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.
 

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