Title 26, Internal Revenue CodeRelease 119-110
§43 Enhanced Oil Recovery Credit
Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter A — Determination of Tax Liability › PART IV — CREDITS AGAINST TAX › Subpart D — Business Related Credits › § 43
Summary
Taxpayers can claim a tax credit equal to 15% of their qualified enhanced oil recovery costs in a tax year. The credit is cut back if a government “reference price” for the prior calendar year is higher than $28. The cutback is calculated by taking how much the reference price is over $28, dividing that amount by $6, and applying that ratio to shrink the credit. After 1991 the $28 figure is increased each year for inflation using the GNP implicit price deflator (with the inflation factor published by April 1). The credit only applies to projects that start injecting after December 31, 1990. Qualified enhanced oil recovery costs cover a few kinds of spending: depreciable equipment used in an approved project; certain drilling and development costs that qualify under section 263(c); certain tertiary injectant expenses (see section 193(b)); and building a specific Alaska gas treatment plant that is north of 64° North latitude, readies Alaska gas for a pipeline with at least 2,000,000,000,000 Btu per day capacity, and produces CO2 that is injected into rock formations. A “qualified enhanced oil recovery project” means a U.S. project using one or more tertiary recovery methods (as defined in section 193(b)(3)) that should noticeably increase oil recovery. Operators must get and send a petroleum engineer’s certification to the Secretary that the project meets these rules. Other rules: any tax deduction for costs used to get the credit must be reduced by the credit amount, and the tax basis of property is reduced by the credit. Taxpayers can choose not to use the credit for a year by making an election (or revoking it) within 3 years after the filing deadline for that year, in the form the Secretary requires. Definitions you may see: Reference price — the price number set under section 45K(d)(2)(C). Alaska natural gas — gas from north of 64° North meeting the section’s location and permit rules.
Full Legal Text
Title 26, §43
Internal Revenue Code, Source: USLM XML via OLRC
(a)General rule
For purposes of section 38, the enhanced oil recovery credit for any taxable year is an amount equal to 15 percent of the taxpayer’s qualified enhanced oil recovery costs for such taxable year.
(b)Phase-out of credit as crude oil prices increase
(1)In general
The amount of the credit determined under subsection (a) for any taxable year shall be reduced by an amount which bears the same ratio to the amount of such credit (determined without regard to this paragraph) as—
(A)the amount by which the reference price for the calendar year preceding the calendar year in which the taxable year begins exceeds $28, bears to
(B)$6.
(2)Reference price
For purposes of this subsection, the term “reference price” means, with respect to any calendar year, the reference price determined for such calendar year under section 45K(d)(2)(C).
(3)Inflation adjustment
(A)In general
In the case of any taxable year beginning in a calendar year after 1991, there shall be substituted for the $28 amount under paragraph (1)(A) an amount equal to the product of— (i)
(ii)the inflation adjustment factor for such calendar year.
(B)Inflation adjustment factor
The term “inflation adjustment factor” means, with respect to any calendar year, a fraction the numerator of which is the GNP implicit price deflator for the preceding calendar year and the denominator of which is the GNP implicit price deflator for 1990. For purposes of the preceding sentence, the term “GNP implicit price deflator” means the first revision of the implicit price deflator for the gross national product as computed and published by the Secretary of Commerce. Not later than April 1 of any calendar year, the Secretary shall publish the inflation adjustment factor for the preceding calendar year.
(c)Qualified enhanced oil recovery costs
For purposes of this section
(1) In general
(2)Qualified enhanced oil recovery project
For purposes of this subsection
(A) In general
(B)Certification
A project shall not be treated as a qualified enhanced oil recovery project unless the operator submits to the Secretary (at such times and in such manner as the Secretary provides) a certification from a petroleum engineer that the project meets (and continues to meet) the requirements of subparagraph (A).
(3)At-risk limitation
For purposes of determining qualified enhanced oil recovery costs, rules similar to the rules of section 49(a)(1), section 49(a)(2), and section 49(b) shall apply.
(4)Special rule for certain gas displacement projects
For purposes of this section, immiscible non-hydrocarbon gas displacement shall be treated as a tertiary recovery method under section 193(b)(3).
(5)Alaska natural gas
For purposes of paragraph (1)(D)—
(A)In general
The term “Alaska natural gas” means natural gas entering the Alaska natural gas pipeline (as defined in section 168(i)(16) (determined without regard to subparagraph (B) thereof)) which is produced from a well—
(i)located in the area of the State of Alaska lying north of 64 degrees North latitude, determined by excluding the area of the Alaska National Wildlife Refuge (including the continental shelf thereof within the meaning of section 638(1)), and
(ii)pursuant to the applicable State and Federal pollution prevention, control, and permit requirements from such area (including the continental shelf thereof within the meaning of section 638(1)).
(B)Natural gas
The term “natural gas” has the meaning given such term by section 613A(e)(2).
(d)Other rules
(1)Disallowance of deduction
Any deduction allowable under this chapter for any costs taken into account in computing the amount of the credit determined under subsection (a) shall be reduced by the amount of such credit attributable to such costs.
(2)Basis adjustments
For purposes of this subtitle, if a credit is determined under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.
(e)Election to have credit not apply
(1)In general
A taxpayer may elect to have this section not apply for any taxable year.
(2)Time for making election
An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last date prescribed by law for filing the return for such taxable year (determined without regard to extensions).
(3)Manner of making election
An election under paragraph (1) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe.
Legislative History
Notes & Related Subsidiaries
Inflation Adjusted Items for Certain Tax YearsFor inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table below.
Editorial Notes
Prior Provisions
A prior section 43 was renumbered section 32 of this title. Another prior section 43 was renumbered section 37 of this title.
Amendments
2005—Subsec. (b)(2). Pub. L. 109–58 substituted “section 45K(d)(2)(C)” for “section 29(d)(2)(C)”. Subsec. (c)(5). Pub. L. 109–135 reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of paragraph (1)(D)— “(1) In general.—The term ‘Alaska natural gas’ means natural gas entering the Alaska natural gas pipeline (as defined in section 168(i)(16) (determined without regard to subparagraph (B) thereof)) which is produced from a well— “(A) located in the area of the State of Alaska lying north of 64 degrees North latitude, determined by excluding the area of the Alaska National Wildlife Refuge (including the continental shelf thereof within the meaning of section 638(1)), and “(B) pursuant to the applicable State and Federal pollution prevention, control, and permit requirements from such area (including the continental shelf thereof within the meaning of section 638(1)). “(2) Natural gas.—The term ‘natural gas’ has the meaning given such term by section 613A(e)(2).” 2004—Subsec. (c)(1)(D). Pub. L. 108–357, § 707(a), added subpar. (D). Subsec. (c)(5). Pub. L. 108–357, § 707(b), added par. (5). 2000—Subsec. (c)(1)(C). Pub. L. 106–554 inserted “(as defined in section 193(b))” after “expenses” and struck out “under section 193” after “allowable”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2005 AmendmentAmendment by Pub. L. 109–58 applicable to credits determined under the Internal Revenue Code of 1986 for taxable years ending after Dec. 31, 2005, see section 1322(c)(1) of Pub. L. 109–58, set out as a note under section 45K of this title.
Effective Date
of 2004 Amendment Pub. L. 108–357, title VII, § 707(c), Oct. 22, 2004, 118 Stat. 1550, provided that: “The amendment made by this section [amending this section] shall apply to costs paid or incurred in taxable years beginning after December 31, 2004.”
Effective Date
of 2000 Amendment Pub. L. 106–554, § 1(a)(7) [title III, § 317(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–645, provided that: “The amendment made by this section [amending this section] shall take effect as if included in section 11511 of the Revenue Reconciliation Act of 1990 [Pub. L. 101–508].”
Effective Date
Pub. L. 101–508, title XI, § 11511(d), Nov. 5, 1990, 104 Stat. 1388–485, provided that: “(1) In general.—The
Amendments
made by this section [enacting this section and amending section 38, 39, 196, and 6501 of this title] shall apply to costs paid or incurred in taxable years beginning after
December 31, 1990. “(2) Special rule for significant expansion of projects.—For purposes of section 43(c)(2)(A)(iii) of the Internal Revenue Code of 1986 (as added by subsection (a)), any significant expansion after
December 31, 1990, of a project begun before
January 1, 1991, shall be treated as a project with respect to which the first injection commences after
December 31, 1990.”
Executive Documents
Inflation Adjusted Items for Certain YearsProvisions relating to inflation adjustment of items in this section for certain years were contained in the following: 2026—Internal Revenue Notice 2026–46. 2025—Internal Revenue Notice 2025–32. 2024—Internal Revenue Notice 2024–61. 2023—Internal Revenue Notice 2023–57. 2022—Internal Revenue Notice 2022–19. 2021—Internal Revenue Notice 2021–47. 2020—Internal Revenue Notice 2020–31. 2019—Internal Revenue Notice 2019–36. 2018—Internal Revenue Notice 2018–49. 2017—Internal Revenue Notice 2017–25. 2016—Internal Revenue Notice 2016–44. 2015—Internal Revenue Notice 2015–64. 2014—Internal Revenue Notice 2014–64. 2013—Internal Revenue Notice 2013–50. 2012—Internal Revenue Notice 2012–49. 2011—Internal Revenue Notice 2011–57. 2010—Internal Revenue Notice 2010–72. 2009—Internal Revenue Notice 2009–73. 2008—Internal Revenue Notice 2008–72. 2007—Internal Revenue Notice 2007–64. 2006—Internal Revenue Notice 2006–62. 2005—Internal Revenue Notice 2005–56. 2004—Internal Revenue Notice 2004–49. 2003—Internal Revenue Notice 2003–43. 2002—Internal Revenue Notice 2002–53. 2001—Internal Revenue Notice 2001–54. 2000—Internal Revenue Notice 2000–51. 1999—Internal Revenue Notice 99–45. 1998—Internal Revenue Notice 98–41. 1997—Internal Revenue Notice 97–39. 1996—Internal Revenue Notice 96–41.
Reference
Citations & Metadata
Citation
26 U.S.C. § 43
Title 26, Internal Revenue Code
Last Updated
Sep 22, 2026
Release point: 119-110