Oil and gas tax break buried in 'domestic energy' bill
H.R. 662 — Promoting Domestic Energy Production Act · Filed by Mike Carey (R-OH) · 43 cosponsors · Introduced Jan 23, 2025 · Referred to committee
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What it does
This bill amends the tax code to allow oil and gas companies to deduct intangible drilling and development costs (costs of drilling wells, not physical equipment) when calculating their adjusted financial statement income for tax purposes. Currently, these costs are treated differently for tax and accounting purposes; the bill aligns the two, allowing companies to reduce their taxable income by these drilling expenses, effective for tax years starting in 2026.
Why we flagged it
The bill's operative mechanism is a targeted tax deduction for a single industry sector. It reduces the tax treatment of drilling costs, allowing companies to claim deductions previously unavailable, functioning as a direct tax subsidy to fossil fuel producers.
What the text implies
- The bill reduces federal revenue without a corresponding public investment or environmental condition, effectively subsidizing oil and gas extraction at taxpayer expense.
- Aligning tax and accounting treatment for drilling costs may incentivize increased drilling activity by improving after-tax returns on exploration, potentially accelerating fossil fuel development.
The full analysis lists 3 implications of this text.
Who stands to gain
oil and gas exploration and production companies; integrated energy companies with upstream operations; independent oil and gas producers