THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY BREWSTER AND FONTANA, OCTOBER 12, 2011

REFERRED TO FINANCE, OCTOBER 12, 2011  

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," providing for extraction tax and for municipal

improvement tax credit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971, is amended by adding articles to

read:

ARTICLE V-A

EXTRACTION TAX

Section 501-A.  Definitions.

The following words and phrases when used in this article 

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Accredited laboratory."  A facility engaged in the testing

and calibration of scientific measurement devices and certified

by the Department of Environmental Protection as having met the

department's standards for accreditation.

"Association."  A partnership, limited partnership or any

other form of unincorporated enterprise owned or conducted by

two or more persons.

"Base rate."  The rate under section 502-A(b).

"Coal bed methane."  Gas which can be produced from coal

beds, coal seams, mined-out areas or gob wells.

"Corporation."  A corporation, joint stock association,

limited liability company, business trust or any other

incorporated enterprise organized under the laws of this

Commonwealth, the United States or any other state, territory or

foreign country or dependency.

"Department."  The Department of Revenue of the Commonwealth.

"Fund."  The Natural Gas Severance Tax Fund established under

section 528-A.

"Meter."  A device to measure the passage of volumes of gases

or liquids past a certain point.

"Municipality."  A city, borough, incorporated town or

township.

"Natural gas."  A fossil fuel consisting of a mixture of

hydrocarbon gases, primarily methane, possibly including ethane,

propane, butane, pentane, carbon dioxide, oxygen, nitrogen and

hydrogen sulfide and other gas species. The term includes

natural gas from oil fields known as associated gas or casing

head gas, natural gas fields known as nonassociated gas, coal

beds, shale beds and other formations. The term does not include

coal bed methane.

"Nonproducing site."  A point of severance that is not

capable of producing natural gas in paying quantities.

"Paying quantities."  Profit to the producer, however small,

over the producer's current operating expenses.

"Person."  A natural person or a corporation, fiduciary,

association or other entity, including the Commonwealth, its

political subdivisions, instrumentalities and authorities. When

the term is used in a clause prescribing and imposing a penalty

or imposing a fine or imprisonment, or both, the term shall

include the members, as applied to an association, and the

officers, as applied to a corporation.

"Producer."  A person who engages or continues within this

Commonwealth in the business of severing natural gas for sale,

profit or commercial use. The term does not include a person who

severs natural gas from a storage field.

"Producing site."  A point of severance capable of producing

natural gas in paying quantities.

"Reporting period."  A calendar month in which natural gas is

severed.

"Secretary."  The Secretary of Revenue of the Commonwealth.

"Sever."  To extract or otherwise remove natural gas from the

soil or water of this Commonwealth.

"Severance."  The extraction or other removal of natural gas

from the soil or water of this Commonwealth.

"Severing."  Extracting or otherwise removing natural gas

from the soil or water of this Commonwealth.

"Storage field."  A natural formation or other site that is

used to store natural gas that did not originate from and has

been injected into the formation or site.

"Stripper well."  A producing site or a nonproducing site

that is not capable of producing and does not produce more than

60,000 cubic feet of natural gas per day.

"Tax."  The tax imposed under this article.

"Tax rate adjustment index."  The amount calculated under

section 503-A(c) by which the rate of the tax imposed under

section 502-A is adjusted annually.

"Taxpayer."  A person subject to the tax imposed by this

article.

"Unit."  A thousand cubic feet of natural gas measured at the

wellhead at a temperature of 60 degrees Fahrenheit and an

absolute pressure of 14.73 pounds per square inch in accordance

with American Gas Association Standards and according to Boyle's

Law for the measurement of gas under varying pressures with

deviations as follows:

(1)  The average absolute atmospheric pressure shall be

assumed to be 14.4 pounds to the square inch, regardless of

elevation or location of point of delivery above sea level or

variations in atmospheric pressure from time to time.

(2)  The temperature of the gas passing the meters shall

be determined by the continuous use of a recording

thermometer installed to properly record the temperature of

gas flowing through the meters. The arithmetic average of the

temperature recorded each 24-hour day shall be used in

computing gas volumes. If a recording thermometer is not

installed, or is installed and not operating properly, an

average flowing temperature of 60 degrees Fahrenheit shall be

used in computing gas volume.

(3)  The specific gravity of the gas shall be determined

annually by tests made by the use of an Edwards or Acme

gravity balance or at intervals as found necessary in

practice. Specific gravity determinations shall be used in

computing gas volumes.

(4)  The deviation of the natural gas from Boyle's Law

shall be determined by annual tests or at other shorter

intervals as found necessary in practice. The apparatus and

method used in making the test shall be in accordance with

recommendations of the National Bureau of Standards or Report

No. 3 of the Gas Measurement Committee of the American Gas

Association or amendments thereto. The results of the tests

shall be used in computing the volume of gas delivered under

this article.

"Wellhead meter."  A meter placed at a producing or

nonproducing site to measure the volume of natural gas severed

for which a wellhead meter certification has been issued.

"Wellhead meter certification."  A report issued by an

accredited laboratory certifying the accuracy of a wellhead

meter.

Section 502-A.  Imposition of tax.

(a)  Establishment.--Beginning July 1, 2011, there shall be 

levied a natural gas severance tax on every producer. The tax

shall not be imposed on units severed from a stripper well

unless the following apply:

(1)  The stripper well is one of multiple producing sites

or nonproducing sites where the combined volumes of gas

produced by all such sites are measured by a single wellhead

meter as provided in section 506-A.

(2)  The combined volumes of gas produced by all the

producing sites or nonproducing sites described in paragraph

(1) is more than 60,000 cubic feet of natural gas per day.

(a.1)  Exemptions.--The tax shall not be imposed on the

following:

(1)  Units severed by a producer and sold and delivered

to a manufacturer of tangible personal property, as defined

in section 201(m), for the manufacturer's use within this

Commonwealth if the units have been severed from one or more

producing sites or nonproducing sites on property owned by

the manufacturer.

(2)  Units provided free of charge to the owner of the

surface under which the gas is severed if the surface owner

is the end user of the gas.

(b)  Rate.--Subject to the provisions of section 503-A, the

rate shall be 29¢ per unit severed at the wellhead.

Section 503-A.  Tax rate adjustment.

(a)  Annual adjustment.--The tax rate shall be adjusted

annually by the amount of the tax rate adjustment index as

calculated under subsection (c), provided that the tax rate

shall never be less than the base rate. The adjusted tax rate

shall be effective for the next year.

(b)  Determination of adjustment.--On or before April 30 of

each year following the effective date of this section, the

secretary shall calculate and determine the amount of the tax

rate adjustment index.

(c)  Calculation of adjustment.--The tax rate adjustment

index shall be determined as follows:

(1)  If 7% of the average of New York Mercantile Exchange

(NYMEX) Henry Hub settled price on the last trading day of

the month, as reported by the Wall Street Journal for the

previous 12-month period ending March 31, is less than the

base rate, the tax rate adjustment index shall be zero and

the adjusted tax rate shall be the base rate.

(2)  If 7% of the average of the NYMEX Henry Hub settled

price on the last trading day of the month, as reported by

the Wall Street Journal for the previous 12-month period

ending March 31, is greater than the base rate, the tax rate

adjustment index shall be 50% of the difference between 7% of

the average of the NYMEX Henry Hub settled price on the last

trading day of the month, as reported in the Wall Street

Journal for the previous 12-month period ending March 31, and

the base rate. The adjusted tax rate shall be the resulting

tax rate adjustment index plus the base rate.

(d)  Publication of adjustment.--The secretary shall forward

the amount of the tax rate adjustment index and the adjusted tax

rate, as determined under subsection (c), to the Legislative

Reference Bureau for publication in the Pennsylvania Bulletin by

May 1 of each year and shall simultaneously provide the

information to producers by written notice. Failure of the

amount of the tax rate adjustment index and the adjusted tax

rate to be published or provided to producers as required by

this subsection shall not affect the effectiveness of the

adjusted tax rate under subsection (b).

(e)  Discontinuance of data.--If publication of the NYMEX

Henry Hub average monthly gas price data is discontinued, the

tax rate then in effect shall not be adjusted until a comparable

method for determining the tax rate adjustment index is adopted

by the General Assembly in legislation.

(f)  Other adjustments.--If the base data of the NYMEX Henry

Hub average monthly gas price is substantially revised, the

secretary shall, when determining the amount of the tax rate

adjustment index under subsection (c), make appropriate changes

to ensure that the tax rate adjustment index is reasonably

consistent with the result which would have been attained had

the substantial revision not been made. If the secretary is

unable to make reasonable changes sufficient to ensure a

consistent result, the tax rate then in effect shall not be

adjusted until a comparable method for determining the tax rate

adjustment index is adopted by the General Assembly in

legislation.

Section 504-A.  Return and payment.

(a)  Requirement.--Every producer is required to file a

return with the department, on a form prescribed by the

department, which shall include all of the following:

(1)  The number of natural gas units severed by the

producer for the reporting period.

(2)  The number of producing sites used by the producer

for the severance of natural gas in each county and

municipality.

(3)  The amount of tax due under section 502-A.

(b)  Filing.--The return required by subsection (a) shall be

filed with the department within 15 days following the end of a

reporting period.

(c)  Deadline.--The tax imposed under section 502-A is due on

the day the return is required to be filed and becomes

delinquent if not remitted to the department by that date.

Section 505-A.  Natural gas severance tax registration.

(a)  Application.--Before a producer severs natural gas in

this Commonwealth, the producer shall apply to the department

for a natural gas severance tax registration certificate.

(a.1)  Application fee.--The department may charge an

application fee to cover the administrative costs associated

with the application and registration process. If the department

charges an application fee, the department shall not issue a

registration certificate until the producer has paid the

application fee.

(a.2)  Declaration.--The producer shall include in its

application a declaration of all producing sites and

nonproducing sites used by the producer for the severance of

natural gas. The declaration shall include copies of wellhead

meter certifications for each site. The producer is required to

update the declaration when the producer adds or removes a

producing site or nonproducing site in this Commonwealth or when

there is a change in the status of a producing site or

nonproducing site or when the producer uses a different

accredited laboratory to issue a wellhead meter certification.

The producer shall update the declaration within 30 days after a

calendar month in which a change to the declaration occurs.

(b)  Issuance.--Except as provided in subsection (c), after

the receipt of an application and payment of any fee imposed

under subsection (a.1), the department shall issue a

registration certificate. The registration certificate shall be

nonassignable. All registrants shall be required to renew their

registration certificates and wellhead meter certifications on a

staggered renewal system established by the department. After

the initial staggered renewal period, a registration certificate

or a wellhead meter certification issued shall be valid for a

period of five years.

(c)  Refusal, suspension or revocation.--The department may

refuse to issue, suspend or revoke a registration certificate if

the applicant or registrant has not filed required State tax

reports and paid State taxes not subject to a timely perfected

administrative or judicial appeal or subject to a duly

authorized deferred payment plan. The department shall notify

the applicant or registrant of any refusal, suspension or

revocation. The notice shall contain a statement that the

refusal, suspension or revocation may be made public. The notice

shall be made by first class mail. An applicant or registrant

aggrieved by the determination of the department may file an

appeal under the provisions for administrative appeals in this

act. In the case of a suspension or revocation which is

appealed, the registration certificate shall remain valid

pending a final outcome of the appeals process. Notwithstanding

sections 274, 353(f), 408(b), 603, 702, 802, 904 and 1102 or any

other provision of law, if no appeal is taken or if an appeal is

taken and denied at the conclusion of the appeal process, the

department may disclose, by publication or otherwise, the

identity of a producer and the fact that the producer's

registration certificate has been refused, suspended or revoked

under this subsection. Disclosure may include the basis for

refusal, suspension or revocation.

(d)  Violation.--A person severing natural gas in this

Commonwealth without holding a valid registration certificate

under subsection (b) shall be guilty of a summary offense and

shall, upon conviction, be sentenced to pay a fine of not less

than $300 nor more than $1,500. In the event the person

convicted defaults in the payment of the fine, he shall be

sentenced to imprisonment for not less than five days nor more

than 30 days. The penalties imposed by this subsection shall be

in addition to any other penalties imposed by this article. For

purposes of this subsection, the severing of natural gas during

any calendar day shall constitute a separate violation. The

secretary may designate employees of the department to enforce

the provisions of this subsection. The employees shall exhibit

proof of and be within the scope of the designation when

instituting proceedings as provided by the Pennsylvania Rules of

Criminal Procedure.

(e)  Failure to obtain registration certificate.--Failure to

obtain or hold a valid registration certificate does not relieve

a person from liability for the tax imposed by this article.

Section 506-A.  Wellhead meters.

(a)  General rule.--Except as provided in subsection (b), a 

producer shall provide for and maintain a discrete wellhead

meter where natural gas is severed. A producer shall ensure that

the wellhead meters are maintained according to industry

standards. Any wellhead meter installed after the effective date

of this section shall be a digital meter.

(b)  Exception.--If a producer has multiple producing sites

or nonproducing sites, where the combined volumes of gas

produced by all such sites are measured by a single wellhead

meter, the producer shall not be required to provide for a

discrete wellhead meter at any of those producing sites or

nonproducing sites that is also a stripper well.

Section 507-A.  Assessments.

(a)  Authorization and requirement.--The department is

authorized and shall make the inquiries, determinations and

assessments of the tax imposed under this article, including

interest, additions and penalties imposed under this article.

(b)  Notice.--The notice of assessment and demand for payment

shall be mailed to the taxpayer. The notice shall set forth the

basis of the assessment. The department shall send the notice of

assessment to the taxpayer at its registered address via

certified mail if the assessment increases the taxpayer's tax

liability by $300. Otherwise, the notice of assessment may be

sent via regular mail.

Section 508-A.  Time for assessment.

(a)  Requirement.--An assessment as provided under section

507-A shall be made within three years after the date when the

return provided for by section 504-A is filed or the end of the

year in which the tax liability arises, whichever shall occur

last. For the purposes of this subsection and subsection (b), a

return filed before the last day prescribed for the filing

period shall be considered as filed on the last day.

(b)  Exception.--If the taxpayer underpays the correct amount

of the tax due by 25% or more, the assessment shall be made

within six years after the date the return was filed.

(c)  Intent to evade.--Where no return is filed or where the

taxpayer files a false or fraudulent return with intent to evade

the tax imposed by this article, the assessment may be made at

any time.

(d)  Erroneous credit or refund.--Within three years of the

granting of a refund or credit or within the period in which an

assessment or reassessment may have been issued by the

department for the taxable period for which the refund was

granted, whichever period shall last occur, the department may

issue an assessment to recover a refund or credit made or

allowed erroneously.

Section 509-A.  Extension of assessment period.

Notwithstanding the provisions of this article, the

assessment period may be extended in the event a taxpayer has

provided written consent before the expiration of the period

provided in section 508-A for a tax assessment. The amount of

tax due may be assessed at any time within the extended period.

The period may be extended further by subsequent written

consents made before the expiration of the extended period.

Section 510-A.  Reassessments.

A taxpayer against whom an assessment is made may petition

the department for a reassessment under Article XXVII.

Section 511-A.  Interest.

The department shall assess interest on any delinquent tax at

the rate prescribed under section 806 of the act of April 9,

1929 (P.L.343, No.176), known as The Fiscal Code.

Section 512-A.  Penalties.

The department shall enforce the following penalties:

(1)  A penalty against a producer without a natural gas

severance tax registration certificate. The penalty shall be

$1 for every unit severed without a valid registration 

certificate. The department may assess this penalty

separately from or in conjunction with any assessment of the

natural gas severance tax.

(2)  A penalty against a producer for failure to timely

file a return as required under section 504-A. The penalty

shall be 5% of the tax liability to be reported on the return

for each day beyond the due date that the return is not

filed.

(3)  In addition to the penalty under paragraph (2), a

penalty against the producer for a willful failure to timely

file a return. The penalty shall be 200% of the tax liability

required to be reported on the return.

(4)  A penalty against a producer for failure to timely

pay the tax as required by section 504-A(c). The penalty

shall be 5% of the amount of tax due for each day beyond the

payment date that the tax is not paid.

Section 513-A.  Criminal acts.

(a)  Fraudulent return.--Any person with intent to defraud

the Commonwealth, who willfully makes or causes to be made a

return required by this article which is false, is guilty of a

misdemeanor and shall, upon conviction, be sentenced to pay a

fine of not more than $2,000 or to imprisonment for not more

than three years, or both.

(b)  Other crimes.--

(1)  Except as otherwise provided by subsection (a), a

person is guilty of a misdemeanor and shall, upon conviction,

be sentenced to pay a fine of not more than $1,000 and costs

of prosecution or to imprisonment for not more than one year,

or both, for any of the following:

(i)  Willfully failing to timely remit the tax to the

department.

(ii)  Willfully failing or neglecting to timely file

a return or report required by this article.

(iii)  Refusing to timely pay a tax, penalty or

interest imposed or provided for by this article.

(iv)  Willfully failing to preserve its books, papers

and records as directed by the department.

(v)  Refusing to permit the department or its

authorized agents to examine its books, records or

papers.

(vi)  Knowingly making any incomplete, false or

fraudulent return or report.

(vii)  Preventing or attempting to prevent the full

disclosure of the amount of natural gas severance tax

due.

(viii)  Providing any person with a false statement

as to the payment of the tax imposed under this article 

with respect to any pertinent facts.

(ix)  Making, uttering or issuing a false or

fraudulent statement.

(2)  The penalties imposed by this section shall be in

addition to other penalties imposed by this article.

Section 514-A.  Abatement of additions or penalties.

Upon the filing of a petition for reassessment or a petition

for refund by a taxpayer as provided under this article,

additions or penalties imposed upon the taxpayer by this article 

may be waived or abated in whole or in part where the petitioner

establishes that he acted in good faith, without negligence and

with no intent to defraud.

Section 515-A.  Bulk and auction sales.

A person that sells or causes to be sold at auction, or that

sells or transfers in bulk, 51% or more of a stock of goods,

wares or merchandise of any kind, fixtures, machinery,

equipment, buildings or real estate involved in a business for

which the person holds a registration certificate or is required

to obtain a registration certificate under the provisions of

this article shall be subject to the provisions of section 1403

of the act of April 9, 1929 (P.L.343, No.176), known as The

Fiscal Code.

Section 516-A.  Collection upon failure to request reassessment,

review or appeal.

(a)  Power of department.--The department may collect the tax 

imposed under this article:

(1)  If an assessment of the tax is not paid within 30

days after notice to the taxpayer when no petition for

reassessment has been filed.

(2)  Within 60 days of the reassessment, if no petition

for review has been filed.

(3)  If no appeal has been made, within 30 days of:

(i)  the Board of Finance and Revenue's decision of a

petition for review; or

(ii)  the expiration of the board's time for acting

upon the petition.

(4)  In all cases of judicial sales, receiverships,

assignments or bankruptcies.

(b)  Prohibition.--In a case for the collection of taxes

under subsection (a), the taxpayer against whom they were

assessed shall not be permitted to set up a ground of defense

that might have been determined by the department, the Board of

Finance and Revenue or the courts, provided that the defense of

failure of the department to mail notice of assessment or

reassessment to the taxpayer and the defense of payment of

assessment or reassessment may be raised in proceedings for

collection by a motion to stay the proceedings.

Section 517-A.  Tax liens.

(a)  Lien imposed.--If any taxpayer neglects or refuses to

pay the tax imposed under this article for which the taxpayer is

liable under this article after demand, the amount, including

interest, addition or penalty, together with additional costs

that may accrue, shall be a lien in favor of the Commonwealth

upon the real and personal property of the taxpayer but only

after the same has been entered and docketed of record by the

prothonotary of the county where the property is situated. The

department may, at any time, transmit to the prothonotaries of

the respective counties certified copies of all liens imposed by

this section. It shall be the duty of the prothonotary receiving

the lien to enter and docket the same of record to the office of

the prothonotary. The lien shall be indexed as judgments are now

indexed. No prothonotary shall require as a condition precedent

to the entry of the lien the payment of costs incidental to its

entry.

(b)  Priority of lien and effect on judicial sale.--Except

for the costs of the sale and the writ upon which the sale was

made and real estate taxes and municipal claims against the

property, a lien imposed under this section shall have priority

from the date of its recording and shall be fully paid and

satisfied out of the proceeds of any judicial sale of property

subject to the lien, before any other obligation, judgment,

claim, lien or estate to which the property may subsequently

become subject, but shall be subordinate to mortgages and other

liens existing and duly recorded or entered of record prior to

the recording of the lien.

(c)  No discharge by sale on junior lien.--In the case of a

judicial sale of property subject to a lien imposed under this

section, upon a lien or claim over which the lien imposed under

this section has priority, the sale shall discharge the lien

imposed under this section to the extent only that the proceeds

are applied to its payment, and the lien shall continue in full

force and effect as to the balance remaining unpaid. There shall

be no inquisition or condemnation upon any judicial sale of real

estate made by the Commonwealth under the provisions of this

article. The lien shall continue as provided in the act of April

9, 1929 (P.L.343, No.176), known as The Fiscal Code, and a writ

of execution may directly issue upon the lien without the

issuance and prosecution to judgment of a writ of scire facias,

provided that not less than ten days before issuance of any

execution on the lien, notice of the filing and the effect of

the lien shall be sent by registered mail to the taxpayer at its

last known post office address, provided further that the lien

shall have no effect upon any stock of goods, wares or

merchandise regularly sold or leased in the ordinary course of

business by the taxpayer against whom the lien has been entered,

unless and until a writ of execution has been issued and a levy

made upon the stock of goods, wares and merchandise.

(d)  Duty of prothonotary.--Any willful failure of any

prothonotary to carry out any duty imposed upon him by this

section shall be a misdemeanor. Upon conviction, he shall be

sentenced to pay a fine of not more than $1,000 and costs of

prosecution or to imprisonment for not more than one year, or

both.

(e)  Priority.--Except as provided in this article, the

distribution, voluntary or compulsory, in receivership,

bankruptcy or otherwise of the property or estate of any person,

all taxes imposed by this article which are due and unpaid and

are not collectible under the provisions of section 225 shall be

paid from the first money available for distribution in priority

to all other claims and liens, except as the laws of the United

States may give priority to a claim to the Federal Government. A

person charged with the administration or distribution of the

property or estate who violates the provisions of this section

shall be personally liable for the taxes imposed by this article 

which are accrued and unpaid and chargeable against the person

whose property or estate is being administered or distributed.

(f)  Other remedies.--Subject to the limitations contained in

this article as to the assessment of taxes, nothing contained in

this section shall be construed to restrict, prohibit or limit

the use by the department in collecting taxes due and payable of

another remedy or procedure available at law or equity for the

collection of debts.

Section 518-A.  Tax suit reciprocity.

The courts of this Commonwealth shall recognize and enforce

liabilities for natural gas severance or extraction taxes

lawfully imposed by any other state, provided that the other

state recognizes and enforces the tax imposed under this

article.

Section 519-A.  Service.

A producer is deemed to have appointed the Secretary of the

Commonwealth its agent for the acceptance of service of process

or notice in a proceeding for the enforcement of the civil

provisions of this article and service made upon the Secretary

of the Commonwealth as agent shall be of the same legal force

and validity as if the service had been personally made upon the

producer. Where service cannot be made upon the producer in the

manner provided by other laws of this Commonwealth relating to

service of process, service may be made upon the Secretary of

the Commonwealth. In that case, a copy of the process or notice

shall be personally served upon any agent or representative of

the producer who may be found within this Commonwealth or, where

no agent or representative may be found, a copy of the process

or notice shall be sent via registered mail to the producer at

the last known address of its principal place of business, home

office or residence.

Section 520-A.  Refunds.

The department shall refund all taxes, interest and penalties

paid to the Commonwealth under the provisions of this article to

which the Commonwealth is not rightfully entitled. The refunds

shall be made in accordance with section 3003.1 to the person or

the person's heirs, successors, assigns or other personal

representatives who paid the tax. No refund shall be made under

this section regarding a payment made by reason of an assessment

where a taxpayer filed a petition for reassessment under section

2702 which was denied and which is no longer subject to further

review or appeal. Nothing in this article shall prohibit a

taxpayer who has filed a timely petition for reassessment from

amending it to a petition for refund where the petitioner paid

the tax assessed.

Section 521-A.  Refund petition.

(a)  General rule.--Except as provided for in subsection (b),

the refund or credit of tax, interest or penalty provided for by

section 520-A shall be made only where the person who has paid

the tax files a petition for refund with the department pursuant

to section 3003.1.

(b)  Natural gas severance tax.--A refund or credit of tax,

interest or penalty paid as a result of an assessment made by

the department under section 507-A shall be made only where the

person who has paid the tax files with the department a petition

for a refund with the department pursuant to section 3003.1. The

filing of a petition for refund, under the provisions of this

subsection, shall not affect the abatement of interest,

additions or penalties to which the person may be entitled by

reason of his payment of the assessment.

Section 522-A.  Rules and regulations.

The department is charged with the enforcement of the

provisions of this article and is authorized and empowered to

prescribe, adopt, promulgate and enforce rules and regulations

not inconsistent with the provisions of this article relating to

any matter or thing pertaining to the administration and

enforcement of the provisions of this article and the collection

of taxes, penalties and interest imposed by this article. The

department may prescribe the extent, if any, to which any of the

rules and regulations shall be applied without retroactive

effect.

Section 523-A.  Recordkeeping.

(a)  General rule.--Every person liable for any tax imposed

by this article, or for the collection of the tax, shall keep

records, including those enumerated in subsection (a.1), render

statements, make returns and comply with the rules and

regulations as the department may prescribe regarding matters

pertinent to the person's business. Whenever it is necessary,

the department may require a person, by notice served upon the

person or by regulations, to make returns, render statements or

keep records as the department deems sufficient to show whether

or not a person is liable to pay tax under this article.

(a.1)  Records.--Records to be maintained are:

(1)  Wellhead meter charts for each reporting period and

the meter calibration and maintenance records. If turbine

meters are in use, the maintenance records will be made

available to the department upon request.

(2)  Records, statements and other instruments furnished

to a producer by a person to whom the producer delivers for

sale, transport or delivery of natural gas.

(3)  Records, statements and other instruments as the

department may prescribe by regulation.

(b)  Records of nonresidents.--A nonresident who does

business in this Commonwealth as a producer shall keep adequate

records of the business and of the tax due as a result. The

records shall be retained within this Commonwealth unless

retention outside this Commonwealth is authorized by the

department. The department may require a taxpayer who desires to

retain records outside this Commonwealth to assume reasonable

out-of-State audit expenses.

(c)  Keeping of separate records.--A producer who is engaged

in another business or businesses which do not involve the

severing of natural gas taxable under this article shall keep

separate books and records of the businesses so as to show the

taxable severing of natural gas under this article separately

from other business activities not taxable hereunder. If any

person fails to keep separate books and records, the person

shall be liable for a penalty equaling 100% of tax due under

this article for the period where separate records were not

maintained.

Section 524-A.  Examinations.

The department or any of its authorized agents are authorized

to examine the books, papers and records of any taxpayer in

order to verify the accuracy and completeness of any return made

or, if no return was made, to ascertain and assess the tax

imposed by this article. The department may require the

preservation of all books, papers and records for any period

deemed proper by it but not to exceed three years from the end

of the calendar year to which the records relate. Every taxpayer

is required to give to the department or its agent the means,

facilities and opportunity for examinations and investigation

under this section. The department is further authorized to

examine any person, under oath, concerning the taxable severing

of natural gas by any taxpayer or concerning any other matter

relating to the enforcement or administration of this article,

and to this end may compel the production of books, papers and

records and the attendance of all persons whether as parties or

witnesses whom it believes to have knowledge of relevant

matters. The procedure for the hearings or examinations shall be

the same as that provided by the act of April 9, 1929 (P.L.343,

No. 176), known as The Fiscal Code.

Section 525-A.  Unauthorized disclosure.

Any information gained by the department as a result of any

return, examination, investigation, hearing or verification

required or authorized by this article shall be confidential

except for official purposes and except in accordance with

proper judicial order or as otherwise provided by law, and any

person unlawfully divulging the information shall be guilty of a

misdemeanor and shall, upon conviction, be sentenced to pay a

fine of not more than $1,000 and costs of prosecution or to

imprisonment for not more than one year, or both.

Section 526-A.  Cooperation with other governments.

Notwithstanding the provisions of section 518-A, the

department may permit the Commissioner of the Internal Revenue

Service of the United States, the proper officer of any state or

the authorized representative of either of them to inspect the

tax returns of any taxpayer, or may furnish to the commissioner

or officer or to either of their authorized representative an

abstract of the return of any taxpayer, or supply him with

information concerning any item contained in any return or

disclosed by the report of any examination or investigation of

the return of any taxpayer. This permission shall be granted

only if the laws of the United States or another state grant

substantially similar privileges to the proper officer of the

Commonwealth charged with the administration of this article.

Section 527-A.  Bonds.

(a)  Taxpayer to file bond.--The department may require a

nonresident natural person or any foreign corporation,

association, fiduciary or other entity, not authorized to do

business within this Commonwealth or not having an established

place of business in this Commonwealth and subject to the tax

imposed by section 502-A, to file a bond issued by a surety

company authorized to do business in this Commonwealth and

approved by the Insurance Commissioner as to solvency and

responsibility, in amounts as it may fix, to secure the payment

of any tax or penalties due or which may become due from a

nonresident natural person, corporation, association, fiduciary

or other entity whenever it deems it necessary to protect the

revenues obtained under this article. The department may also

require a bond of a person petitioning the department for

reassessment in the case of any assessment over $500 or where,

in its opinion, the ultimate collection is in jeopardy. For a

period of three years, the department may require a bond of any

person who has, on three or more occasions within a 12-month

period, either filed a return or made payment to the department

more than 30 days late. In the event the department determines a

taxpayer is required to file a bond, it shall give notice to the

taxpayer specifying the amount of the bond required. The

taxpayer shall file the bond within five days after notice is

given by the department unless, within five days, the taxpayer

shall request in writing a hearing before the secretary or his

representative. At the hearing, the necessity, propriety and

amount of the bond shall be determined by the secretary or the

secretary's representative. The determination shall be final and

the taxpayer shall comply with it within 15 days after notice is

mailed to the taxpayer.

(b)  Securities in lieu of bond.--In lieu of the bond

required by this section, securities approved by the department

or cash in a prescribed amount may be deposited. The securities

or cash shall be kept in the custody of the department. The

department may apply the securities or cash to the tax imposed

by this article and interest or penalties due without notice to

the depositor. The securities may be sold by the department to

pay the tax and interest or penalties due at public or private

sale upon five days' written notice to the depositor.

(c)  Failure to file bond.--The department may file a lien

under section 517-A against any taxpayer who fails to file a

bond when required to do so under this section. All funds

received upon execution of the judgment on the lien shall be

refunded to the taxpayer with 3% interest, should a final

determination be made that it does not owe any payment to the

department.

Section 528-A.  Funds and accounts established.

(a)  Natural Gas Severance Tax Fund.--

(1)  The Natural Gas Severance Tax Fund is established as

a restricted account within the General Fund.

(2)  The proceeds of the tax imposed under section 502-A

and penalties and interest imposed under this article, less

the amounts transferred to the department under section 531-

A, shall be deposited into the fund.

(3)  The money in the fund shall only be used in

accordance with sections 529-A and 530-A.

(b)  Local Government Services Account.--

(1)  The Local Government Services Account is established

as a restricted account within the fund.

(2)  The allocation under section 529-A(3) shall be

deposited into the Local Government Services Account and

shall be distributed as provided in section 530-A.

Section 529-A.  Transfers.

Annually, the State Treasurer shall transfer the revenue in

the fund at the end of each month as follows:

(1)  Twenty-five percent to the Local Government Services

Account.

(2)  Twenty-five percent to the Environmental Stewardship

Fund.

(3)  Fifty percent to a restricted revenue account

established in the General Fund for distribution by the

Department of Education to provide additional funding to

school districts for the purposes of basic education. Each

school district shall receive a share of the money in the

restricted revenue account in proportion to the amount of the

State payment for basic education funding that the school

district received in the previous fiscal year.

Section 530-A.  Distributions from Local Government Services

Account.

(a)  Prohibition.--On the last business day of each period of

three calendar months, the State Treasurer shall make the

distribution under subsection (b) to municipalities from the

money in the Local Government Services Account.

(b)  Formula.--The money under this section shall be

distributed to each municipality based on the following formula:

(1)  Divide:

(i)  the total number of municipalities; by

(ii)  the amount of money available for distribution

under this section.

(2)  The State Treasurer shall distribute an equal share

to each eligible municipality. The amount distributed to a

municipality shall not exceed 50% of the municipality's total

budget for fiscal year 2010-2011, adjusted for inflation in

subsequent years by an amount not to exceed an annual cost-

of-living adjustment calculated by applying the Annual

Percentage Change in the Consumer Price Index for All Urban

Consumers immediately prior to the date the adjustment is due

to take effect and shall be used for the following purposes:

(i)  Reconstruction, maintenance and repair of

municipal roadways and bridges.

(ii)  Preservation and improvement of municipal water

supplies.

(iii)  Maintenance and capital improvements to

municipal waste and sewage systems.

(iv)  Preservation and reclamation of surface waters

of the municipality.

(v)  Other lawful purposes reasonably related to the

health, safety and welfare of residents of the

municipality.

(c)  Budgetary limitations.--Any funds not distributed to the

municipalities because of budgetary limitations under this

section shall be distributed to other municipalities pursuant to

this article.

(d)  Limitations.--Only producing sites and nonproducing

sites on which the tax is levied under section 502-A(a) during

the three-month period for which transfers and distributions are

made shall be included in the calculation made under subsection

(a) for that three-month period.

(e)  Administration of funds by municipalities.--

(1)  The governing body of a municipality receiving

distributions under subsection (a) shall administer the funds

received.

(2)  Commencing in 2012, before February 1, each

municipality receiving distributions under subsection (a)

shall prepare and deliver a report to the Governor, the

Secretary of the Senate and the Chief Clerk of the House of

Representatives detailing the expenditure of funds.

(3)  The Department of Community and Economic Development

shall have the authority to audit a municipality's use of the

funds. Each municipality receiving funds shall make financial

records and other documents relating to its use of the funds

available to the Department of Community and Economic

Development.

(f)  Administration.--The department shall make the

calculations required for the transfers and distributions under

this section and shall submit the calculations to the State

Treasurer in sufficient time for the State Treasurer to make the

transfers and distributions as required by this section.

Section 531-A.  Administration of costs.

Annually, the State Treasurer shall transfer from the fund an

amount not to exceed $3,000,000 to the department to be used for

costs associated with the enforcement or administration of this

article.

ARTICLE XVII-G

MUNICIPAL IMPROVEMENT TAX CREDIT

Section 1701-G.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Contribution."  A payment of money to a participating

municipality.

"Department."  The Department of Revenue of the Commonwealth.

"Municipal improvements."  The reconstruction or repair of

local highways, rehabilitation of water and sanitary sewer

facilities, rehabilitation of parks and other municipal

recreational areas and other similar improvements to municipal

infrastructure.

"Participating municipality."  A municipality that complies

with section 1703-G(a).

"Pass-through entity."  A partnership as defined in section

301(n.0) or a Pennsylvania S corporation as defined in section

301(n.1).

"Project costs."  The following costs:

(1)  Project design, engineering and associated planning.

(2)  Project management costs, including contracting,

document preparation and applications.

(3)  Project construction or installation.

(4)  Equipment, materials and all other components of

projects eligible under paragraph (1).

(5)  Postconstruction inspections.

(6)  Interest payments on loans for project

implementation for up to one year prior to the award of the

tax credit.

"Qualified tax liability."  The liability for taxes imposed

upon a taxpayer under Article V-A.

"Taxpayer."  An entity authorized to do business in this

Commonwealth and subject to the tax imposed by Article V-A.

Section 1702-G.  Municipal Improvement Tax Credit Program.

The Municipal Improvement Tax Credit Program is established

to encourage private investment to assist counties and

municipalities for the repair and maintenance of municipal

infrastructure.

Section 1703-G.  Municipality participation.

(a)  Compliance.--A municipality that elects to participate

in the program shall comply with the following in the manner and

frequency as determined by the department:

(1)  Provide notification to the department of

participation in the program.

(2)  Establish a restricted account for the receipt of

contributions from a taxpayer and deposit all contributions