Okla. Stat. tit. 68, § 68-2369

Withholding production payments for failure to file state income tax

return.

A. Except as otherwise provided for in this section, all

persons, banks or corporations, in whatever capacity acting, and

whether or not otherwise exempted from taxation under this act,

including lessees, mortgagors of real or personal property,

fiduciaries, employers and all officers or employees of the state or

of any political subdivision thereof, having the control, receipt,

custody, disposal or payment of interest, income from real property

and tangible personal property including rents, oil or gas

production payments, and mining production payments, salaries,

wages, premiums, annuities, compensation, remunerations, emoluments

or other fixed or determinable annual or other periodical gains,

profits or income, amounting to Seven Hundred Fifty Dollars

($750.00) or over, paid or payable during any year, to any taxpayer,

shall make complete reports thereof, under oath, to the Tax

Commission, under such rules and regulations, in such form and

manner and to such extent, as may be prescribed by it.

B. Such reports may be required, regardless of amounts, (1) in

case of payments of interest upon bonds, mortgages, deeds of trust,

or other similar obligations of corporations, and (2) in the case of

dividend payments by corporations subject to the tax levied by this

act and (3) in the case of any broker transacting any business, as

such, for any individual subject to the provisions of this act. The

Tax Commission may require such corporations to state the name and

address of each shareholder, the number of shares owned by him and,

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1061

in the case of a broker, it may require submission of the names of

the customer for whom such broker transacted any business, with such

details as to profits, losses or other information as the Tax

Commission may require as to each such customer. Any reports

required under this subsection shall likewise be rendered under

oath, and in accordance with rules and regulations prescribed and

adopted by the Tax Commission.

C. Complete reports shall be required, regardless of amounts

and not limited to payments exceeding Seven Hundred Fifty Dollars

($750.00), for all oil, gas, or mining production payments, paid or

payable during any year, to any person, as defined in Section 202 of

of this title. The Tax Commission may require any person or

corporation making such production payments to report the total

production payments made to any person during any calendar year, in

addition to any other information necessary to calculate Oklahoma

income tax upon such production payments. The Tax Commission may

require such reports from any person or corporation making

production payments for any time period prior to the effective date

of this act based on payment records that such person or corporation

is required to maintain by state or federal law. For purposes of

this section, the term "production payment" means payments of

proceeds generated from mineral interests in this state, including

but not limited to, a lease bonus, delay rental, royalty and working

interest payment, and overriding royalty interest payment.

D. 1. The Tax Commission, or its duly authorized agent, is

authorized and empowered to issue orders to withhold all production

payments to any person upon a determination that the person has

failed to file a state income tax return as required by law

reporting production payment income or has failed to pay state

income tax. The order to withhold production payments shall be

directed to the person or corporation making production payments and

shall apply to all production payments that the person named within

such order is entitled to until the return is filed and the income

tax, penalty and interest are paid. Release of the order to

withhold shall be mailed by the Tax Commission to the person or
ate

income tax. The order to withhold production payments shall be

directed to the person or corporation making production payments and

shall apply to all production payments that the person named within

such order is entitled to until the return is filed and the income

tax, penalty and interest are paid. Release of the order to

withhold shall be mailed by the Tax Commission to the person or

corporation withholding production payments upon the filing of the

return and payment of the tax, penalty and interest by the person

named within such order or upon payment of the tax, penalty and

interest by the person or corporation withholding the production

payment.

2. Upon receipt of the Tax Commission order to withhold

production payments, the person or corporation making production

payments, within thirty (30) days of receiving such order, shall:

a. withhold payments for all production of the

person named within such order until such order is released by the

Tax Commission,

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1062

b. hold in suspense all production payments subject

to such order to withhold, and

c. in the case of established delinquent income

tax, upon receiving such order from the Tax Commission of such

established delinquency, pay the tax, penalty and interest out of

the withheld production payments and receipt such tax payment to the

taxpayer in lieu of cash in settlement for such production.

The order to withhold shall apply to production payments in any case

where a successor person or corporation is required to make

production payments and to production payments of subsequent

production of minerals in this state. Any person or corporation

that withholds production payments or pays same to the Tax

Commission pursuant to such order is hereby relieved of all

liability for such acts.

3. The Tax Commission shall mail notice to each delinquent

taxpayer at the last-known address reported by the person or

corporation making production payments at least twenty (20) days

prior to issuance of an order to withhold production payments. The

notice shall contain a statement that the taxpayer has failed to

file an income tax return as required by law or has failed to pay

delinquent income tax. An order to withhold production payments may

be issued by the Tax Commission, or its duly authorized agent, for

collection of any delinquent income tax, penalty and interest owed

by the taxpayer entitled to production payments.

4. Any person or corporation making production payments who

refuses or fails tofile the reports required by this section, in the

manner and at the time prescribed by the Tax Commission, shall be

subject to a penalty in the amount of One Hundred Dollars ($100.00)

for each day such report is delinquent. Any person or corporation

making production payments who refuses to withhold payments shall be

subject to a penalty in the amount of One Hundred Dollars ($100.00)

for each payment made which was ordered to be withheld. All

penaltiesassessed pursuant to this subsection shall be collected and

apportioned in the same manner as the state income tax.