Oil and gas—reference prices for 2021, inflation adjustment factor and phase-out for enhanced oil recovery credit
Three IRS notices providing information for taxpayers in the oil and gas sector
Three IRS notices providing information for taxpayers in the oil and gas sector
The Internal Revenue Bulletin (IRB) 2022-18 (dated May 2, 2022) includes three IRS notices providing information for taxpayers in the oil and gas sector.
The IRB synopses summarize the three notices as follows:
- Notice 2022-17 publishes the reference price under section 45K(d) (2)(C) for calendar year 2021. The reference price applies in determining the amount of the enhanced oil recovery credit under section 43, the marginal well production credit for qualified crude oil production under section 45I, and the applicable percentage under section 613A to be used in determining percentage depletion in the case of oil and natural gas produced from marginal properties.
- Notice 2022-18 provides the applicable reference price for qualified natural gas production from qualified marginal wells during tax years beginning in calendar year 2021 for the purpose of determining the marginal well production credit under section 45I. The applicable reference price for tax years beginning in calendar year 2021 is $1.52 per 1,000 cubic feet. The notice also provides the credit amount used for the purpose of determining the marginal well production credit. The credit amount for tax years beginning in calendar year 2021 is $0.67 per 1,000 cubic feet.
- Notice 2022-19 announces the inflation adjustment factor and phase-out amount for the enhanced oil recovery credit for tax years beginning in the 2022 calendar year. Because the reference price for the 2021 calendar year ($65.90) exceeds $28 multiplied by the inflation adjustment factor for the 2022 calendar year ($28 multiplied by 1.8607 = $52.10) by $13.80, the enhanced oil recovery credit for qualified costs paid or incurred in 2022 is phased-out completely.
Read the IRS notices in IRB-2022-18 [PDF 844 KB]
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.