C.R.S. § 39-29-105 — Tax on severance of oil and gas

(1) (a) In addition to any other tax, there shall be levied, collected, and paid for each taxable year commencing prior to January 1, 2000, a tax upon the gross income of crude oil, natural gas, carbon dioxide, and oil and gas severed from the earth in this state; except that oil produced from any wells that produce ten barrels per day or less of crude oil for the average of all producing days during the taxable year shall be exempt from the tax. Nothing in this paragraph (a) shall exempt a producer of oil and gas from submitting a production employee report as required by section 39-29-110 (1)(d)(I). The tax for crude oil, natural gas, carbon dioxide, and oil and gas shall be at the following rates of the gross income: Under $25,0002% $25,000 and under $100,0003% $100,000 and under $300,0004% $300,000 and over5% (b) In addition to any other tax, there shall be levied, collected, and paid for each taxable year commencing on or after January 1, 2000, a tax upon the gross income attributable to the sale of oil and gas severed from the earth in this state; except that oil produced from any wells that produce fifteen barrels per day or less of oil and gas produced from wells that produce ninety thousand cubic feet or less of gas per day for the average of all producing days for such oil or gas production during the taxable year shall be exempt from the tax. The tax for oil and gas shall be at the following rates of the gross income: Under $25,000 2% $25,000 and under $100,000 3% $100,000 and under $300,000 4% $300,000 and over 5% (2) (a) With respect to crude oil, natural gas, carbon dioxide, and oil and gas, there shall be allowed, as a credit against the tax computed in accordance with the provisions of paragraph (a) of subsection (1) of this section for each taxable year commencing prior to January 1, 2000, an amount equal to eighty-seven and one-half percent of all ad valorem taxes assessed during the taxable year in the case of accrual basis taxpayers or paid during the taxable year in the case of cash basis taxpayers upon crude oil, natural gas, carbon dioxide, and oil and gas leaseholds and leasehold interests and oil and gas royalties and royalty interests for state, county, municipal, school district, and special district purposes, except such ad valorem taxes assessed or paid for such purposes upon equipment and facilities used in the drilling for, production of, storage of, and pipeline transportation of crude oil, natural gas, and carbon dioxide. However, no credit shall be allowed for ad valorem taxes paid or assessed on oil wells that produce ten barrels per day or less of crude oil for the average of all producing days during the taxable year. (b) (I) With respect to oil and gas, there is allowed, as a credit against the tax computed in accordance with the provisions of subsection (1)(b) of this section for each taxable year commencing on or after January 1, 2000, but prior to January 1, 2024, an amount equal to eighty-seven and one-half percent of all ad valorem taxes assessed during the taxable year in the case of accrual basis taxpayers or paid during the taxable year in the case of cash basis taxpayers upon oil and gas leaseholds and leasehold interests and oil and gas royalties and royalty interests for state, county, municipal, school district, and special district purposes, except such ad valorem taxes assessed or paid for such purposes upon equipment and facilities used in the drilling for, production of, storage of, and pipeline transportation of oil and gas. (II) (A) With respect to oil and gas there is allowed, as a credit against the tax computed in accordance with subsection (1)(b) of this section for each taxable year commencing on or after January 1, 2024, but prior to January 1, 2027, an amount equal to seventy-five percent of all ad valorem taxes assessed during the taxable year in the case of accrual basis taxpayers or paid during the taxable year in the case of cash basis taxpayers upon oil and gas leaseholds and leasehold interests and oil and gas royalties and royalty interests for state, county, municipal, school district, and special district purposes, except such ad valorem taxes assessed or paid for such purposes upon equipment and facilities used in the drilling for, production of, storage of, and pipeline transportation of oil and gas. (B) With respect to oil and gas there is allowed, as a credit against the tax computed in accordance with subsection (1)(b) of this section for each taxable year commencing on or after January 1, 2027, but prior to January 1, 2028, an amount equal to eighty-seven and five-tenths percent of all ad valorem taxes assessed during the taxable year in the case of accrual basis taxpayers or paid during the taxable year in the case of cash basis taxpayers upon oil and gas leaseholds and leasehold interests and oil and gas royalties and royalty interests for state, county, municipal, school district, and special district purposes, except such ad valorem taxes assessed or paid for such purposes upon equipment and facilities used in the drilling for, production of, storage of, and pipeline transportation of oil and gas. (III) Notwithstanding subsections (2)(b)(I) and (2)(b)(II) of this section, no credit shall be allowed for ad valorem taxes paid or assessed on oil and gas production that is exempt from the state severance tax pursuant to subsection (1) of this section. (c) Repealed. (d) For a taxable year beginning on or after January 1, 2028, for each well that is not exempt from the state severance tax pursuant to subsection (1)(b) of this section, there is allowed a credit against the tax computed in accordance with subsection (1)(b) of this section in an amount calculated by the formula C = 0.7656 x GI x ML, where: (I) C is the amount of the credit; (II) GI is the gross income attributable to the well for the current taxable year; and (III) ML is the total of all mill levies, fixed not later than December 22 of the preceding calendar year pursuant to section 39-1-111, by all local governments for property at the well's location. Source: L. 77: Entire article added, p. 1846, § 1, effective January 1, 1978. L. 82: Entire section amended, p. 578, § 2, effective January 1, 1983. L. 84: (2) amended, p. 1028, § 1, effective January 1, 1985. L. 2000: Entire section amended, p. 1442, § 2, effective July 1. L. 2008: (1)(b) amended, p. 1680, § 4, effective August 5. L. 2022: (2)(b) amended and (2)(c) added, (HB 22-1391), ch. 401, p. 2856, § 2, effective August 10. L. 2023: (2)(b) and IP(2)(c) amended and (2)(d) added, (HB 23-1272), ch. 167, p. 808, § 13, effective May 11. L. 2025: (2)(b)(II) and IP(2)(d) amended and (2)(c) repealed, (SB 25-040), ch. 193, p. 862, § 3, effective August 6. Cross references: For the legislative declaration in HB 22-1391, see section 1 of chapter 401, Session Laws of Colorado 2022. For the legislative declaration in HB 23-1272, see section 1 of chapter 167, Session Laws of Colorado 2023. For the legislative declaration in SB 25-040, see section 1 of chapter 193, Session Laws of Colorado 2025.