Internal Revenue Code:Sec. 43. Enhanced oil recovery credit
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Contents |
Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart D - Business Related Credits
Statute
Sec. 43. Enhanced oil recovery credit
(a) General rule
For purposes of section 38, the enhanced oil recovery credit for
any taxable year is an amount equal to 15 percent of the taxpayer's
qualified enhanced oil recovery costs for such taxable year.
(b) Phase-out of credit as crude oil prices increase
(1) In general
The amount of the credit determined under subsection (a) for
any taxable year shall be reduced by an amount which bears the
same ratio to the amount of such credit (determined without
regard to this paragraph) as -
(A) the amount by which the reference price for the calendar
year preceding the calendar year in which the taxable year
begins exceeds $28, bears to
(B) $6.
(2) Reference price
For purposes of this subsection, the term ''reference price''
means, with respect to any calendar year, the reference price
determined for such calendar year under section 45K(d)(2)(C).
(3) Inflation adjustment
(A) In general
In the case of any taxable year beginning in a calendar year
after 1991, there shall be substituted for the $28 amount under
paragraph (1)(A) an amount equal to the product of -
(i) $28, multiplied by
(ii) the inflation adjustment factor for such calendar
year.
(B) Inflation adjustment factor
The term ''inflation adjustment factor'' means, with respect
to any calendar year, a fraction the numerator of which is the
GNP implicit price deflator for the preceding calendar year and
the denominator of which is the GNP implicit price deflator for
1990. For purposes of the preceding sentence, the term ''GNP
implicit price deflator'' means the first revision of the
implicit price deflator for the gross national product as
computed and published by the Secretary of Commerce. Not later
than April 1 of any calendar year, the Secretary shall publish
the inflation adjustment factor for the preceding calendar
year.
(c) Qualified enhanced oil recovery costs
For purposes of this section -
(1) In general
The term ''qualified enhanced oil recovery costs'' means any of
the following:
(A) Any amount paid or incurred during the taxable year for
tangible property -
(i) which is an integral part of a qualified enhanced oil
recovery project, and
(ii) with respect to which depreciation (or amortization in
lieu of depreciation) is allowable under this chapter.
(B) Any intangible drilling and development costs -
(i) which are paid or incurred in connection with a
qualified enhanced oil recovery project, and
(ii) with respect to which the taxpayer may make an
election under section 263(c) for the taxable year.
(C) Any qualified tertiary injectant expenses (as defined in
section 193(b)) which are paid or incurred in connection with a
qualified enhanced oil recovery project and for which a
deduction is allowable for the taxable year.
(D) Any amount which is paid or incurred during
the taxable year to construct a gas treatment plant
which--
(i) is located in the area of the United
States (within the meaning of section 638(1))
lying north of 64 degrees North latitude,
(ii) prepares Alaska natural gas for
transportation through a pipeline with a capacity
of at least 2,000,000,000,000 Btu of natural gas
per day, and
(iii) produces carbon dioxide which is
injected into hydrocarbon-bearing geological
formations.
(2) Qualified enhanced oil recovery project
For purposes of this subsection -
(A) In general
The term ''qualified enhanced oil recovery project'' means
any project -
(i) which involves the application (in accordance with
sound engineering principles) of 1 or more tertiary recovery
methods (as defined in section 193(b)(3)) which can
reasonably be expected to result in more than an
insignificant increase in the amount of crude oil which will
ultimately be recovered,
(ii) which is located within the United States (within the
meaning of section 638(1)), and
(iii) with respect to which the first injection of liquids,
gases, or other matter commences after December 31, 1990.
(B) Certification
A project shall not be treated as a qualified enhanced oil
recovery project unless the operator submits to the Secretary
(at such times and in such manner as the Secretary provides) a
certification from a petroleum engineer that the project meets
(and continues to meet) the requirements of subparagraph (A).
(3) At-risk limitation
For purposes of determining qualified enhanced oil recovery
costs, rules similar to the rules of section 49(a)(1), section
49(a)(2), and section 49(b) shall apply.
(4) Special rule for certain gas displacement projects
For purposes of this section, immiscible non-hydrocarbon gas
displacement shall be treated as a tertiary recovery method under
section 193(b)(3).
(5) Alaska natural gas.--For purposes of paragraph
(1)(D)--
(A) In general.--The term `Alaska natural gas'
means natural gas entering the Alaska natural gas
pipeline (as defined in section 168(i)(16) (determined
without regard to subparagraph (B) thereof)) which is
produced from a well--
(i) located in the area of the State of
Alaska lying north of 64 degrees North latitude,
determined by excluding the area of the Alaska
National Wildlife Refuge (including the
continental shelf thereof within the meaning of
section 638(1)), and
(ii) pursuant to the applicable State and
Federal pollution prevention, control, and permit
requirements from such area (including the
continental shelf thereof within the meaning of
section 638(1)).
(B) Natural gas.--The term `natural gas' has the
meaning given such term by section 613A(e)(2).
(d) Other rules
(1) Disallowance of deduction
Any deduction allowable under this chapter for any costs taken
into account in computing the amount of the credit determined
under subsection (a) shall be reduced by the amount of such
credit attributable to such costs.
(2) Basis adjustments
For purposes of this subtitle, if a credit is determined under
this section for any expenditure with respect to any property,
the increase in the basis of such property which would (but for
this subsection) result from such expenditure shall be reduced by
the amount of the credit so allowed.
(e) Election to have credit not apply
(1) In general
A taxpayer may elect to have this section not apply for any
taxable year.
(2) Time for making election
An election under paragraph (1) for any taxable year may be
made (or revoked) at any time before the expiration of the 3-year
period beginning on the last date prescribed by law for filing
the return for such taxable year (determined without regard to
extensions).
(3) Manner of making election
An election under paragraph (1) (or revocation thereof) shall
be made in such manner as the Secretary may by regulations
prescribe.
Sources
(Added Pub. L. 101-508, title XI, Sec. 11511(a), Nov. 5, 1990, 104
Stat. 1388-483; amended Pub. L. 106-554, Sec. 1(a)(7) (title III,
Sec. 317(a)), Dec. 21, 2000, 114 Stat. 2763, 2763A-645.)
Miscellaneous
PRIOR PROVISIONS
A prior section 43 was renumbered section 32 of this title.
Another prior section 43 was renumbered section 34 of this title.
AMENDMENTS
2005 - P.L. 109-135, Section 412
(i) Paragraph (5) of section 43(c) is amended to read as follows:
``(5) Alaska natural gas.--For purposes of paragraph
(1)(D)--
``(A) In general.--The term `Alaska natural gas'
means natural gas entering the Alaska natural gas
pipeline (as defined in section 168(i)(16) (determined
without regard to subparagraph (B) thereof)) which is
produced from a well--
``(i) located in the area of the State of
Alaska lying north of 64 degrees North latitude,
determined by excluding the area of the Alaska
National Wildlife Refuge (including the
continental shelf thereof within the meaning of
section 638(1)), and
``(ii) pursuant to the applicable State and
Federal pollution prevention, control, and permit
requirements from such area (including the
continental shelf thereof within the meaning of
section 638(1)).
``(B) Natural gas.--The term `natural gas' has the
meaning given such term by section 613A(e)(2).''.
2005 - Energy Policy Act of 2005. Sections 43(b)(2), is amended by
striking `section 29(d)(2)(C)' and inserting `section 45K(d)(2)(C)'.
Effective Dates- the amendments made by this section shall apply
to credits determined under the Internal Revenue Code of 1986 for
taxable years ending after December 31, 2005.
2004 - Subsec.707(a),Pub.L.108-357, amended Sec.43(c)(1) by
adding a new subparagraph (D). Sec.707(b), amended Sec.43(c)
by adding a new paragraph (5).
2000 - Subsec. (c)(1)(C). Pub. L. 106-554 inserted ''(as defined
in section 193(b))'' after ''expenses'' and struck out ''under
section 193'' after ''allowable''.
EFFECTIVE DATE OF 2004 AMENDMENT
Pub.L.108-357,Sec.707; Effective Date.--The amendment made by
this section shall apply to costs paid or incurred in taxable
years beginning after December 31, 2004.
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-554, Sec. 1(a)(7) (title III, Sec. 317(b)), Dec. 21,
2000, 114 Stat. 2763, 2763A-645, provided that: ''The amendment
made by this section (amending this section) shall take effect as
if included in section 11511 of the Revenue Reconciliation Act of
1990 (Pub. L. 101-508).''
EFFECTIVE DATE
Section 11511(d) of Pub. L. 101-508 provided that:
''(1) In general. - The amendments made by this section (enacting
this section and amending sections 38, 39, 196, and 6501 of this
title) shall apply to costs paid or incurred in taxable years
beginning after December 31, 1990.
''(2) Special rule for significant expansion of projects. - For
purposes of section 43(c)(2)(A)(iii) of the Internal Revenue Code
of 1986 (as added by subsection (a)), any significant expansion
after December 31, 1990, of a project begun before January 1, 1991,
shall be treated as a project with respect to which the first
injection commences after December 31, 1990.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 29, 38, 39, 196, 6501 of
this title.
