Sponsors (7)
The bill increases tax benefits and cash flow for oil and gas producers—supporting marginal wells and local energy jobs—but does so at the expense of federal revenue, with potential environmental trade‑offs and added compliance complexity.
Oil and gas producers (especially small operators) can take substantially larger depletion deductions—raising the percentage to as much as 25% and increasing the depletable quantity per unit—improving after‑tax cash flow for marginal wells and small energy businesses.
Indexing the $70 base by a PPI measure preserves the real value of the depletion calculation over time, preventing inflation from eroding the benefit for producers.
By increasing deductions and stabilizing their value, the changes make marginal well operations and small producers more economically viable, which can support local jobs and sustained domestic energy production.
The tax changes will reduce federal revenue, which could increase budget deficits or force reductions or reallocations in other government spending.
These benefits primarily accrue to the fossil fuel industry, potentially tilting incentives toward oil and gas production and away from clean energy investment and decarbonization goals.
The indexing and reference‑price calculations add administrative complexity and compliance burden for taxpayers and the IRS, requiring additional tracking and annual adjustments.
Based on analysis of 2 sections of legislative text.
Increases and indexes percentage depletion and doubles depletable barrels per unit for marginal oil and gas properties, and relaxes limits on using that depletion.
Official title: Amend the Internal Revenue Code of 1986 to modify certain percentage depletion rules with respect to oil and gas wells.
Introduced May 20, 2026 by Roger Wayne Marshall · Last progress May 20, 2026
Changes to the tax code increase and relax limits on percentage depletion for marginal oil and gas properties, raise the per-unit depletable oil quantity, and tie future adjustments to a Producer Price Index. The modifications boost the permitted depletion percentage (15% plus an adjustment tied to crude price, capped at 25%), exempt that portion from certain taxable income limitations, double the depletable barrels per unit from 1,000 to 2,000, and apply to tax years beginning after December 31, 2026.