ebook turbine capital guide to us oil and gas tax benefits 1
This Turbine Capital guide explains federal and state tax benefits available to high-income individuals who invest directly in domestic oil and gas drilling programs (non-operating working interests). It describes major incentives—intangible drilling cost (IDC) expensing, intangible completion costs (ICC), depreciation of tangible drilling costs (typically 7-year MACRS with bonus depreciation), percentage and cost depletion (commonly 15% for small producers), lease operating expense deductions, exceptions to passive activity loss rules for working interests, at-risk limitations (IRC §465), and potential eligibility for the 20% QBI deduction (IRC §199A). The guide also covers deal-structuring, diligence checklists, timing considerations (including the ‘spud within 90 days’ rule), state-tax differences (notably California changes), and comparisons to ETFs/MLPs/royalties. It targets investors evaluating drilling funds (e.g., IronHorse Energy Fund) and emphasizes verifying partnership elections, liability treatment, and documentation to ensure tax benefits withstand scrutiny.
Questions this document answers
70% to 85% of total well cost.
IRC §263(c).
Drilling must start by the 90th day after year-end (commonly treated as drilling commencing by March 31) to deduct IDCs in the year paid.
Typically 7 years (MACRS 7-year property).
40% bonus depreciation (as of 2025, per the guide).