Protecting America’s Small Oil and Gas Producers and Rural Jobs Act

Bigger tax deduction for small wells

If enacted, owners of small oil and gas wells would be able to claim larger percentage depletion deductions. The depletable quantity would increase from 1,000 barrels to 2,000 barrels. The depletion rate would be 15% plus 1 percentage point for each whole dollar that $70 exceeds the prior calendar year's reference price, but the rate could not exceed 25%. For tax years beginning after 2027, the $70 amount used in that formula would be raised by a Producer Price Index adjustment compared to 2026. The bill would also remove the taxable income limit for the portion of depletion calculated under the marginal-properties rule. This would apply to taxable years beginning after December 31, 2026.