Effective federal tax rates on income from new investments in oil and gas extraction

Journal Article · Tue Jan 01 04:00:00 EST 1985 · Energy J.; (United States)

DOI:https://doi.org/10.5547/ISSN0195-6574-EJ-Vol6-NoSI-12· OSTI ID:6017118

Gravelle, J G

Accelerated tax depreciation (established by the Economic Recovery Tax Act of 1981, though partially rolled back by the Tax Equity and Fiscal Responsibility Act of 1982 and the Deficit Reduction Act of 1984) has led to substantially lower effective tax rates for business fixed investment. These changes suggest a reconsideration of the tax subsidy for oil extraction. The findings reported here suggest that the returns on integrated corporations' investments in the acquisition of oil and gas reserves are taxed at rates about the same as for investment in equipment, but considerably below rates applying to structures. Overall, oil extraction remains in a favored position. Recent changes in tax rules for oil and gas extraction have created differentials between producers in different circumstances. When percentage depletion is allowed, the tax benefits are so great as to create negative tax rates. Furthermore, individuals can largely avoid the adverse effects of the minimum tax on intangible drilling costs by capitalizing them and writing them off under the depreciation and investment tax credit rules that apply to equipment. 13 references, 3 tables.

• Research Organization: Library of Congress, Washington, DC
• OSTI ID: 6017118
• Journal Information: Energy J.; (United States), Journal Name: Energy J.; (United States) Vol. 6; ISSN ENJOD
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700* -- Petroleum-- Economics
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03 NATURAL GAS
030600 -- Natural Gas-- Economic
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29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294000 -- Energy Planning & Policy-- Fossil Fuels
ECONOMIC IMPACT
ECONOMIC RECOVERY TAX ACT
ENERGY SOURCES
FINANCIAL INCENTIVES
FLUIDS
FOSSIL FUELS
FUEL GAS
FUELS
GAS FUELS
GASES
INVESTMENT
LAWS
NATURAL GAS
NORTH AMERICA
PETROLEUM
PRODUCTION
RESOURCE DEVELOPMENT
TAXES
USA