39-29-111 - Oil and Gas Severance Tax Withholding
Basis and Purpose. The statutory bases for this rule are sections 39-21-101(3), 39-21-112(1), 39-29-101(1), 39-29-111, 39-29-112, and 39-29-115 (1.5), C.R.S. The purpose of this rule is to clarify requirements for withholding severance tax from gross income from oil and gas, to establish reporting requirements, and to clarify which taxpayer may claim credit for taxes withheld.
(1) Every producer or purchaser who disburses
funds owed to any person owning a working interest, a royalty interest, a
production payment, or any other interest in any oil or gas produced in
Colorado shall withhold one percent (1%) of the gross income from such
payments; except, no withholding shall be taken from payments for:
(a) Interests held by the United States of
America;
(b) Interests held by the
State of Colorado or any political subdivisions of the state of
Colorado;
(c) Interests held by the
Southern Ute Indian Tribe or the Mountain Ute Indian Tribe; or,
(d) On or after January 1, 2000, any
production exempt from the tax imposed by section
39-29-105(1)(a) or
(b), C.R.S.
(2) Producers and purchasers do not have to
register wells with production exempt under section 39 29 105(1)(b), C.R.S.
where the well American Petroleum Institute (API) number shows exempt levels of
monthly production on the conservation levy records of the Colorado Oil and Gas
Conservation Commission.
(3)
Annual Report.
(a) Every
producer or first purchaser required to provide a statement pursuant to section
39-29-111(4),
C.R.S., shall issue such statement using form DR 0021W, Oil and Gas Withholding
Statement, and report on such form the amount of tax deducted and withheld
pursuant to section
39-29-111, C.R.S., and the
following amounts determined for the calendar year on both an accrual basis and
a cash basis:
(i) Gross income;
(ii) Gross income attributable to production
that is exempt from taxation pursuant to section
39-29-105(1),
C.R.S.;
(iii) Ad valorem tax
assessed or paid in accordance with section
39-29-105(2),
C.R.S.; and
(iv) Ad valorem tax
assessed or paid in accordance with section
39-29-105(2),
C.R.S., on oil and gas production that is exempt from taxation pursuant to
section 39-29-105(1),
C.R.S.
(b) On or before
April 15 of each year, every producer or first purchaser shall file with the
Department:
(i) a copy of each form DR 0021W,
Oil and Gas Withholding Statement, required pursuant to section
39-29-111(4),
C.R.S., and paragraph (3)(a) of this rule; and
(ii) a form DR 0456, Annual Reconciliation of
Oil and Gas Severance Withholding
(c) A producer or first purchaser who fails
to comply with the annual reporting requirements prescribed by paragraph (3)(b)
of this rule shall be subject to the penalty imposed pursuant to section
39-29-115 (1.5), C.R.S.
(4)
Returns and
Liability. The tax is imposed on the interest owner who shall file the
severance tax return and pay the severance tax. The return shall reflect the
amount listed on form DR 0021W, Oil and Gas Withholding Statement, received
from the producer or first purchaser; the tax liability shall not be shifted
onto another party. For example, a limited partnership, limited liability
company, S Corporation, or joint venture must file at the entity level.
Partners, members, or shareholders shall not file a severance tax return to
report oil and gas income received by the pass-through entity. The interest
owner is the person who receives income from the producer or first purchaser
regardless of the person's form of organization, including individual
partnerships, limited liability companies, corporations, or joint
ventures.
(5) The amount withheld
pursuant to section
39-29-111, C.R.S., by the producer
or first purchaser may be claimed as a credit by the interest owner of oil and
gas or oil shale production when such party files a return as required under
section 39-29-112, C.R.S.
(a) If the credit for the amount withheld
exceeds the tax shown on the return, the excess credit shall be refunded to the
royalty interest owner.
Notes
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