taxes

Natural Gas Tax Refund Requests

Reasons for Filing a Refund Request

Taxpayers may request natural gas refunds based on one or more of the following reasons:

  • Marketing costs (should be submitted as a separate refund)
  • Any statutory exemption
  • Exempt value for governmental entities
  • Value reduction
  • Tax reimbursement (should be submitted as a separate refund)
  • Credit interest earned
  • Overpaid tax
  • Waiver on penalty assessments
  • Erroneous assessment of tax, penalty and/or interest

Refund Claim Requirements

To request a refund from the Comptroller's office, you must:

  • submit a claim in writing that states fully and in detail each reason or ground on which the claim is founded;
  • provide summary schedules or detailed spreadsheets that include dollar amounts for each period;
  • identify the period during which the claimed overpayment was made;
  • calculate total amount of the refund request; and
  • submit the claim within the applicable limitations period.

Additional requirements may apply for the claim to be valid:

  • Form 10-341, Limited Power of Attorney (PDF), must be submitted with the claim if the refund claim is filed by any person, such as an accountant or attorney, other than the person or entity to whom the refund is due. Each form must be complete and signed by an authorized representative of the tax paying entity.
  • Form 00-985, Assignment of Rights to Refund (PDF), is required when the person seeking a refund of tax he or she paid is not the person who remitted the tax to the Comptroller's office. A separate form is required for each vendor to whom the tax was paid in error, and each form must be complete and signed by an authorized representative of the tax paying entity.
Legislative Exemption Refunds

Taxpayers are required to file credit-amended reports to recoup taxes previously paid on a lease for a specific report period for all statutory exemptions. These reports must have a postmark date within four years from the due date of a report period. Examples of statutory exemptions are low-producing well, reduced tax rate for high cost gas and two-year inactive well.

Credit for Reduced Tax Rate for High Cost Gas

All of the following criteria must be met to obtain a credit from leases approved for reduced tax rate for high cost gas:

  • Four-Year Statute of Limitations: Credit-amended reports must be filed within four years of the due date of a production period.
  • Ten Percent Penalty: Form AP-180, Request for Approval of Reduced Tax Rate for High Cost Gas (PDF), must be filed on the later of these dates: 180th day after the date of first production OR the 45th day after the date of approval by the commission. If Form AP-180 is not filed by the applicable deadline, the tax exemption or tax deduction is reduced by 10 percent for the period beginning on the 180th day after the first day of production and ending on the date on which Form AP-180 is filed with the Comptroller.
  • One-Year Window Requirement: Credit-amended reports containing approved exempt high cost gas wells with production periods that precede the Comptroller's signature date must be filed by the first anniversary from the Comptroller's signature date.
  • Two-Year Window Requirement: If the application for certification (Texas Railroad Commission Form ST-1) is submitted to the Texas Railroad Commission after Jan. 1, 2004, the total allowable credit for taxes paid for reporting periods before the date the application is filed may not exceed the total tax paid on the gas that otherwise qualified for the exemption or tax reduction and that was produced during the 24 consecutive calendar months immediately preceding the month in which the application for certification was filed with the Texas Railroad Commission.
Marketing Cost Refunds

Visit our Natural Gas Severance Taxes Audit Policy on Marketing Costs webpage for general concepts on marketing cost deductions and a list of allowable and not allowable marketing costs claimed.

Determining Wellhead Value

Establishing the producer's actual marketing costs and subtracting these costs from the producer's gross cash receipts from the sale of the gas determines the market value at the mouth of the well, or wellhead value.

Filing Marketing Cost Credits

A producer can use one of the following methods to file marketing cost credits.

  • When producers report and pay their own natural gas tax on a lease in a specific report period, they are required to file an amended report to claim a marketing cost credit.
  • When producers report being not liable for the natural gas tax on a lease in a specific report period, they are required to file an amended report on the purchaser's account to claim a marketing cost credit.

Claiming Marketing Cost Credits When a Purchaser Paid the Tax on a Lease

Standard reporting requirements, including the requirements that the party that paid the tax file amended returns, apply. This can be accomplished by the producer if the purchaser signs Form 10-341, Limited Power of Attorney (PDF) and Form 00-985, Assignment of Rights to Refund (PDF).

Filing Credit-Amended Reports for Marketing Cost Credits on the Purchaser's Account

To receive a refund of purchaser-paid taxes, producers must submit the following documents for all pending and future refund claims for marketing costs:

After these credit-amended reports are filed to a purchaser's account, and provided the credit-amended reports do not contain critical errors, the credit amounts will be validated, deemed refundable and then transferred to the producer's account for refund purposes. In some situations, credit amounts are not refundable from a purchaser's account, such as:

  • A purchaser's account has delinquent liabilities in other report periods.
  • The credit amount generated from a credit-amended report is not available in the corresponding report period (in this case, the credit amount was reduced because a previous liability existed).

If a producer files credit-amended reports for marketing cost credits that are processed to a purchaser's account, he or she must include all of the following:

  • Commodity code
  • Lease type
  • Lease number
  • County number
  • Exemption type, if applicable
  • Producer taxpayer number
  • "Yes" block marked in the report field titled, "Are you liable for the tax?"
  • Marketing cost amount
  • Credit amount in the report field titled, "net taxable value"

Refund Request Contact Information

So that we can record and track refund requests, taxpayers should submit the original refund request letter and required documents to cong.refunds@cpa.texas.gov or mail to:

Texas Comptroller of Public Accounts
Account Maintenance Division
Crude Oil and Natural Gas Tax Section
111 E. 17th Street
Austin, TX 78774-0100

For additional information, call the Account Maintenance Division toll-free at 1-800-531-5441, ext. 3-4455 or email congtax@cpa.texas.gov.