Small Oil and Gas Producers Act

Summary#

This bill changes tax rules in the Internal Revenue Code for percentage depletion of oil and gas wells. It revises how the applicable depletion percentage is calculated for marginal properties, raises the amount of oil considered depletable for a property, and removes certain taxable-income limits that can reduce depletion allowances. The new percentage is set as 15% plus 1 percentage point for each whole dollar that $70 exceeds the annual reference price for crude oil (but not more than 25%). After 2027, the $70 level is adjusted each year using a Producer Price Index (PPI) measure for drilling oil and gas wells. The bill also increases the depletable oil quantity from 1,000 barrels to 2,000 barrels. These changes apply to taxable years beginning after December 31, 2026.

What it means for you#

• If you own or operate oil or gas wells that qualify as marginal properties, the formula used to calculate percentage depletion would change, which could change the depletion deduction you claim.
• Some rules that limit how much depletion can reduce taxable income would not apply to the portion of depletion determined under the updated rule.
• The threshold for how many barrels count as depletable for a property would increase from 1,000 to 2,000 barrels.

Expenses#

No publicly available information.

Proponents' View#

The bill's short title is "Protecting America's Small Oil and Gas Producers and Rural Jobs Act," indicating the sponsors present the measure as intended to help small oil and gas producers and rural employment. No additional proponents' statements are included in the bill text or metadata provided.

Opponents' View#

No publicly available information.