Amends the Internal Revenue Code to allow a business tax credit for producing crude oil and natural gas from marginal wells of: (1) $3 per barrel of qualified crude oil production; and (2) $.50 per 1,000 cubic feet of qualified natural gas production. Provides: (1) a formula for reducing such credit in years in which oil and gas prices increase; and (2) an inflation adjustment for such formula. Allows such credit against the regular and minimum tax.
[Congressional Bills 106th Congress]
[From the U.S. Government Printing Office]
[H.R. 53 Introduced in House (IH)]
106th CONGRESS
1st Session
H. R. 53
To amend the Internal Revenue Code of 1986 to provide a tax credit for
marginal oil and natural gas well production.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 6, 1999
Mr. Watkins (for himself, Mr. Thomas, Mr. Istook, Mr. Moran of Kansas,
Mr. Brady of Texas, Mr. Skeen, Mr. Thornberry, Mr. McCrery, Mr.
Largent, Mr. Watts of Oklahoma, Mr. Lucas of Oklahoma, Mr. Smith of
Texas, and Mr. Stenholm) introduced the following bill; which was
referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide a tax credit for
marginal oil and natural gas well production.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND NATURAL GAS WELL
PRODUCTION.
(a) Credit for Producing Oil and Gas From Marginal Wells.--Subpart
D of part IV of subchapter A of chapter 1 of the Internal Revenue Code
of 1986 (relating to business credits) is amended by adding at the end
the following new section:
``SEC. 45D. 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 $14 ($1.56 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 for 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 1999,
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 `1998' 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 29(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
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 equivalents.
``(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) Marginal well.--The term `marginal well'
means a domestic well which during the taxable year has
marginal production (as defined in section 613A(c)(6)).
``(B) Crude oil, etc.--The terms `crude oil',
`natural gas', `domestic', and `barrel' have the
meanings given such terms by section 613A(e).
``(C) Barrel equivalent.--The term `barrel
equivalent' means, with respect to natural gas, a
conversion ratio of 6,000 cubic feet of natural gas to
1 barrel of crude oil.
``(d) Other Rules.--
``(1) Production attributable to the taxpayer.--In the case
of a 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 marginal well which is eligible
for the credit allowed under section 29 for the taxable year,
no credit shall be allowable under this section unless the
taxpayer elects not to claim the credit under section 29 with
respect to the well.''.
(b) Credit Treated as Business Credit.--Section 38(b) of such Code
is amended by striking ``plus'' at the end of paragraph (11), by
striking the period at the end of paragraph (12) and inserting ``,
plus'', and by adding at the end the following new paragraph:
``(13) the marginal oil and gas well production credit
determined under section 45D(a).''.
(c) Credit Allowed Against Regular and Minimum Tax.--
(1) In general.--Subsection (c) of section 38 of such Code
(relating to limitation based on amount of tax) is amended by
redesignating paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following new paragraph:
``(3) Special rules for marginal oil and gas well
production credit.--
``(A) In general.--In the case of the marginal oil
and gas well production credit--
``(i) this section and section 39 shall be
applied separately with respect to the credit,
and
``(ii) in applying paragraph (1) to the
credit--
``(I) subparagraphs (A) and (B)
thereof shall not apply, and
``(II) the limitation under
paragraph (1) (as modified by subclause
(I)) shall be reduced by the credit
allowed under subsection (a) for the
taxable year (other than the marginal
oil and gas well production credit).
``(B) Marginal oil and gas well production
credit.--For purposes of this subsection, the term
`marginal oil and gas well production credit' means the
credit allowable under subsection (a) by reason of
section 45D(a).''.
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) of such Code is amended by inserting ``or the
marginal oil and gas well production credit'' after
``employment credit''.
(d) Carryback.--Subsection (a) of section 39 of such Code (relating
to carryback and carryforward of unused credits generally) is amended
by adding at the end the following new paragraph:
``(3) 10-year carryback for marginal oil and gas well
production credit.--In the case of the marginal oil and gas
well production credit--
``(A) this section shall be applied separately from
the business credit (other than the marginal oil and
gas well production credit), and
``(B) paragraph (1) shall be applied by
substituting `10 taxable years' for `1 taxable years'
in subparagraph (A) thereof.''.
(e) Coordination With Section 29.--Section 29(a) of such Code is
amended by striking ``There'' and inserting ``At the election of the
taxpayer, there''.
(f) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following item:
``45D. Credit for producing oil and gas from marginal wells.''.
(g) Effective Date.--The amendments made by this section shall
apply to production after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
Referred to the Subcommittee on Oversight.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line