SECTION 3.30. Natural Gas Tax Managed Audits and Determination of Overpaid Amounts

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Managed audit--A review and analysis of invoices, checks, accounting records, or other documents or information conducted by a taxpayer to determine a taxpayer's liability for tax under Tax Code, Chapter 201 (Gas Production Tax).

(2) Taxpayer--Any person required to file a report with the comptroller under Tax Code, §201.203 (Producer's Report) or §201.2035 (First Purchaser's Report).

(b) Managed audits. The comptroller may authorize taxpayers that meet certain requirements to perform managed audits.

(1) A taxpayer who wishes to participate in a managed audit must request authorization from the comptroller's office to conduct a managed audit under this section. Authorization will only be granted as part of a written agreement between the taxpayer and the comptroller's office. The agreement must:

(A) be signed by an authorized representative of the comptroller and the taxpayer; and

(B) specify the period to be audited and the procedure to be followed.

(2) In determining whether to authorize a managed audit, the comptroller may consider:

(A) the taxpayer's history of tax compliance, including:

(i) timely filing of reports;

(ii) timely payment of all taxes and fees due to the state;

(iii) prior audit history;

(iv) delinquency in other taxes;

(v) correction of problems identified in prior audits; and

(vi) whether a penalty waiver had been denied on prior occasions and the reason for denial;

(B) whether the taxpayer has sufficient time and resources to conduct the audit;

(C) the sufficiency and availability of the taxpayer's tax records;

(D) the taxpayer's ability to pay any liability arising as a result of the audit; and

(E) any other factor the comptroller determines is relevant.

(3) The decision to authorize or not authorize a managed audit rests solely with the comptroller.

(4) A managed audit may be limited to one or more factors affecting a taxpayer's liability for tax under this chapter, including:

(A) gross value of gas produced;

(B) exempt interest;

(C) marketing costs of gas produced;

(D) gas used to power operations at a well or lease; or

(E) tax reimbursement paid by a purchaser to a producer.

(5) Before the audit is finalized, the comptroller may examine records that the comptroller determines are necessary to verify the results.

(6) Unless the audit or information reviewed by the comptroller under this subsection discloses fraud or willful evasion of the tax, the comptroller may not assess a penalty and may waive all or part of the interest that would otherwise accrue on any amount identified to be due in a managed audit. This does not apply to any amount collected by the taxpayer that was a tax or represented to be a tax but that was not remitted to this state.

(7) Except as provided by Tax Code, §111.104(f) (Refunds), a taxpayer is entitled to a refund of any tax overpayment disclosed by a managed audit under this section.

(8) This subsection applies to audits initiated on or after September 1, 2019.

(c) Determination of overpaid amounts by sampling marketing cost transactions.

(1) A taxpayer may sample marketing cost transactions provided that the sampling method is approved by the comptroller. The taxpayer must record the method and make available on request by the comptroller the records on which the computation is based.

(2) A taxpayer may obtain a reimbursement of an overpayment identified by sampling under this subsection by amending all relevant reports and:

(A) taking a credit on one or more reports filed under Tax Code, §201.203 or §201.2035; or

(B) filing a claim for refund with the comptroller within the statute of limitations specified by Tax Code, §111.107 (When a Refund or Credit is Permitted) and Chapter 111, Subchapter D (Limitations).

(3) This subsection applies to refund claims filed on or after September 1, 2019.

Source Note: The provisions of this §3.30 adopted to be effective March 2, 2020, 45 TexReg 1439