Internal Revenue Code:Sec. 45I. Credit for producing oil and gas from marginal wells
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Location
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 TAXES
Statute
SEC. 45I. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.
(a) General Rule.--For purposes of section 38, the marginal well
production credit for any taxable year is an amount equal to the product
of--
(1) the credit amount, and
(2) the qualified crude oil production and the qualified
natural gas production which is attributable to the taxpayer.
(b) Credit Amount.--For purposes of this section--
(1) In general.--The credit amount is--
(A) $3 per barrel of qualified crude oil
production, and
(B) 50 cents per 1,000 cubic feet of qualified
natural gas production.
(2) Reduction as oil and gas prices increase.--
(A) In general.--The $3 and 50 cents amounts under
paragraph (1) shall each be reduced (but not below zero)
by an amount which bears the same ratio to such amount
(determined without regard to this paragraph) as--
(i) the excess (if any) of the applicable
reference price over $15 ($1.67 for qualified
natural gas production), bears to
(ii) $3 ($0.33 for qualified natural gas production).
The applicable reference price for a taxable year is the
reference price of the calendar year preceding the
calendar year in which the taxable year begins.
(B) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2005,
each of the dollar amounts contained in subparagraph (A)
shall be increased to an amount equal to such dollar
amount multiplied by the inflation adjustment factor for
such calendar year (determined under section 43(b)(3)(B)
by substituting `2004' for `1990').
(C) Reference price.--For purposes of this
paragraph, the term `reference price' means, with
respect to any calendar year--
(i) in the case of qualified crude oil
production, the reference price determined under
section 45K(d)(2)(C), and
(ii) in the case of qualified natural gas
production, the Secretary's estimate of the annual
average wellhead price per 1,000 cubic feet for
all domestic natural gas.
(c) Qualified Crude Oil and Natural Gas Production.--For purposes
of this section--
(1) In general.--The terms `qualified crude oil
production' and `qualified natural gas production' mean domestic
crude oil or natural gas which is produced from a qualified
marginal well.
(2) Limitation on amount of production which may
qualify.--
(A) In general.--Crude oil or natural gas produced
during any taxable year from any well shall not be
treated as qualified crude oil production or qualified
natural gas production to the extent production from the
well during the taxable year exceeds 1,095 barrels or
barrel-of-oil equivalents (as defined in section
45K(d)(5)).
(B) Proportionate reductions.--
(i) Short taxable years.--In the case of a
short taxable year, the limitations under this
paragraph shall be proportionately reduced to
reflect the ratio which the number of days in such
taxable year bears to 365.
(ii) Wells not in production entire year.--
In the case of a well which is not capable of
production during each day of a taxable year, the
limitations under this paragraph applicable to the
well shall be proportionately reduced to reflect
the ratio which the number of days of production
bears to the total number of days in the taxable
year.
(3) Definitions.--
(A) Qualified marginal well.--The term `qualified
marginal well' means a domestic well--
(i) the production from which during the
taxable year is treated as marginal production
under section 613A(c)(6), or
(ii) which, during the taxable year--
(I) has average daily production
of not more than 25 barrel-of-oil
equivalents (as so defined), and
(II) produces water at a rate not less than
95 percent of total well effluent.
(B) Crude oil, etc.--The terms `crude oil',
`natural gas', `domestic', and `barrel' have the
meanings given such terms by section 613A(e).
(d) Other Rules.--
(1) Production attributable to the taxpayer.--In the case
of a qualified marginal well in which there is more than one
owner of operating interests in the well and the crude
oil or natural gas production exceeds the limitation under
subsection (c)(2), qualifying crude oil production or qualifying
natural gas production attributable to the taxpayer shall be
determined on the basis of the ratio which taxpayer's revenue
interest in the production bears to the aggregate of the revenue
interests of all operating interest owners in the production.
(2) Operating interest required.--Any credit under this
section may be claimed only on production which is attributable
to the holder of an operating interest.
(3) Production from nonconventional sources excluded.--In
the case of production from a qualified marginal well which is
eligible for the credit allowed under section 45K for the taxable
year, no credit shall be allowable under this section unless the
taxpayer elects not to claim the credit under section 45K with
respect to the well.
Sources
Pub.L. 108-357, Sec.341, dated October 22, 2004.
Miscellaneous
AMENDMENTS
2005 - Energy Policy Act of 2005. Sections 45I(b)(2)(C)(i)), is
amended by striking `section 29(d)(2)(C)' and inserting
`section 45K(d)(2)(C)'; in subsection (c)(2)(A) by striking
`section 29(d)(5))' and inserting `section 45K(d)(5))'; and
in subsection (d)(3) by striking `section 29' both places it
appears and inserting `section 45K'.
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.
