Intangible drilling costs
(A) In general
(A)In general#
With respect to all oil, gas, and geothermal properties of the taxpayer, the amount (if any) by which the amount of the excess intangible drilling costs arising in the taxable year is greater than 65 percent of the net income of the taxpayer from oil, gas, and geothermal properties for the taxable year.
(B)Excess intangible drilling costs#
For purposes of subparagraph (A), the amount of the excess intangible drilling costs arising in the taxable year is the excess of—
(i) the intangible drilling and development costs paid or incurred in connection with oil, gas, and geothermal wells (other than costs incurred in drilling a nonproductive well) allowable under section 263(c) or 291(b) for the taxable year, over
(ii) the amount which would have been allowable for the taxable year if such costs had been capitalized and straight line recovery of intangibles (as defined in subsection (b)) had been used with respect to such costs.
(B)(i)#
the intangible drilling and development costs paid or incurred in connection with oil, gas, and geothermal wells (other than costs incurred in drilling a nonproductive well) allowable under section 263(c) or 291(b) for the taxable year, over
(B)(ii)#
the amount which would have been allowable for the taxable year if such costs had been capitalized and straight line recovery of intangibles (as defined in subsection (b)) had been used with respect to such costs.
(C)Net income from oil, gas, and geothermal properties#
For purposes of subparagraph (A), the amount of the net income of the taxpayer from oil, gas, and geothermal properties for the taxable year is the excess of—
(i) the aggregate amount of gross income (within the meaning of section 613(a)) from all oil, gas, and geothermal properties of the taxpayer received or accrued by the taxpayer during the taxable year, over
(ii) the amount of any deductions allocable to such properties reduced by the excess described in subparagraph (B) for such taxable year.
(C)(i)#
the aggregate amount of gross income (within the meaning of section 613(a)) from all oil, gas, and geothermal properties of the taxpayer received or accrued by the taxpayer during the taxable year, over
(C)(ii)#
the amount of any deductions allocable to such properties reduced by the excess described in subparagraph (B) for such taxable year.
(D)Paragraph applied separately with respect to geothermal properties and oil and gas properties#
This paragraph shall be applied separately with respect to—
(i) all oil and gas properties which are not described in clause (ii), and
(ii) all properties which are geothermal deposits (as defined in section 613(e)(2)).
(D)(i)#
all oil and gas properties which are not described in clause (ii), and
(D)(ii)#
all properties which are geothermal deposits (as defined in section 613(e)(2)).
(E)Exception for independent producers#
In the case of any oil or gas well—
(i) In general This paragraph shall not apply to any taxpayer which is not an integrated oil company (as defined in section 291(b)(4)).
(ii) Limitation on benefit The reduction in alternative minimum taxable income by reason of clause (i) for any taxable year shall not exceed 40 percent of the alternative minimum taxable income for such year determined without regard to clause (i) and the alternative tax net operating loss deduction under section 56(a)(4).
(E)(i)In general#
This paragraph shall not apply to any taxpayer which is not an integrated oil company (as defined in section 291(b)(4)).
(E)(ii)Limitation on benefit#
The reduction in alternative minimum taxable income by reason of clause (i) for any taxable year shall not exceed 40 percent of the alternative minimum taxable income for such year determined without regard to clause (i) and the alternative tax net operating loss deduction under section 56(a)(4).