Starting July 1, 2013, Illinois will impose a hydraulic fracturing tax on the severance and production of oil or gas from a well on a production unit required to be permitted by Illinois pursuant to the state’s Hydraulic Fracturing Regulatory Act. The tax liability accrues when oil or gas is removed from the production unit. For the first 24 months that oil or gas is produced and extracted from a registered well, the rate of tax is 3 percent of the extracted value of the oil or gas. After the initial 24-month period, the rate of tax on extracted gas is 6 percent, and the rate of tax on extracted oil is as follows:
4 percent for wells whose ADP is between 25 and 49 barrels of oil
5 percent for wells whose ADP is between 50 and 99 barrels of oil
6 percent for wells whose ADP is at least 100 barrels of oil
However, the rate is lowered on working interest owners when at least of 50 percent of the total work force on the production units are Illinois construction workers that are paid the general prevailing wage.
The views expressed in this article are those of the authors and do not necessarily reflect the position or policy of Berkeley Research Group, LLC.
TAX ADVICE DISCLOSURE: ANY TAX ADVICE CONTAINED IN THIS COMMUNICATION (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF (I) AVOIDING PENALTIES UNDER THE INTERNAL REVENUE CODE OR (II) PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TRANSACTION OR MATTER ADDRESSED HEREIN. BERKELEY RESEARCH GROUP, LLC IS NOT A LAW FIRM AND DOES NOT PROVIDE LEGAL ADVICE AND IS NOT A CPA FIRM AND DOES NOT PROVIDE AUDIT, ATTEST, OR PUBLIC ACCOUNTING SERVICES.