(EMAILWIRE.COM, April 07, 2011 ) Lexington, KY - Why does the U.S. government offer something like this? Diversified and seasoned investors almost always have a good percentage of oil and gas investments but does the average U.S. citizen know of these incentives?

Ignorance of the law is no excuse for breaking it nor taking advantage of it. International Journalism Review (IJR) continues its research and analysis on the energy arguments that have become a huge part of the Obama administration and just about every presidency prior as well.
Most people don't realize that oil and gas investments can almost entirely be written off and many of these oil and gas wells continue to profit for ten to twenty years.

Here are some facts dictated by section 263 of the tax code. The intangible expenditures of drilling (labor, chemicals, grease, etc.) are usually about (65 to 80%) of the cost of a well. These expenditures are 100% deductible during the first year. The tangible drilling cost tax deduction sees the total amount of the investment allocated to the equipment is 100% tax deductible. Tangible costs may be deducted as depreciation over a seven-year period, the cost savings can easily be transferred to the investor.

Congressional incentives encourage domestic petroleum development. Congress has provided tax incentives to stimulate domestic natural gas and oil production. There are several tax credits in relation to oil or natural gas production. The Enhanced Oil Recovery Credit is applied to certain project costs incurred to enhance a well’s oil or natural gas production. This credit is up to 15% of the costs incurred to enhance production.

There is also a small producers tax exemption. The “Small Producers Exemption” allows 15% of the Gross Income (not Net Income) from an oil and gas producing property to be tax-free. In addition lease costs sales expenses, legal expenses, administrative accounting, and lease operating costs are 100% tax deductible through cost depletion.
One of the most interesting aspects of the tax code is active vs. passive income.

The tax code specifically states that a Working Interest in an oil and gas well is not a “Passive” Activity, therefore, deductions can be offset against income from active stock trades, business income, salaries, etc.
As with any investment IJR recommends the investor to do their research before choosing any investment. Almost any investment comes with a certain amount of risk. Although there are a few government allowed general investments that offer tax benefits and income relief, IJR uncovered none with more benefits then those described under section 263 of the tax code. IJR has previously unveiled that most major Oil and Natural Gas companies are concentrating their exploration efforts outside of the Continental United States, however, there are ample opportunities for investors to invest in domestic drilling opportunities.
Chris Sloan / Senior Journalist / M.S.

International Journalism Review / http://www.InternationalJournalismReview.com
internationaljournalismreview@gmail.com / 347 882 4943 or 949 533 8454

Contact Information:
International Journalism Review
Chris Sloan / Senior Journalist / M.S.
Tel: 8058077201
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