Oil and Gas Taxation: Fundamentals (OILF)

Minot Grand International
8 CPE Hours
$250 Member ($300 Nonmember)
Add $25 after 8/9/2010

Instructor: John C. Tripp, Ph.D., CPA

This course will cover the fundamental concepts of income taxation of the oil and gas industry with a primary emphasis on the oil and gas producer. The tax treatment of costs incurred in the exploration, acquisition, development and production of oil and gas will be covered. The materials for this program include a complete copy of the IRS MSSP on the Oil and Gas Industry. The author’s outlines are cross referenced to the MSSP as well as CCH’s recently published treatise Oil and Gas - Federal Income Taxation (2010 Edition). These reference materials will be used to highlight the IRS’s position on various oil and gas tax questions, cases and revenue rulings. Recently published oil and gas industry Coordinated Issue Papers will also be discussed. The taxation of the exploration and development of natural resources is very specific to the industry and very different from regular tax accounting rules. Concepts like the “pool of capital” doctrine, that allows certain tax free conveyances of oil and gas property interests, are not applicable to any other industry. Other very specific rules regarding geological and geophysical expenses, the current deduction for IDCs, special depreciation recovery periods and cost and percentage depletion are unique to this industry. If CPAs or their clients are involved in the oil and gas business the knowledge of these special industry tax rules is essential. Any new industry rules promulgated during President Obama’s administration will be covered in detail.

Objectives:

  • To gain an understanding of the upstream operations of the oil and gas industry and to understand the nomenclature used to describe oil and gas mineral interests and their economic characteristics.
  • To understand the basic conveyancing transactions common in the oil and gas industry and to understand the tax implications arising from those conveyances.
  • To identify and determine the proper tax treatment for geological and geophysical expenditures.
  • To compute depreciation on lease and well equipment under MACRS rules or the units of production method.
  • To identify intangible drilling and development costs (IDCs) and to understand the requirements that must be met in order to take a current deduction for IDCs.

Major Topics:

  • Working definitions for oil and gas mineral interests and other industry terminology, including the unit of property and an economic interest
  • Geological and geophysical costs
  • Proper tax accounting for the leasing transaction, the subleasing transaction, including lease bonus, sublease bonus, and delay rental payments
  • Depreciation issues specific to oil and gas exploration and production companies
  • Proper tax treatment of IDCs, including what they are, the election to currently expense, and an election to capitalize IDCs under section 59(e)

Who should attend: Tax professionals involved in oil and gas industry's upstream operations and tax professionals whose clients own oil and gas mineral interests. The people who will most benefit from this program are tax staff, tax supervisors and managers moving into the oil and gas industry. This course will also serve as a great review for senior level managers and practitioners that have had prior experience in the industry and are seeking to reenter the field.

Level: Update
Developer: John Tripp