Protecting America’s Small Oil and Gas Producers and Rural Jobs Act
- Bill Number
- S. 4604
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 2
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2026-05-20: Read twice and referred to the Committee on Finance.
- Last Updated
- 2026-06-24T11:03:30Z
AI-Generated Summary
Purpose of the Legislation
This bill amends the Internal Revenue Code of 1986 to adjust tax rules on percentage depletion for oil and gas wells, with the goal of supporting small producers operating marginal properties.
Key Provisions
- Short Title: The Act is named the "Protecting America's Small Oil and Gas Producers and Rural Jobs Act."
- Modified Depletion Rate for Marginal Properties: Updates the calculation of the applicable percentage under section 613A(c)(6)(C) to a base of 15 percent plus an additional 1 percentage point for each dollar by which $70 exceeds the prior year's reference price for crude oil (with a cap at 25 percent); adds an annual adjustment based on the Producer Price Index for Drilling Oil and Gas Wells starting after 2027.
- Removal of Taxable Income Limitation: Exempts depletion allowances for marginal properties from the taxable income limit in section 613A(c)(6)(H) and related rules in section 613.
- Increased Depletable Quantity: Raises the limit in section 613A(c)(3)(B) from 1,000 barrels to 2,000 barrels per day.
- Effective Date: Applies to taxable years beginning after December 31, 2026.
Significant Changes to Existing Law
The bill alters three parts of section 613A of the Internal Revenue Code:
- Revises the formula for the depletion percentage rate on marginal oil and gas properties to tie it more closely to oil prices and inflation via the Producer Price Index.
- Eliminates the taxable income limitation that previously capped depletion deductions for these properties.
- Doubles the daily production threshold qualifying for percentage depletion treatment.
These represent targeted expansions of existing tax benefits for marginal wells.
Potential Impacts
- On government agencies: May reduce federal tax revenue collected by the Internal Revenue Service from oil and gas operations, with possible effects on budgeting for energy-related programs.
- On citizens: Could support employment in rural areas tied to small-scale oil and gas production by lowering tax burdens on qualifying wells.
- On international relations: No direct provisions address foreign entities or trade, though changes in domestic production incentives might indirectly influence U.S. energy output and global markets.
Main Stakeholders Affected
- Small oil and gas producers operating marginal properties.
- Workers and communities in rural areas dependent on these operations.
- The Internal Revenue Service, which would administer the revised rules.
- Broader energy sector participants and federal taxpayers, due to shifts in tax liabilities and revenue.
Notable Legal, Constitutional, or Political Implications
The legislation makes technical adjustments within established tax authority under the Internal Revenue Code, without raising apparent constitutional issues related to taxation powers. It focuses on domestic energy tax policy and may influence debates on incentives for fossil fuel production versus other energy sources.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (6)
Sen. Cassidy, Bill [R-LA], Sen. Moran, Jerry [R-KS], Sen. Lankford, James [R-OK], Sen. Daines, Steve [R-MT], Sen. Moreno, Bernie [R-OH], Sen. Ricketts, Pete [R-NE]
Recent Actions
- 2026-05-20: Read twice and referred to the Committee on Finance.
- 2026-05-20: Introduced in Senate
Bill Versions
- Protecting America’s Small Oil and Gas Producers and Rural Jobs Act — issued 2026-05-20 — PDF (4 pages)