Energy - Fossil Fuels

Passive Loss Limitations Exemption

Passive business activity refers to any activity in which a taxpayer has an economic interest but does not “materially participate.” Normally, taxpayers are allowed to deduct the losses they incur from passive activities (passive losses), but only an amount equal to income generated from the activity. Any excess of passive losses over passive income in […]

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Amortization for Certain Pollution Control Facilities

Amortization for certain pollution control facilities provides an option to amortize investments in pollution control equipment for coal-fired electric generation plants over seven years. Amortization is a method of depreciation that recovers investment costs evenly (i.e., straight line depreciation) over the recovery period. The standard recovery period for the conventional type of electric generating equipment […]

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Amortization of Geological and Geophysical Expenditures

Geological and geophysical expenditures are the costs oil and gas companies incur when gathering data used to determine where oil and gas is located, and in what amounts, as well as where drilling may be most appropriate. They include seismic surveys, electromagnetic surveys, other types of remote sensing, shallow test drilling and bottom sampling. Amortization […]

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Gas Royalty Relief – Deep and Shallow Water Gas

Oil and gas companies that drill on public lands or in federal waters pay royalties for the oil and gas they extract. The amount of royalties they pay depends on the amount extracted, the market price for oil and gas, and the royalty rate. The Deepwater Royalty Relief Act of 1995 (DWRRA) allowed the Secretary […]

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Industrial Carbon Capture and Sequestration Tax Credit

Carbon capture and sequestration involves separating carbon oxides (COX) from combusted fossil fuels or capturing them directly from the atmosphere. The carbon oxides are then stored (“sequestered”) by either pumping them into underground geologic formations or using them to produce some other product. The technology is predominantly designed to be used with coal, coal-to-liquid or […]

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Last In, First Out Accounting

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 […]

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Master Limited Partnerships for Oil and Gas Companies

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 […]

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Excess of Percentage Over Cost Depletion, Oil and Gas

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 […]

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