24, 1992, repealed the excess
percentage depletion preference for tax years beginning after 1992 - except for integrated oil companies (large retailers and refiners).
Accordingly, 75% of the excess of
percentage depletion over cost depletion will be subject to the alternative minimum tax (AMT).
Landowners are more likely to qualify for
percentage depletion. The amount of the
percentage depletion deduction is 15% of the taxpayer's gross income from the property, limited to the lesser of the taxpayer's taxable income from the property or 65% of the taxpayer's taxable income.
Percentage depletion in individual layers and total column.
*
Percentage depletion was designed to increase overall oil and gas production and small petroleum producers.
It's 7 times less costly than the "
percentage depletion allowance," one of many tax breaks bestowed upon the oil industry, which continues to report enormous profits.
There are a number of deductions specific to the oil and gas industry, such as the ability to expense intangible drilling costs (IDCs) and to claim
percentage depletion instead of cost depletion.
* Suspension of the 100 percent taxable income limit on
percentage depletion deductions for oil and gas production from marginal properties;