Independent Producer and Royalty Owner Exemption

§ 613A. Limitations on percentage depletion in case of oil and gas wells(a) General ruleExcept as otherwise provided in this section, the allowance for depletion under section 611 with respect to any oil or gas well shall be computed without regard to section 613. (b) Exemption for certain domestic gas wells(1) In generalThe allowance for depletion under section 611 shall be computed in accordance with section 613 with respect to—(A) regulated natural gas, and (B) natural gas sold under a fixed contract, and 22 percent shall be deemed to be specified in subsection (b) of section 613 for purposes of subsection (a) of that section. (2) Natural gas from geopressured brineThe allowance for depletion under section 611 shall be computed in accordance with section 613 with respect to any qualified natural gas from geopressured brine, and 10 percent shall be deemed to be specified in subsection (b) of section 613 for purposes of subsection (a) of such section. (3) DefinitionsFor purposes of this subsection—(A) Natural gas sold under a fixed contractThe term “natural gas sold under a fixed contract” means domestic natural gas sold by the producer under a contract, in effect on February 1, 1975, and at all times thereafter before such sale, under which the price for such gas cannot be adjusted to reflect to any extent the increase in liabilities of the seller for tax under this chapter by reason of the repeal of percentage depletion for gas. Price increases after February 1, 1975, shall be presumed to take increases in tax liabilities into account unless the taxpayer demonstrates to the contrary by clear and convincing evidence. (B) Regulated natural gasThe term “regulated natural gas” means domestic natural gas produced and sold by the producer, before July 1, 1976, subject to the jurisdiction of the Federal Power Commission, the price for which has not been adjusted to reflect to any extent the increase in liability of the seller for tax under this chapter by reason of the repeal of percentage depletion for gas. Price increases after February 1, 1975, shall be presumed to take increases in tax liabilities into account unless the taxpayer demonstrates the contrary by clear and convincing evidence. (C) Qualified natural gas from geopressured brineThe term “qualified natural gas from geopressured brine” means any natural gas—(i) which is determined in accordance with section 503 of the Natural Gas Policy Act of 1978 to be produced from geopressured brine, and (ii) which is produced from any well the drilling of which began after September 30, 1978, and before January 1, 1984. (c) Exemption for independent producers and royalty owners(1) In generalExcept as provided in subsection (d), the allowance for depletion under section 611 shall be computed in accordance with section 613 with respect to—(A) so much of the taxpayer’s average daily production of domestic crude oil as does not exceed the taxpayer’s depletable oil quantity; and