Percentage Depletion AT Risk plus 15% Tax on Royalties

Percentage Depletion deduction taken away!


This week, U.S. Senator Max Baucus, Chairman of the U.S. Senate Committee on Finance, released a tax reform discussion draft that would repeal percentage depletion, an accounting mechanism that allows royalty owners to depreciate their minerals as they are extracted from the ground. Percentage depletion is a critical and appropriate tool for the nation’s mineral owners in every extractive industry. The Royalty Owners and Producers Educational (ROPE) Coalition released the following statement:

“The Chairman’s discussion draft is bad for royalty owners in every state in the nation, bad for consumers, bad for the economy, and bad for U.S. energy security.
This draft targets percentage depletion and a number of other important oil and gas tax policies, including the ability of domestic oil and gas producers to deduct their drilling expenses in the year they occur. This draft proposes to raise taxes 15 percent on royalty owners and significantly cut the value of their private property by making recovery of their minerals uneconomic.This proposal is a bad idea and I hope it is rejected immediately.” 
-Jerry Simmons, ROPE Executive Vice President

Call Senator Baucus. Tell him your name and where you live. Tell him you are a royalty owner, and that you don’t support the plan to repeal PERCENTAGE DEPLETION. Tell him to please change his tax draft.
 
Office of US Senator Max Baucus
202-224-2651
 
You royalty owners are the only hope to keep your percentage depletion deduction. MUST CALL NOW!  

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Replies to This Discussion

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on November 26, 2013 at 8:58am

Wasn't Senator Baucus one of those who lead the charge (and the drafting of) Obamacare?  Don't feel like he's playing with a full deck.

Permalink Reply by Al Cramblett on November 26, 2013 at 9:20am

Since I didn't mention the "full deck" issue when I called, could you mention it when you call?

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on November 26, 2013 at 9:48am

I made no mention of it in my email to him.  I don't want to end up on some NSA list.

Permalink Reply by Al Cramblett on November 26, 2013 at 9:19am

Yes, you typically pay taxes on 85% of the royalty paid due to "depletion".

Permalink Reply by Angela Smith on November 26, 2013 at 1:50pm

Are you sure that the bill proposes to both eliminate the 15% depletion and raise taxes by 15% or is he proposing to eliminate the 15% depletion thereby increasing taxes to royalty owners by 15%?

Permalink Reply by Mud Flaps on November 26, 2013 at 5:46pm

Obamacare already increases taxes on Royalties.  See my recent post on this topic.  People are having to pay a lot of money for this garbage legislation.  I warned that it won't stop there.  They just keep coming for more and more.  Baucus is just the next thief disguised as a legislature to come along with a another fleecing program for you.  Remember. every time they say they've done something for you, they have instead done something to you.

Permalink Reply by jason smith on November 26, 2013 at 7:09pm
Its unfortunate the Democratic party main purpose is raising taxes on landowners for votes confiscating wealth from hardworking Americans.
0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on November 27, 2013 at 4:09am

"If the well stops producing in "paying quantities" before then, can I accelerate the depreciation schedule?"

I believe you can retroactively accelerate the depreciation, but if there are any CPAs out there I'd love to hear a more detailed summation.

Permalink Reply by Al Cramblett on November 27, 2013 at 4:21am

Angela, I think your latter analysis is correct.  I meant to mention the potential

loss of the IDC deduction but was distracted by a couple of phone calls during

my posting.

Permalink Reply by Joseph-Ohio on November 27, 2013 at 1:20am
Thanks for posting Al.
The politicians all have agendas ( D & R alike ).
None appear to coincide with landowner's interests however.
It's a political rat race and the rats seem to be winning.
All IMHO.
Permalink Reply by Joseph-Ohio on November 27, 2013 at 9:07am
Seems to me every new Bill or Law or Code diminishes freedoms / rights / privileges and presents more opportunity to confuse / obfuscate / expand arguments.

There are things that are obviously right as there are things that are obviously wrong.

Seems to me these days that many times new legislation is introduced to justify the obviously wrong.

To me it seems there are fewer times that are not.

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