On February 1, 2010, President Obama sent to Congress his 2011 budget proposal which continues to call for the repeal of the percentage depletion tax for oil and natural gas wells.  The Office of Management and Budget estimates that the repeal of the percentage depletion tax will bring in to the federal budget $10 billion over 10 years.  This $10 billion will come from YOU, as a royalty owner.  This $10 billion is part of an estimated $36.5 billion of new taxes on oil and gas. 

 

One difference between the proposed 2010 budget and the 2011 budget is that the 2011 budget no longer proposes to repeal credit for oil and gas produced from marginal wells and enhanced oil recovery, this is an indirect benefit for mineral and royalty owners.

 

The percentage depletion income tax deduction on natural gas and oil production has been in the tax code since 1926. The tax incentive allows for “depreciation” of oil and gas wells.  The repeal of this deduction will have a corresponding direct 15% tax increase on individual royalty owners.

 

Call, write, email, fax or stop by a local office of your Congressmen and let them know that as a royalty owner, increasing the taxes on your oil and gas royalty will have a huge impact on you.  This is not a tax that will impact big oil and gas but you as a individual royalty owner.  The National Association of Royalty Owners (NARO) has been quite active at fighting this issue on behalf of all royalty owners.  In some of NARO’s written remarks, they concluded that the average royalty owner is female, widowed, over 60 years old and receives monthly royalty income of less than $500 per month.  

 

Like NARO, SWKROA has members in all 50 states and we need all those members to contact their Congressmen (and all Congressmen in their State even if you are not in their district) and educate them that while their state may not have oil and gas interests you are a constitute of theirs that does have oil and gas interest and this tax will impact you directly. 

 

We will post on our webpage sample letters you may refer to when writing your Congressman as well as the following links to the House of Representative and Senate members. To locate your Congressman you may go to http://www.house.gov and http://www.senate.gov and at the top of both of these sites will be a link to find your Representative or Senator.  Your local library should also be able to assist you in locating your Congressman and if you call our office we would be happy to assist you in finding your Congressman.

 

The President’s proposed 2011 budget can be found at www.whitehouse.gov/omb/budget/Overview and the Summary Tables to the Budget listing the repeal of the percentage depletion income tax is located at www.whitehouse.gov/omb/budget/fy2011/assets/tables.pdf.