Tax Advantages

In 1986, the U.S. Congress passed the Tax Reform Act. This Act makes a direct investment in domestic oil and gas one of the most tax-advantaged investments available to today’s investor. This act exempts oil and gas working interests from being classified as “Passive Income” (see Section 469(c)(3) of the Tax Code).

Potential tax incentives available to oil and gas investors:

Intangible Drilling Costs (IDCs): For a producing well, approximately 70% – 85% of an investment constitutes what are known as IDCs and may be written off your ordinary income in the first year. IDCs include labor-intensive costs such as the drilling contractor and professional services and are reported to the investor at the end of the year.
Tangible Drilling Costs (TDCs): For a producing well, 15% – 30% of an investment constitutes which may be depreciated over a seven-year period using the Accelerated Cost Recovery System (ACRS). TDCs include pipe, storage tanks, and wellhead equipment, capitalized and depreciated.
Depletion Allowance: If you are an investor in an independent oil and gas project, the current depletion allowance is 15% of your share of the gross income from the property based on average daily production, up to the depletable oil or natural gas quantity. This makes fifteen cents of every gross income dollar non-taxable, therefore producing tax-sheltered income.
Dry Hole: In the event that you invest in a nonproducing well, 100% of all dollars invested may be written off as a loss against ordinary income in the first year.

The above examples are for general information only and not intended to be construed as individual tax advice. Consult your personal tax advisor concerning the applicability and effect on your personal tax situation. Tax laws change from time to time and there can be no guarantee of the interpretation of the tax laws.

The public portion of this site contains only general information regarding classes of products and services that are designed to meet the needs of qualified investors. In order to receive any information on actual investment vehicles you must meet our accreditation qualifications. This is not an offer to sell or solicitation of an offer to buy any security listed herein. Such offer may only be made by written prospectus in a jurisdiction wherein the offering is duly registered or exempt therefrom. Please see our Due Diligence page, which outlines important information from the US Securities and Exchange Commission (SEC) on recognizing and avoiding oil and gas investment scams. For the complete publication, see www.sec.gov/investor/pubs/oilgasscams.htm.

Energy investments are speculative and involve a high degree of risk, oil and natural gas wells are naturally depleting assets, cash flows and returns may vary and are not guaranteed. Past performance is no indication of future performance.