Oil and gas tax break expands deductions when prices fall

What it does

This bill increases tax deductions for small oil and gas producers by raising the daily production threshold that qualifies for percentage depletion from 1,000 to 2,000 barrels, and modifies the depletion rate calculation to provide higher deductions when crude oil prices fall below $70 per barrel. The bill benefits oil and gas companies by allowing them to deduct more of their extraction costs from taxable income, reducing their federal tax liability.

Why we flagged it

The bill's operative mechanism is a targeted tax deduction expansion for oil and gas extraction. Despite the 'small producer' framing in the title, the amendments apply to any producer meeting the depletable quantity threshold, and the deduction increase is permanent and indexed to inflation, making this a structural tax subsidy to the sector.

What the text implies

• The $70 price threshold is indexed to Producer Price Index (PPI) for drilling, not general inflation, which may increase the deduction more rapidly than standard COLA adjustments and lock in permanent subsidy growth.
• Removal of the 'taxable income limitation' (§613A(c)(6)(H)) allows depletion deductions to exceed the producer's actual taxable income in a given year, creating carryforward or loss-offset opportunities that amplify the tax benefit.
• The 2,000-barrel threshold captures producers previously ineligible for percentage depletion, expanding the beneficiary pool beyond 'marginal' wells and potentially including mid-sized operations.
• Price-indexed depletion creates a perverse incentive: lower crude prices trigger higher deductions, subsidizing production precisely when market conditions are weakest, potentially prolonging uneconomic extraction.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The bill reduces federal tax revenue by expanding tax deductions for oil and gas producers without offsetting public benefit. While framed as protecting 'small' producers and rural jobs, the mechanism is a direct tax subsidy to an extractive industry, shifting tax burden to other taxpayers or reducing public investment capacity.

Who stands to gain

• oil and gas extraction companies
• independent oil and gas producers
• marginal well operators

Named in the bill

Internal Revenue Code §613A, Internal Revenue Code §613, Internal Revenue Code §45K, Bureau of Labor Statistics, Producer Price Index for Drilling Oil and Gas Wells, oil and gas producers

Where it stands

12 cosponsors: 12 Republicans.

• Mar 20, 2026 — Introduced · Congress.gov: “Introduced in House”
• Mar 20, 2026 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

1 lobbying clients named this bill on 1 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $250,000 in lobbying spend. A filing names 27 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 0% of bills with at least one filing.

Tracey Mann, the sponsor, reported $639,250 in PAC receipts in the 2026 cycle.

• Independent Petroleum Association of America — $250,000 on 1 filing

Lobbying Disclosure Act filings through Jul 18, 2026. A filing shows who paid to lobby on a bill it names, not what changed.