H.R. 383 — End Oil and Gas Tax Subsidies Act of 2025

This section revises the amortization period for geological and geophysical expenditures (i.e., costs for data acquisition such as seismic surveys used to identify oil and gas reserves) to a 7-year period (from 24 months) and strikes paragraph (5) (which coordinates the amortization with the election under IRC §59(e) to amortize certain expenses over 10 years). The changes apply to amounts paid or incurred in taxable years beginning after December 31, 2024. (Thus, taxpayers primarily defer deductions for such costs over a longer period.)

This section terminates the tax credit for producing oil and gas from marginal wells for taxable years beginning after December 31, 2024. (Thus, taxpayers may claim the credit—up to $3 per barrel of oil equivalent or $0.50 per thousand cubic feet of gas, subject to phaseout—for production attributable to taxable years beginning on or before December 31, 2024.)

This section terminates the enhanced oil recovery tax credit (i.e., IRC §43) for amounts paid or incurred in taxable years beginning after December 31, 2024. (The credit equals 15% of qualified costs for advanced recovery techniques—such as thermal, gas flooding, or chemical flooding—to extract oil from reservoirs after primary and secondary production; thus, it remains available through 2024 for calendar-year taxpayers.)

This section terminates the exception under IRC §263(c) allowing taxpayers to immediately deduct intangible drilling and development costs (IDCs)—such as labor, fuel, and supplies—for oil and gas wells for amounts paid or incurred after December 31, 2024. (Thus, taxpayers must capitalize and recover such costs through depreciation or amortization.)

This section repeals the percentage depletion allowance for oil and gas wells (i.e., IRC §613A) for property placed in service after December 31, 2024. (As background, percentage depletion permits oil and gas producers to deduct a specified percentage—generally 15%—of gross income from the property as a depletion allowance, subject to limits and often exceeding cost recovery.) It also makes conforming amendments to 10 other IRC sections (e.g., §§45H, 57, 291, 613, 705, 993, 1202, 1367, and 1446) to remove or adjust references to §613A.

This section repeals the tax deduction for qualified tertiary injectants (i.e., carbon dioxide or nitrogen used in qualified enhanced oil or natural gas recovery projects) for taxable years beginning after December 31, 2024. (Thus, such costs must be capitalized and recovered through depletion or depreciation after that date.)

This section repeals the exception to passive activity loss limitations for working interests in oil and gas properties (i.e., under current law, such interests are treated as nonpassive activities, allowing losses to offset nonpassive income), effective for taxable years beginning after December 31, 2024. (Thus, after 2024, losses from such working interests are subject to passive loss rules and deductible only against passive income.)

This section excludes the production, refining, processing, transportation, or distribution of oil, gas, or any primary product thereof from the qualified business income deduction under Section 199A of the Internal Revenue Code (i.e., up to 20% deduction available to owners of pass-through businesses such as sole proprietorships, partnerships, and S corporations). The exclusion applies to taxable years beginning after December 31, 2024.

This section prohibits major integrated oil companies from using the last-in, first-out (LIFO) inventory accounting method under IRC §472(b). A major integrated oil company is a crude oil producer with average daily worldwide production of at least 500,000 barrels, gross receipts exceeding $1 billion, and average daily refinery runs (of the taxpayer and related persons) exceeding 75,000 barrels in the taxable year; special aggregation rules apply to controlled groups and related persons with significant ownership interests (i.e., 15% or more). The prohibition applies to taxable years beginning after December 31, 2024, with changes in accounting method treated as initiated by the taxpayer with Treasury consent and any required IRC §481 adjustments taken into account ratably over a period of up to eight taxable years.

This section establishes special rules under new IRC §901(n) limiting the foreign tax credit for dual capacity taxpayers (i.e., persons subject to a foreign levy who receive a specific economic benefit from the foreign country or U.S. possession, per regulations). For amounts paid or accrued with respect to combined foreign oil and gas income, such payments are not considered taxes eligible for credit to the extent they exceed the amount a non-dual capacity taxpayer would pay (per regulations). (Thus, this reduces the credit available to oil and gas companies receiving such benefits, increasing their U.S. tax liability.) The rules apply to taxes paid or accrued in taxable years beginning after December 31, 2024, except to the extent contrary to a U.S. treaty obligation.

This section revises the definition of "crude oil" for purposes of the Oil Spill Liability Trust Fund excise tax (imposed by IRC §4611 on crude oil received at U.S. refineries and certain imported petroleum products) to explicitly include crude oil condensates, natural gasoline, bitumen or bituminous mixtures, oil derived from such mixtures (including from tar sands), and oil derived from kerogen-bearing sources (including oil shale). (As background, the excise tax—currently at $0.09 per barrel—funds oil spill response, cleanup, and natural resource damages under the Oil Pollution Act of 1990.) It further (1) authorizes the Secretary of the Treasury to classify additional pipeline-, vessel-, rail-, or truck-transported fuel feedstocks or finished fuel products as crude oil or petroleum products subject to the tax if consistent with the Oil Pollution Act definition of oil and produced in commercial quantities posing significant spill hazards; and (2) makes a conforming technical amendment by striking language limiting crude oil to production "from a well located." The amendments apply to amounts received or entered on or after the date of enactment.