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To amend the Internal Revenue Code of 1986 to allow intangible drilling and development costs to be taken into account when computing adjusted financial statement income.
2/6/2025, 9:06 AM
Summary of Bill HR 662
Intangible drilling and development costs refer to expenses incurred during the process of exploring for and developing oil and gas reserves. These costs are typically associated with activities such as labor, materials, and equipment used in drilling operations.
By allowing these costs to be taken into account when computing adjusted financial statement income, the bill aims to provide tax relief to companies involved in oil and gas exploration and development. This could potentially incentivize investment in these industries and spur economic growth. Overall, the IDC Act is designed to streamline the tax process for companies in the oil and gas sector and make it easier for them to accurately report their financial information. It is important to note that this bill is non-partisan and focuses solely on making technical changes to the tax code.
Congressional Summary of HR 662
Promoting Domestic Energy Production Act
This bill allows corporations to reduce their adjusted financial statement income to account for certain intangible costs related to oil, gas, or geothermal well drilling and development for purposes of calculating the corporate alternative minimum tax.
Under current law, a 15% corporate alternative minimum tax is imposed on a corporation with adjusted financial statement income exceeding an average of $1 billion for a consecutive three-year period (or an average of $100 million for a U.S. corporation that is part of a foreign parent multinational group if the adjusted financial statement income of such group exceeds an average of $1 billion for a consecutive three-year period). Adjusted financial statement income generally is the net income or loss reported on the corporation’s applicable financial statement for a tax year, with adjustments for specific items.
This bill expands the reductions that may be made to a corporation’s adjusted financial statement income to include (1) intangible drilling and development costs incurred by an operator of a domestic oil, gas, or geothermal well that are allowed as a deduction in the current tax year when computing regular taxable income; and (2) any depletion expenses related to the intangible oil, gas, or geothermal well drilling and development costs.
