1Amending Title 72 (Taxation and Fiscal Affairs) of the
2Pennsylvania Consolidated Statutes, providing for natural gas
3severance tax.

4The General Assembly of the Commonwealth of Pennsylvania
5hereby enacts as follows:

6Section 1. Title 72 is amended by adding a chapter to read:

7CHAPTER 16

8NATURAL GAS SEVERANCE TAX

9Sec.

101601. Scope of chapter.

111602. Definitions.

121603. Imposition of tax.

131603.1. Rate adjustment index.

141604. Registration.

151605. Meters.

161606. Assessments.

171607. Time for assessment.

11608. Extension of assessment period.

21609. Reassessments.

31610. Interest.

41611. Criminal acts.

51612. Abatement of additions or penalties.

61613. Bulk and auction sales.

71614. Collection upon failure to request reassessment, review
8or appeal.

91615. Tax liens.

101616. Tax suit reciprocity.

111617. Service.

121618. Refunds.

131619. Refund petition.

141620. Rules and regulations.

151621. Recordkeeping.

161622. Examinations.

171623. Unauthorized disclosure.

181624. Cooperation with other governments.

191625. Bonds.

201626. Deposit of proceeds.

211627. Penalties.

221628. Appropriation.

23§ 1601. Scope of chapter.

24This chapter relates to the implementation of a natural gas
25severance tax.

26§ 1602. Definitions.

27The following words and phrases when used in this chapter
28shall have the meanings given to them in this section unless the
29context clearly indicates otherwise:

30"Association." A partnership, limited partnership or any

1other form of unincorporated enterprise owned or conducted by
2two or more persons.

3"Average annual price of natural gas." The arithmetic mean
4of the New York Mercantile Exchange (NYMEX) Henry Hub settled
5price on the last trading day of each month of a calendar year
6as reported by the Wall Street Journal for the 12-month period
7ending March 31.

8"Base rate." The rate under section 1603 (relating to
9imposition of tax).

10"Coal bed methane." Gas that can be produced from coal beds,
11coal seams, mined-out areas or gob wells.

12"Corporation." A corporation, joint stock association,
13limited liability company, business trust or any other
14incorporated enterprise organized under the laws of the United
15States, this Commonwealth or any other state, territory or
16foreign country or dependency.

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

18"Municipality." A city, borough, incorporated town or
19township.

20"Natural gas." As defined in 58 Pa.C.S. § 2301 (relating to
21definitions).

22"Nonproducing site." A point of severance that is not
23capable of producing natural gas in paying quantities.

24"Paying quantities." Profit to the producer, however small,
25over the producer's current operating expenses.

26"Person." Any natural person, a corporation, fiduciary,
27association or other entity. The term includes the Commonwealth
28and any political subdivision, instrumentality and authority of
29the Commonwealth.

30"Producer." As defined in 58 Pa.C.S. § 2301 (relating to

1definitions).

2"Producing site." A point of severance capable of producing
3natural gas in paying quantities.

4"Reporting period." Every three successive calendar months
5beginning January 1, 2014.

6"Sever." Extract or otherwise remove natural gas from the
7soil or water of this Commonwealth.

8"Stripper well." A producing site or a nonproducing site
9that is not capable of producing and does not produce more than
1090,000 cubic feet of natural gas per day.

11"Taxpayer." A person subject to the tax imposed by this
12chapter.

13"Unconventional gas well." As defined in 58 Pa.C.S. § 2301
14(relating to definitions). The term does not include a vertical
15gas well.

16"Unit." One thousand cubic feet of natural gas measured at
17the wellhead at a temperature of 60 degrees Fahrenheit and an
18absolute pressure of 14.73 pounds per square inch in accordance
19with American Gas Association Standards and according to Boyle's
20Law for the measurement of gas under varying pressures with
21deviations as follows:

22(1) The average absolute atmospheric pressure shall be
23assumed to be 14.4 pounds per square inch, regardless of
24elevation or location of point of delivery above sea level or
25variations in atmospheric pressure.

26(2) The temperature of the gas passing the meters shall
27be determined by the continuous use of a recording
28thermometer installed to properly record the temperature of
29gas flowing through the meters. The arithmetic average of the
30temperature recorded each 24-hour day shall be used in

1computing gas volumes. If a recording thermometer is not
2installed, or is installed and not operating properly, an
3average flowing temperature of 60 degrees Fahrenheit shall be
4used in computing gas volume.

5(3) The specific gravity of the gas shall be determined
6annually by tests made by the use of an Edwards or Acme
7gravity balance, or at intervals as found necessary in
8practice. Specific gravity determinations shall be used in
9computing gas volumes.

10(4) The deviation of the natural gas from Boyle's Law
11shall be determined by annual tests or at other shorter
12intervals as found necessary in practice. The apparatus and
13method used in making the test shall be in accordance with
14recommendations of the National Bureau of Standards or Report
15No. 3 of the Gas Measurement Committee of the American Gas
16Association. The results of the tests shall be used in
17computing the volume of gas delivered under this chapter.

18"Vertical gas well." As defined in 58 Pa.C.S. § 2301
19(relating to definitions).

20"Wellhead meter." A meter that measures the volume of
21natural gas severed from an unconventional gas well.

22§ 1603. Imposition of tax.

23(a) Establishment.--Beginning July 1, 2014, there shall be
24levied a natural gas severance tax payable on every producer.
25The tax shall not be imposed on units severed from a stripper
26well unless:

27(1) The stripper well is one of multiple producing sites
28or nonproducing sites, the combined volumes of gas produced
29by all of which sites are measured by a single wellhead meter
30as provided in section 1605 (relating to meters).

1(2) The combined volumes of gas produced by all the
2producing sites or nonproducing sites described in paragraph
3(1) is more than 90,000 cubic feet of natural gas per day.

4(a.1) Exemptions.--The fee shall not be imposed on the
5following:

6(1) Units severed by a producer and sold and delivered
7to a manufacturer of tangible personal property for the
8manufacturer's use within this Commonwealth if the units have
9been severed from one or more producing sites or nonproducing
10sites on property owned by the manufacturer.

11(2) Units provided free of charge to the owner of the
12surface under which the gas is severed if the surface owner
13is the end user of the gas.

14(b) Base rate.--The base rate shall be 29¢ per unit severed
15at the wellhead.

16(c) Return and payment.--Every producer subject to the
17provisions of this chapter shall file a return with the
18department, on a form prescribed by the department, which shall
19include the following:

20(1) The number of natural gas units severed by the
21producer for the reporting period and the gross value of the
22units.

23(2) The amount of tax due under subsection (b).

24(3) Other information reasonably required by the
25department.

26(d) Filing.--The return required by subsection (c) shall be
27filed with the department within 15 days following the end of a
28reporting period. The tax is due on the day the return is
29required to be filed under this subsection and shall become
30delinquent if not remitted to the department by the required

1date.

2§ 1603.1. Rate adjustment index.

3(a) Annual adjustment.--The base rate shall be adjusted
4annually by the amount of the rate adjustment index as
5calculated under subsection (c), provided that the adjusted rate
6shall never be less than the base rate. The adjusted rate shall
7be effective for the next fiscal year.

8(b) Determination of adjustment.--On or before April 30 of
9each year following the effective date of this section, the
10department shall calculate and determine the amount of the rate
11adjustment index.

12(c) Calculation of adjustment.--The rate adjustment index
13shall be determined as follows:

14(1) If 8% of the average annual price of natural gas is
15less than the base rate, the rate adjustment index shall be
16zero and the adjusted rate shall be the base rate.

17(2) If 8% of the average annual price of natural gas is
18greater than the base rate, the rate adjustment index shall
19be 60% of the difference between 8% of the average annual
20price of natural gas and the base rate. The adjusted rate
21shall be the resulting rate adjustment index plus the base
22rate rounded to the nearest whole cent.

23(d) Publication of adjustment.--The department shall forward
24the amount of the rate adjustment index and the adjusted rate,
25as determined under subsection (c), to the Legislative Reference
26Bureau for publication in the Pennsylvania Bulletin by May 1 of
27each year and shall simultaneously provide the information to
28producers by written notice. Failure to publish or provide to
29producers the amount of the rate adjustment index and the
30adjusted rate shall not affect the applicability of the adjusted

1rate under subsection (b).

2(e) Discontinuance of data.--If publication of the NYMEX
3Henry Hub average monthly natural gas price data is
4discontinued, the adjusted rate then in effect shall not be
5adjusted until a comparable method for determining the rate
6adjustment index is adopted by the General Assembly.

7(f) Other adjustments.--If the base data of the NYMEX Henry
8Hub average monthly natural gas price is substantially revised,
9the department shall, when determining the amount of the rate
10adjustment index under subsection (c), make appropriate changes
11to ensure that the rate adjustment index is reasonably
12consistent with the result that would have been attained had the
13substantial revision not been made. If the department is unable
14to make reasonable changes sufficient to ensure a consistent
15result, the adjusted rate then in effect shall not be adjusted
16until a comparable method for determining the rate adjustment
17index is adopted by the General Assembly.

18(g) Application of fee determinations.--The provisions of
19this section shall affect only the determination of the tax
20imposed under section 1603 (relating to imposition of tax). The
21provisions of this section are not intended nor shall they be
22construed to affect any other determination, including, but not
23limited to, the determination of royalty due under mineral
24leases. Notwithstanding any other provision of law, the tax
25imposed under section 1603 shall not reduce any royalty payments
26due under mineral leases, and the producer shall not recover any
27portion of the tax paid from the royalty owner through other
28means of deduction or reallocation, notwithstanding any
29provision in the lease, contract or agreement.

30§ 1604. Registration.

1(a) Application.--Before a producer severs natural gas or
2continues to sever natural gas in this Commonwealth after
3December 31, 2013, the producer shall apply to the department
4for a registration certificate. The department may charge an
5application fee to cover the administrative costs associated
6with the application and registration process.

7(b) Issuance.--Except as provided in subsection (c), after
8the receipt of an application and the required application fee,
9the department shall issue a registration certificate to the
10producer. The registration certificate is nonassignable. A
11registrant is required to renew the registration certificate on
12a staggered renewal system established by the department. After
13the initial staggered renewal period, a registration certificate
14is valid for a period of five years.

15(c) Refusal, suspension or revocation.--

16(1) The department may refuse to issue, suspend or
17revoke a registration certificate if the applicant or
18registrant has not filed required State tax reports and paid
19State taxes not subject to a timely perfected administrative
20or judicial appeal or an authorized deferred payment plan.

21(2) The department shall notify the applicant or
22registrant of a refusal, suspension or revocation. The notice
23shall contain a statement that the refusal, suspension or
24revocation may be made public. The notice shall be made by
25first class mail.

26(3) An applicant or registrant aggrieved by the
27determination of the department may file an appeal under the
28provisions for administrative appeals in the act of March 4,
291971 (P.L.6, No.2), known as the Tax Reform Code of 1971. In
30the case of a suspension or revocation which is appealed, the

1registration certificate shall remain valid pending a final
2outcome of the appeals process. Notwithstanding any other
3provision of law, if no appeal is taken or if an appeal is
4taken and denied at the conclusion of the appeal process, the
5department may disclose, by publication or otherwise, the
6identity of a producer and the fact that the producer's
7registration certificate has been refused, suspended or
8revoked under this subsection. Disclosure may include the
9basis for refusal, suspension or revocation.

10(d) Violation.--

11(1) A person that severs natural gas in this
12Commonwealth in violation of subsection (a) commits a summary
13offense and shall, upon conviction, be sentenced to pay a
14fine not less than $300 nor more than $1,500, or in default
15of the payment, to imprisonment for not less than five days
16nor more than 30 days.

17(2) For purposes of this subsection, each day in which
18natural gas is severed shall constitute a separate violation.

19(3) The penalties imposed by this subsection shall be in
20addition to any other penalties imposed by this chapter.

21(4) The secretary may designate employees of the
22department to enforce the provisions of this subsection. The
23employees shall exhibit proof of and be within the scope of
24the designation when instituting proceedings as provided by
25the Pennsylvania Rules of Criminal Procedure.

26(e) Failure to obtain registration certificate.--Failure to
27obtain or hold a valid registration certificate does not relieve
28a person from liability for the tax imposed by this chapter.

29§ 1605. Meters.

30A producer shall provide for and maintain a discrete wellhead

1meter where natural gas is severed. A producer shall ensure that
2the meters are maintained according to industry standards. Any
3wellhead meter installed after the effective date of this
4section shall be a digital meter.

5§ 1606. Assessments.

6(a) Authorization and requirement.--The department is
7authorized and shall make inquiries, determinations and
8assessments of the tax imposed under this chapter, including
9interest, additions and penalties imposed under this chapter.

10(b) Notice.--The notice of assessment and demand for payment
11shall be mailed to the taxpayer. The notice shall set forth the
12basis of the assessment. The department shall send the notice of
13assessment to the taxpayer at its registered address via
14certified mail if the assessment increases the taxpayer's tax
15liability by $300. Otherwise, the notice of assessment may be
16sent via regular mail.

17§ 1607. Time for assessment.

18(a) Requirement.--An assessment as provided under section
191606 (relating to assessments) shall be made within three years
20after the date when the return provided for by section 1603(c)
21(relating to imposition of tax) is filed or the end of the year
22in which the tax liability arises, whichever shall occur last.
23For the purposes of this subsection and subsection (b), a return
24filed before the last day prescribed for the filing period shall
25be considered as filed on the last day.

26(b) Exception.--If the taxpayer underpays the correct amount
27of the tax due by 25% or more, the tax may be assessed within
28six years after the date the return was filed.

29(c) Intent to evade.--Where no return is filed or where the
30taxpayer files a false or fraudulent return with intent to evade

1the tax imposed by this chapter, the assessment may be made at
2any time.

3(d) Erroneous credit or refund.--Within three years of the
4granting of a refund or credit or within the period in which an
5assessment or reassessment may have been issued by the
6department for the taxable period for which the refund was
7granted, whichever period shall occur last, the department may
8issue an assessment to recover a refund or credit made or
9allowed erroneously.

10§ 1608. Extension of assessment period.

11Notwithstanding the provisions of this chapter, the
12assessment period may be extended in the event a taxpayer has
13provided written consent before the expiration of the period
14provided in section 1607 (relating to time for assessment) for a
15tax assessment. The amount of tax due may be assessed at any
16time within the extended period. The period may be extended
17further by subsequent written consents made before the
18expiration of the extended period.

19§ 1609. Reassessments.

20A taxpayer against whom an assessment is made may petition
21the department for a reassessment under Article XXVII of the act
22of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
231971.

24§ 1610. Interest.

25The department shall assess interest on any delinquent tax at
26the rate prescribed under section 806 of the act of April 9,
271929 (P.L.343, No.176), known as The Fiscal Code.

28§ 1611. Criminal acts.

29(a) Fraudulent return.--Any person with intent to defraud
30the Commonwealth, who willfully makes or causes to be made a

1return required by this chapter which is false, is guilty of a
2misdemeanor and shall, upon conviction, be sentenced to pay a
3fine of not more than $2,000 or to imprisonment for not more
4than three years, or both.

5(b) Other crimes.--

6(1) Except as otherwise provided by subsection (a), a
7person is guilty of a misdemeanor and shall, upon conviction,
8be sentenced to pay a fine of not more than $1,000 and costs
9of prosecution or to imprisonment for not more than one year,
10or both, for any of the following:

11(i) Willfully failing to timely remit the tax to the
12department.

13(ii) Willfully failing or neglecting to timely file
14a return or report required by this chapter.

15(iii) Refusing to timely pay a tax, penalty or
16interest imposed or provided for by this chapter.

17(iv) Willfully failing to preserve its books, papers
18and records as directed by the department.

19(v) Refusing to permit the department or its
20authorized agents to examine its books, records or
21papers.

22(vi) Knowingly making any incomplete, false or
23fraudulent return or report.

24(vii) Preventing or attempting to prevent the full
25disclosure of the amount of natural gas severance tax
26due.

27(viii) Providing any person with a false statement
28as to the payment of the tax imposed under this chapter
29with respect to any pertinent facts.

30(ix) Making, uttering or issuing a false or

1fraudulent statement.

2(2) The penalties imposed by this section shall be in
3addition to other penalties imposed by this chapter.

4§ 1612. Abatement of additions or penalties.

5Upon the filing of a petition for reassessment or a petition
6for refund by a taxpayer as provided under this chapter,
7additions or penalties imposed upon the taxpayer by this chapter
8may be waived or abated, in whole or in part, where the
9petitioner establishes that he acted in good faith, without
10negligence and with no intent to defraud.

11§ 1613. Bulk and auction sales.

12A person that sells or causes to be sold at auction, or that
13sells or transfers in bulk, 51% or more of a stock of goods,
14wares or merchandise of any kind, fixtures, machinery,
15equipment, buildings or real estate involved in a business for
16which the person holds a registration certificate or is required
17to obtain a registration certificate under the provisions of
18this chapter shall be subject to the provisions of section 1403
19of the act of April 9, 1929 (P.L.343, No.176), known as The
20Fiscal Code.

21§ 1614. Collection upon failure to request reassessment, review
22or appeal.

23(a) Power of department.--The department may collect the tax
24imposed under this chapter:

25(1) If an assessment of the tax is not paid within 30
26days after notice to the taxpayer when no petition for
27reassessment has been filed.

28(2) Within 60 days of the reassessment, if no petition
29for review has been filed.

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

1(i) the Board of Finance and Revenue's decision of a
2petition for review; or

3(ii) the expiration of the board's time for acting
4upon the petition.

5(4) In all cases of judicial sales, receiverships,
6assignments or bankruptcies.

7(b) Prohibition.--In a case for the collection of taxes
8under subsection (a), the taxpayer against whom they were
9assessed shall not be permitted to set up a ground of defense
10that might have been determined by the department, the Board of
11Finance and Revenue or the courts, provided that the defense of
12failure of the department to mail notice of assessment or
13reassessment to the taxpayer and the defense of payment of
14assessment or reassessment may be raised in proceedings for
15collection by a motion to stay the proceedings.

16§ 1615. Tax liens.

17(a) Lien imposed.--If any taxpayer neglects or refuses to
18pay the tax imposed under this chapter for which the taxpayer is
19liable under this chapter after demand, the amount, including
20interest, addition or penalty, together with additional costs
21that may accrue, shall be a lien in favor of the Commonwealth
22upon the real and personal property of the taxpayer, but only
23after the same has been entered and docketed on the record by
24the prothonotary of the county where the property is situated.
25The department may, at any time, transmit to the prothonotaries
26of the respective counties certified copies of all liens imposed
27by this section. It shall be the duty of the prothonotary
28receiving the lien to enter and docket the same of record to the
29office of the prothonotary. The lien shall be indexed as
30judgments are now indexed. No prothonotary shall require as a

1condition precedent to the entry of the lien the payment of
2costs incidental to its entry.

3(b) Priority of lien and effect on judicial sale.--Except
4for the costs of the sale and the writ upon which the sale was
5made and real estate taxes and municipal claims against the
6property, a lien imposed under this section shall have priority
7from the date of its recording and shall be fully paid and
8satisfied out of the proceeds of any judicial sale of property
9subject to the lien, before any other obligation, judgment,
10claim, lien or estate to which the property may subsequently
11become subject, but shall be subordinate to mortgages and other
12liens existing and duly recorded or entered on the record prior
13to the recording of the lien.

14(c) No discharge by sale on junior lien.--In the case of a
15judicial sale of property subject to a lien imposed under this
16section, upon a lien or claim over which the lien imposed under
17this section has priority, the sale shall discharge the lien
18imposed under this section to the extent only that the proceeds
19are applied to its payment, and the lien shall continue in full
20force and effect as to the balance remaining unpaid. There shall
21be no inquisition or condemnation upon any judicial sale of real
22estate made by the Commonwealth under the provisions of this
23chapter. The lien shall continue as provided in the act of April
249, 1929 (P.L.343, No.176), known as The Fiscal Code, and a writ
25of execution may directly issue upon the lien without the
26issuance and prosecution to judgment of a writ of scire facias,
27provided that not less than ten days before issuance of any
28execution on the lien, notice of the filing and the effect of
29the lien shall be sent by registered mail to the taxpayer at its
30last known post office address, further provided that the lien

1shall have no effect upon any stock of goods, wares or
2merchandise regularly sold or leased in the ordinary course of
3business by the taxpayer against whom the lien has been entered,
4unless and until a writ of execution has been issued and a levy
5made upon the stock of goods, wares and merchandise.

6(d) Penalty.--A prothonotary who intentionally violates this
7section commits a misdemeanor of the third degree and shall,
8upon conviction, be sentenced to pay a fine of not more than
9$1,000 and costs of prosecution or to imprisonment for not more
10than one year, or both.

11(e) Priority.--Except as provided in this chapter, the
12distribution, voluntary or compulsory, in receivership,
13bankruptcy or otherwise of the property or estate of any person,
14all taxes imposed by this chapter which are due and unpaid and
15are not collectible under the provisions of section 225 of the
16act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
17of 1971, shall be paid from the first money available for
18distribution in priority to all other claims and liens, except
19as the laws of the United States may give priority to a claim to
20the Federal Government. A person charged with the administration
21or distribution of the property or estate who violates the
22provisions of this section shall be personally liable for the
23taxes imposed by this chapter which are accrued and unpaid and
24chargeable against the person whose property or estate is being
25administered or distributed.

26(f) Other remedies.--Subject to the limitations contained in
27this chapter as to the assessment of taxes, nothing contained in
28this section shall be construed to restrict, prohibit or limit
29the use by the department in collecting taxes due and payable of
30another remedy or procedure available at law or equity for the

1collection of debts.

2§ 1616. Tax suit reciprocity.

3The courts of the Commonwealth shall recognize and enforce
4liabilities for natural gas severance or extraction taxes
5lawfully imposed by any other state, provided that the other
6state recognizes and enforces the tax imposed under this
7chapter.

8§ 1617. Service.

9A producer is deemed to have appointed the Secretary of the
10Commonwealth its agent for the acceptance of service of process
11or notice in a proceeding for the enforcement of the civil
12provisions of this chapter and service made upon the Secretary
13of the Commonwealth as agent shall be of the same legal force
14and validity as if the service had been personally made upon the
15producer. Where service cannot be made upon the producer in the
16manner provided by other laws of this Commonwealth relating to
17service of process, service may be made upon the Secretary of
18the Commonwealth. In that case, a copy of the process or notice
19shall be personally served upon any agent or representative of
20the producer who may be found within this Commonwealth or, where
21no agent or representative may be found, a copy of the process
22or notice shall be sent via registered mail to the producer at
23the last known address of its principal place of business, home
24office or residence.

25§ 1618. Refunds.

26Under Article XXVII of the act of March 4, 1971 (P.L.6,
27No.2), known as the Tax Reform Code of 1971, the department
28shall refund all taxes, interest and penalties paid to the
29Commonwealth under the provisions of this chapter to which the
30Commonwealth is not rightfully entitled. The refunds shall be

1made to the person or the person's heirs, successors, assigns or
2other personal representatives who paid the tax, provided that
3no refund shall be made under this section regarding a payment
4made by reason of an assessment where a taxpayer has filed a
5petition for reassessment under section 2702 of the Tax Reform
6Code of 1971 to the extent the petition is adverse to the
7taxpayer by a decision which is no longer subject to further
8review or appeal. Nothing in this chapter shall prohibit a
9taxpayer who has filed a timely petition for reassessment from
10amending it to a petition for refund where the petitioner paid
11the tax assessed.

12§ 1619. Refund petition.

13(a) General rule.--Except as provided for in subsection (b),
14the refund or credit of tax, interest or penalty provided for by
15section 1619 (relating to refunds) shall be made only where the
16person who has paid the tax files a petition for refund with the
17department under Article XXVII of the act of March 4, 1971
18(P.L.6, No.2), known as the Tax Reform Code of 1971, within the
19time limits of section 3003.1 of the Tax Reform Code of 1971.

20(b) Natural gas severance tax.--A refund or credit of tax,
21interest or penalty paid as a result of an assessment made by
22the department under section 1606 (relating to assessment) shall
23be made only where the person who has paid the tax files with
24the department a petition for a refund with the department under
25Article XXVII of the Tax Reform Code of 1971 within the time
26limits of section 3003.1 of the Tax Reform Code of 1971. The
27filing of a petition for refund under the provisions of this
28subsection shall not affect the abatement of interest, additions
29or penalties to which the person may be entitled by reason of
30his payment of the assessment.

1§ 1620. Rules and regulations.

2The department is charged with the enforcement of the
3provisions of this chapter and is authorized and empowered to
4prescribe, adopt, promulgate and enforce rules and regulations
5not inconsistent with the provisions of this chapter relating to
6any matter or thing pertaining to the administration and
7enforcement of the provisions of this chapter and the collection
8of taxes, penalties and interest imposed by this chapter. The
9department may prescribe the extent, if any, to which any of the
10rules and regulations shall be applied without retroactive
11effect.

12§ 1621. Recordkeeping.

13(a) General rule.--Every person liable for any tax imposed
14by this chapter, or for the collection of the tax, shall keep
15records, including those enumerated in subsection (b), render
16statements, make returns and comply with the rules and
17regulations as the department may prescribe regarding matters
18pertinent to the person's business. Whenever it is necessary,
19the department may require a person, by notice served upon the
20person or by regulations, to make returns, render statements or
21keep records as the department deems sufficient to show whether
22or not a person is liable to pay tax under this chapter.

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

24(1) Wellhead meter charts for each reporting period and
25the meter calibration and maintenance records. If turbine
26meters are in use, the maintenance records will be made
27available to the department upon request.

28(2) Records, statements and other instruments furnished
29to a producer by a person to whom the producer delivers for
30sale, transport or delivery of natural gas.

1(3) Records, statements and other instruments as the
2department may prescribe by regulation.

3(b) Records of nonresidents.--A nonresident who does
4business in this Commonwealth as a producer shall keep adequate
5records of the business and of the tax due as a result. The
6records shall be retained within this Commonwealth unless
7retention outside this Commonwealth is authorized by the
8department. The department may require a taxpayer who desires to
9retain records outside this Commonwealth to assume reasonable
10out-of-State audit expenses.

11(c) Keeping of separate records.--A producer who is engaged
12in another business or businesses which do not involve the
13severing of natural gas taxable under this chapter shall keep
14separate books and records of the businesses so as to show the
15taxable severing of natural gas under this chapter separately
16from other business activities not taxable hereunder. If any
17person fails to keep separate books and records, the person
18shall be liable for a penalty equaling 100% of tax due under
19this chapter for the period where separate records were not
20maintained.

21§ 1622. Examinations.

22The department or any of its authorized agents are authorized
23to examine the books, papers and records of any taxpayer in
24order to verify the accuracy and completeness of any return made
25or, if no return was made, to ascertain and assess the tax
26imposed by this chapter. The department may require the
27preservation of all books, papers and records for any period
28deemed proper by it but not to exceed three years from the end
29of the calendar year to which the records relate. Every taxpayer
30is required to give to the department or its agent the means,

1facilities and opportunity for examinations and investigations
2under this section. The department is further authorized to
3examine any person, under oath, concerning the taxable severing
4of natural gas by any taxpayer or concerning any other matter
5relating to the enforcement or administration of this chapter,
6and to this end may compel the production of books, papers and
7records and the attendance of all persons whether as parties or
8witnesses whom it believes to have knowledge of relevant
9matters. The procedure for the hearings or examinations shall be
10the same as that provided by the act of April 9, 1929 (P.L.343,
11No. 176), known as The Fiscal Code.

12§ 1623. Unauthorized disclosure.

13Any information gained by the department as a result of any
14return, examination, investigation, hearing or verification
15required or authorized by this chapter shall be confidential
16except for official purposes and except in accordance with
17proper judicial order or as otherwise provided by law, and any
18person unlawfully divulging the information shall be guilty of a
19misdemeanor and shall, upon conviction, be sentenced to pay a
20fine of not more than $1,000 and costs of prosecution or to
21imprisonment for not more than one year, or both.

22§ 1624. Cooperation with other governments.

23Notwithstanding the provisions of section 1616 (relating to
24tax suit reciprocity), the department may permit the
25Commissioner of the Internal Revenue Service of the United
26States, the proper officer of any state or the authorized
27representative of either of them to inspect the tax returns of
28any taxpayer, or may furnish to the commissioner or officer or
29to either of their authorized representative an abstract of the
30return of any taxpayer, or supply him with information

1concerning any item contained in any return or disclosed by the
2report of any examination or investigation of the return of any
3taxpayer. This permission shall be granted only if the laws of
4the United States or another state grant substantially similar
5privileges to the proper officer of the Commonwealth charged
6with the administration of this chapter.

7§ 1625. Bonds.

8(a) Taxpayer to file bond.--The department may require a
9nonresident natural person or any foreign corporation,
10association, fiduciary or other entity, not authorized to do
11business within this Commonwealth or not having an established
12place of business in this Commonwealth and subject to the tax
13imposed by section 1603 (relating to imposition of tax), to file
14a bond issued by a surety company authorized to do business in
15this Commonwealth and approved by the Insurance Commissioner as
16to solvency and responsibility, in amounts as it may fix, to
17secure the payment of any tax or penalties due or which may
18become due from a nonresident natural person, corporation,
19association, fiduciary or other entity whenever it deems it
20necessary to protect the revenues obtained under this chapter.
21The department may also require a bond of a person petitioning
22the department for reassessment in the case of any assessment
23over $500 or where, in its opinion, the ultimate collection is
24in jeopardy. For a period of three years, the department may
25require a bond of any person who has, on three or more occasions
26within a 12-month period, either filed a return or made payment
27to the department more than 30 days late. In the event the
28department determines a taxpayer is required to file a bond, it
29shall give notice to the taxpayer specifying the amount of the
30bond required. The taxpayer shall file the bond within five days

1after notice is given by the department unless, within five
2days, the taxpayer shall request in writing a hearing before the
3secretary or his representative. At the hearing, the necessity,
4propriety and amount of the bond shall be determined by the
5secretary or the secretary's representative. The determination
6shall be final and the taxpayer shall comply with it within 15
7days after notice is mailed to the taxpayer.

8(b) Securities in lieu of bond.--In lieu of the bond
9required by this section securities approved by the department
10or cash in a prescribed amount may be deposited. The securities
11or cash shall be kept in the custody of the department. The
12department may apply the securities or cash to the tax imposed
13by this chapter and interest or penalties due without notice to
14the depositor. The securities may be sold by the department to
15pay the tax, interest or penalties due at public or private sale
16upon five days' written notice to the depositor.

17(c) Failure to file bond.--The department may file a lien
18under section 1615 (relating to tax liens) against any taxpayer
19who fails to file a bond when required to do so under this
20section. All funds received upon execution of the judgment on
21the lien shall be refunded to the taxpayer with 3% interest,
22should a final determination be made that it does not owe any
23payment to the department.

24§ 1626. Deposit of proceeds.

25The proceeds of the tax imposed under section 1603 (relating
26to imposition of tax) and penalties and interest imposed under
27this chapter, less the amounts appropriated under section 1628
28(relating to appropriation) shall be deposited into the State
29Treasury as follows:

30(1) Fifty percent shall be deposited into the General

1Fund and shall be allocated to the Building Blocks PA program
2established by the act of March 10, 1949 (P.L.30, No.14),
3known as the Public School Code of 1949.

4(2) Twenty-five percent shall be deposited into the Host
5Local Government Fund, which fund is hereby established, to
6be expended as provided by law and according to the following
7distribution:

8(i) Forty-five percent to host municipalities.

9(ii) Thirty percent to host counties.

10(iii) Fifteen percent to nonhost municipalities in
11host counties.

12(iv) Ten percent to fire departments and emergency
13management service providers in host counties.

14(3) Eleven percent shall be deposited into the Marcellus
15Legacy Fund established by 58 Pa.C.S. § 2315 (relating to
16Statewide initiatives).

17(4) Five percent shall be deposited into the General
18Fund and shall be allocated to the Classrooms for the Future
19Program.

20(5) Three percent shall be deposited into the State
21Conservation District Fund.

22(6) Two percent shall be deposited into the General Fund
23and shall be allocated to the Department of Environmental
24Protection to be expended as provided by law.

25(7) Two percent shall be deposited into the Hazardous
26Sites Cleanup Fund.

27(8) One percent shall be deposited into the General Fund
28and shall be allocated to the Pennsylvania Fish and Boat
29Commission to be expended as provided by law.

30(9) One percent shall be deposited into the General Fund

1and shall be allocated to the Pennsylvania Game Commission to
2be expended as provided by law.

3§ 1627. Penalties.

4The department shall enforce the following penalties:

5(1) A penalty against a producer without a registration
6certificate required under section 1604 (relating to
7registration). The penalty shall be $1 for every unit severed
8without a valid registration certificate. The department may
9assess this penalty separately from or in conjunction with
10any assessment of the natural gas severance tax.

11(2) A penalty against a producer for failure to timely
12file a return as required under section 1603(c) (relating to
13imposition of tax). The penalty shall be 5% of the tax
14liability to be reported on the return for each day beyond
15the due date that the return is not filed.

16(3) In addition to the penalty under paragraph (2), a
17penalty against the producer for a willful failure to timely
18file a return. The penalty shall be 200% of the tax liability
19required to be reported on the return.

20(4) A penalty against a producer for failure to timely
21pay the tax as required by section 1603(d). The penalty shall
22be 5% of the amount of tax due for each day beyond the
23payment date that the tax is not paid.

24§ 1628. Appropriation.

25The amount of the proceeds from the tax imposed by this
26chapter as shall be necessary for the payment of refunds,
27enforcement or administration under this chapter is hereby
28appropriated to the department for those purposes.

29Section 2. This act shall take effect in 60 days.