Protecting America’s Small Oil and Gas Producers and Rural Jobs Act
- Bill Number
- H.R. 8034
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2026-03-20: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-06-01T22:56:49Z
AI-Generated Summary
Summary of H.R. 8034: Protecting America's Small Oil and Gas Producers and Rural Jobs Act
Purpose
This bill aims to update tax rules for percentage depletion—a deduction that allows oil and gas producers to subtract a fixed percentage of their gross income from wells as a cost of extracting natural resources. It focuses on helping smaller ("marginal") producers by making these deductions more generous, particularly when oil prices are low, to support their operations and related rural jobs.
Key Provisions
- Adjusted Depletion Rate for Marginal Properties (amends IRC Section 613A(c)(6)(C)):
- Sets the base rate at 15%.
- Adds 1 percentage point for each whole dollar below $70 that the prior year's average crude oil reference price falls (capped at 25% total).
- After 2027, the $70 threshold adjusts annually using the Producer Price Index (PPI) for drilling oil and gas wells (a government measure of industry costs).
- Removes Taxable Income Limit (adds IRC Section 613A(c)(6)(H)):
- The depletion deduction for marginal properties is no longer capped at 100% of the property's taxable income (previously required under IRC Sections 613A(d)(1) and 613(a)).
- Increases Production Threshold (amends IRC Section 613A(c)(3)(B)):
- Raises the average daily oil production limit for qualifying for percentage depletion from 1,000 barrels to 2,000 barrels (per property equivalent).
- Effective Date: Applies to tax years starting after December 31, 2026.
Significant Changes to Existing Law
- Replaces fixed depletion formula: Current law has a simpler rate; this introduces a dynamic, oil-price-based rate that increases deductions when prices drop.
- Eliminates income cap: Previously, deductions couldn't exceed the property's net income; now they can, potentially creating tax losses.
- Doubles oil production limit: Expands eligibility for percentage depletion to slightly larger operations.
Potential Impacts
- Government Agencies: IRS and U.S. Treasury face reduced tax revenue from oil/gas producers (exact amount depends on oil prices and production).
- Citizens: Benefits small producers and rural workers by lowering taxes, potentially preserving jobs in oil-dependent areas; indirect costs to taxpayers via lower federal revenue.
- International Relations: None directly; may encourage U.S. domestic production, indirectly affecting global oil markets.
Main Stakeholders Affected
- Primary Beneficiaries: Independent small oil and gas producers with marginal (low-output or low-profit) wells.
- Others: Rural communities relying on oil/gas jobs; federal government (revenue impact).
Notable Legal, Constitutional, or Political Implications
- Legal: Standard tax code amendment; no challenges to constitutionality anticipated (Congress has broad taxing authority under Article I).
- Political: Favors fossil fuel industry amid debates on energy policy; could influence budget deficits but aligns with incentives for domestic energy production. No novel legal issues raised.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (7)
Rep. Estes, Ron [R-KS-4], Rep. Schmidt, Derek [R-KS-2], Rep. Pfluger, August [R-TX-11], Rep. Fallon, Pat [R-TX-4], Rep. Hern, Kevin [R-OK-1], Rep. Kelly, Mike [R-PA-16], Rep. Moran, Nathaniel [R-TX-1]
Recent Actions
- 2026-03-20: Referred to the House Committee on Ways and Means.
- 2026-03-20: Introduced in House
- 2026-03-20: Introduced in House
Bill Versions
- Protecting America’s Small Oil and Gas Producers and Rural Jobs Act — issued 2026-03-20 — PDF (4 pages)