Tax-advantaged Energy Investing

Oil and natural gas from domestic reserves helps to make our country more energy self-sufficient by reducing our dependence on foreign imports. In light of this, Congress has provided tax incentives to stimulate domestic natural gas and oil production financed by private sources. Drilling projects offer many tax advantages and these benefits can greatly enhance the economics. These incentives are not “Loopholes;” they were placed in the Tax Code by Congress to make participation in oil and gas ventures one of the best tax advantaged investments available to accredited investors seeking tax relief.

Your Potential Write-Offs in Year One:

Based on a $100,000 Investment* with Eagle Natural Resources

Intangible Drilling Cost
Tax Deduction

Enjoy up to $80,000 in IDC tax deductions during the 1st year of the venture.

The intangible expenditures of drilling (labor, chemicals, mud, grease, etc.) are usually about (65 to 80%) of the cost of a well. These expenditures are considered “Intangible Drilling Cost (IDC)” and are available in the year the money was invested, even if the well does not start drilling until March 31 of the year following the contribution of capital. (See Section 263 of the Tax Code.)

Tangible Drilling
Cost Tax Deduction

Generate an additional $2,800 in TDC, bringing the total write-off potential in Year 1 to $82,800.

The total amount of the investment allocated to the equipment “Tangible Drilling Costs (TDC)” is 100% tax-deductible. In the example above, the remaining tangible costs may be deducted as depreciation over a seven-year period. (See Section 263 of the Tax Code.)

Active vs. Passive Income

The Tax Reform Act of 1986 introduced into the Tax Code the concepts of “Passive” income and “Active” income. The Act prohibits the offsetting of losses from Passive activities against income from Active businesses. The Tax Code specifically states that a Working Interest in an oil and gas well is not a “Passive” Activity, therefore, deductions can be offset against income from active stock trades, business income, salaries, etc. (See Section 469(c)(3) of the Tax Code).

Small Producers Tax Exemption

The 1990 Tax Act provided some special tax advantages for small companies and individuals. This tax incentive, known as the “Percentage Depletion Allowance”, is specifically intended to encourage participation in oil and gas drilling. This tax benefit is not available to large oil companies, retail petroleum marketers, or refiners that process more than 50,000 barrels per day. It is also not available for entities owning more than 1,000 barrels of oil (or 6,000,000 cubic feet of gas) average daily production. The “Small Producers Exemption” allows 15% of the Gross Income (not Net Income) from an oil and gas producing property to be tax-free

Lease Costs

Lease costs (purchase of leases, minerals, etc.), sales expenses, legal expenses, administrative accounting, and Lease Operating Costs (LOC) are also 100% tax deductible through cost depletion.

This page is displayed as general tax code information related to oil and gas investment.  The following information and Internet URL is provided for your convenience and should not be construed as tax advice from Eagle Natural Resources.

The Tax Code
Benefits for Oil & Gas.

We invite you to spend 40 minutes with us to learn about tax reduction options with direct, US-based, oil and gas investments.

Join James Anthony with Eagle Natural Resources as he shares how accredited investors can lower taxes while concurrently add income-producing assets to their portfolios. The on-demand event is free and open to accredited investors in the U.S.

Eagle Natural Resources, LLC

ENR Operating, LLC RRC # 253075

5445 Legacy Dr. STE 440 Plano TX 75024

Phone: (469) 915-9399

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There are significant risks associated with oil and gas investments. Information found on this site is for general purposes only and is not a solicitation to buy or an offer to sell securities. General information on this site is not intended to be used as individual investment or tax advice. Consult your personal tax advisor concerning the current tax laws and their applicability and effect on your personal tax situation.