Energy

Last-in, first-out (LIFO) is a method for estimating the value of a company’s inventory against the value of goods sold in a given year. A taxpayer’s gross profit from the sale of goods is determined by subtracting the cost of goods sold from gross receipts. Cost of goods sold generally is determined by adding the […]

A Master Limited Partnership (MLP) is a partnership, or a limited liability company (LLC) with interests that are traded on a public exchange or an over-the-counter market, like stock in a corporation. MLPs are treated essentially as an aggregation of the individual investors, and thus income is taxed as individual income for the investors rather […]

Businesses are generally allowed to recoup capital costs associated with acquiring or creating an asset by deducting these costs from their taxable income. Typically, the costs are depreciated—deducted each year in proportion to the remaining useful life of the asset, corresponding to the income it generates. For natural resource assets, the costs of acquiring the […]

Created by the Tax Reform Act of 1986, the Modified Accelerated Cost Recovery System (MACRS) is the system within the Internal Revenue Code for determining the depreciable lives of assets. Businesses “recover” the costs of tangible property (assets) by making annual deductions from their taxable income for depreciation over the specified life of the property. […]

Expensing of costs associated with exploration and development refers to the ability of some extractive industries to deduct these costs fully from their taxable income immediately or as they are incurred rather than waiting for those activities to generate income. This is an exception to general tax rules, which normally require companies to capitalize these […]