Insights

On Monday President Obama outlined a few details of his 2011 budget package. These details will have a significant impact on the coal industry as well as the oil and gas sector. A few of the proposed changes include:

1) Elimination of percentage depletion deduction for oil and gas producers and related royalty recipients
2) Elimination of IDC (Intangible Drilling Cost) deduction
3) Elimination of Section 199, domestic producer’s activities deduction, for oil and gas businesses
4) Elimination of the exception under the passive loss rules for working interest in oil and gas properties
5) Elimination of percentage deletion deduction for coal mining business and related royalty recipients
6) Elimination of Section 199, domestic producer’s activities deduction for coal mining businesses
7) Elimination of the election to expense exploration and development costs for coal companies
8) Elimination of the deduction for tertiary injectants for oil and gas businesses

It remains to be seen what the final form of these budget proposals will be but, if passed, the above proposed changes will dramatically impact the cost of doing business for taxpayers in the coal and oil and gas industries. Stay tuned for more updates.

Schneider Downs provides accounting, tax and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA, and Columbus, OH.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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