We have put together some points on energy tax policy that have a direct affect on your royalty income. For the past 4 budgets President Obama has requested that Congress repeal oil and gas tax deductions that are only used by independent domestic producers and royalty owners. Including: Percentage Depletion and Intangible Drilling Costs (IDC). President Obama calls these tax deductions government subsidies.
If you make $500/month in royalty income your annual depletion allowance would be $900. Under the Obama administration?s policies you would lose this $900 deduction. If domestic independent producers lose their IDC deduction they estimate drilling 30% fewer wells. That's 30% fewer lease bonus and royalty payments. Repeal of percentage depletion and IDC is a tax increase on domestic production. After implementation of the Windfall Profits Tax in 1980 the Congressional Research Service stated that: "The WPT reduced domestic production between 3 and 6%, and increased oil imports from between 8 and 16% . . . " This made the U.S. more dependent upon imported oil. From the White House web site . . . "President Obama has repeatedly called on Congress to eliminate the wastefultax breaks for oil and gas industry . . ."