Expensing of Exploration and Development Costs, Other Fuels


Energy - Fossil Fuels

Subsidy Type

Tax Expenditure

Committees of Jurisdiction

House Committee on Ways and Means, Senate Finance Committee

$40 FY 23 Budget Score (in mil.)
$400 FY 23-32 Budget Score (in mil.)

Established for this category in 1966, the 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 costs (i.e. depletion or depreciation) over the life of the asset. Costs that can be expensed by coal companies include excavating mines, and the construction of shafts and tunnels. Noncorporate coal producers may fully expense their costs, while corporate coal producers may expense 70 percent of their costs and deduct the remaining 30 percent over 60 months.

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