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Revenue Administrative Bulletin 1989-15


Approved:           April 4, 1989



RAB-89-15. The Michigan Severance Tax Act, MCL 205.303(2), provides for a severance tax rate on oil and liquid phase condensate severed from marginal properties or from stripper wells that is lower than the tax rate for regular oil wells. The lower rate is not applicable until the well in question qualifies as marginal or stripper property under the definition outlined in MCL 205.303(2). To qualify for the lower rate, the well must fall into the marginal and stripper definition for a qualifying period of 12 consecutive months.

During the 12-month qualifying period, the oil and liquid phase condensate production is to be reported at the higher tax rate. At the end of the 12-month qualifying period, assuming the qualifications are met, amended severance tax returns may be filed. Any overpayment due to the higher tax rate having been paid over the 12 months may be considered for refund.

The Department requires that the amended returns for the periods affected show the volume of production, the value of the product, and the tax paid for each well. For those wells that qualify as marginal or stripper properties, the lower tax rate is to be shown and the overpayment determined. No refund will be made and no credits shall be taken until such claim for refund is accepted by the Department.

To claim a refund, the reclassification of wells as marginal or stripper must be for production within the 4-year statute of limitations as set forth in the Michigan Revenue Act. The refund claim is also subject to the same 4-year statute of limitations for audit by the Department.


Stripper Well Crude Oil. Oil produced and sold from a property whose maximum average daily production of crude oil per well during any consecutive 12-month period does not exceed 10 barrels.

Marginal Property Crude Oil. Oil severed from a property whose average daily production (excluding condensate recovered in nonassociated production) per well during any preceding consecutive 12-month period beginning after December 31, 1972 did not exceed the number of barrels shown in the following table for the average completion depth:

Average Completion Depth in Feet
Barrels Per Day
2,000 or more but less than 4,000 20 or less
4,000 or more but less than 6,000 25 or less
6,000 or more but less than 8,000 30 or less
8,000 or more 35 or less


Terms used in these guidelines shall have the same meaning as when used in comparable context in the laws and regulations of the United States relating to federal energy regulation unless a different meaning is clearly required. The Department will follow the Department of Energy's policy in deeming the classification of "stripper well crude oil" and "crude oil from marginal properties" to be a permanent classification of the property.