that

the 36 months begins from the payment date, not the calendar month. Will the new Gross Production Tax System accept prior period adjustments only as far back as 3 years from the filing month?”On the system, the statute of limitations is based on

the 36 months from the reporting period. This is to ensure that the OTC does not process a claim for rebate outside of the 36 month statute of limitations.

If your payment period was not the same as the reporting period, you will need to follow the adjustments on paper.


“What is the procedure for OTC to update/correct the rate and incentive period for the period of the well?”If the operator made a mistake, then the operator

would need to complete a 320C, which may be done electronically or on a hardcopy form.

If there is a discrepancy on the Public PUN Search, Qualifying Tax Rate Download, or the reporting system, then the remitter needs to call the OTC at 405-521-3674.

PAYMENTS

Jessica Roberts

Project Manager


Payments

Every payment must have an accompanying 300C.

If a company submits a check, they must also submit a hardcopy 300C.

If a company submits an electronic payment, they must complete the steps to submit an electronic 300C.

Submitting an electronic 300R auto-generates a 300C, but does not automatically submit a 300C.

Payments

One payment per report. Both SOER and OERB fees must be

remitted on the 300C with the tax remittance.

Do not submit the old SOER (Form 316) and OERB (Form 324) coupons.

PaymentsACH Credit vs. ACH Debit

ACH Credit allows a company to control the payment.Company must go to the bank after submitting the

300C to initiate the payment.○ New Addenda Record

TXP*00000*08401*150831*T*0001550542\

ACH Debit allows a company to put their bank account information into the reporting system, as well as, schedule a future payment.

Payments (Industry Question)

“Why does the Pay Status not change for months that have been paid?”As of September 2, 2015, updates have

been implemented into the system. This includes:○ Status Changes

Instead of “payment pending,” the status will show “ACH Credit Submitted” or “ACH Debit Submitted.”

This change affected prior, current, and future payments.


“We are supposed to receive an email once the production month payment is applied or received. We have not received an email notice since the change in payment setup.”The tax remitter will receive a confirmation

email when the payment is submitted.Note: only the remitter and the company

administrator will receive this email.


“I would like to be able to print the 300C Form more effectively and print it after the production period is set up for payment, in ‘Payment Pending’ status.”With the changes to the payment statuses,

after the 300C and payment is submitted and the status changes “Not Submitted” to “ACH Credit Submitted” or “ACH Debit Submitted,” the customer is able to select the “Submitted Forms” module, then 300C, then print the applicable Form 300C.

Rejected Payments Reasons why payments are rejected by the

Treasurer:Incorrect bank account numberBank block Selected “Savings Account” rather than “Checking

Account”Insufficient funds

Remember, a company must be registered with the Tax Commission to pay via ACH. To register, please call 405-522-0214.

For questions regarding a payment, please call 405-522-1764

Phase 3

300R printing Penalty and Interest Module Confirmation numbers on 300C Auto-generated addenda record in

confirmation email Refund Module Reclaimer’s Module

Suggested Changes “Have page numbers on the error report so you

can locate the line that is in error more quickly instead of clicking on the different page numbers at the bottom.”

“The ability to search by PUN number.” “The addenda for the ACH Credit should be sent in

an email just in case you click past the screen to print it.”

“Can the form 300R be saved in an editable format on the website so that the data may be entered, then printed and saved to a personal file?”

Suggested Changes

“The ability to reprint the 300C report.” “Show all errors for the same PUN

number at the same time.” “Date stamp on the 300C search screen

as to when the report was received.” “On the error report that has the different

PUN numbers, a company reference number would be helpful if you are dealing with multiple companies.”

Suggested Changes

“Add on-line option to add exemptions to a PUN on the 320C form.”

“Have the error messages for uploaded reports be exported to an Excel file for printing.”

Contact Information

Gross Production Online System & Reporting Questions:Phone: 405-522-1764Email: [email protected]

Gross Production Company Registration & Bonding QuestionsPhone: 405-521-4740

Gross Production New Well Registration & PUN QuestionsPhone: 405-521-3674

mailto:[email protected]

Questions?

Documents

Gross Production Industry Meeting September 29, 2015