III 

109TH CONGRESS 

1ST SESSION S. 280 

To amend the Internal Revenue Code of 1986 to provide for the amortization 

of delay rental payments and geological and geophysical expenditures. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 3, 2005 

Mrs. HUTCHISON introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for the amortization of delay rental payments and geological and geophysical expenditures. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. AMORTIZATION OF DELAY RENTAL PAYMENTS. 

4 (a) IN GENERAL.—Section 167 of the Internal Rev5 enue Code of 1986 (relating to depreciation) is amended 

6 by redesignating subsection (h) as subsection (i) and by 

7 inserting after subsection (g) the following new subsection: 

8 ‘‘(h) AMORTIZATION OF DELAY RENTAL PAYMENTS

9 FOR DOMESTIC OIL AND GAS WELLS.— 
2 

•S 280 IS 

1 ‘‘(1) IN GENERAL.—Any delay rental payment 

2 paid or incurred in connection with the development 

3 of oil or gas wells within the United States (as de4 fined in section 638) shall be allowed as a deduction 

5 ratably over the 24-month period beginning on the 

6 date that such payment was paid or incurred. 

7 ‘‘(2) HALF-YEAR CONVENTION.—For purposes 

8 of paragraph (1), any payment paid or incurred dur9 ing the taxable year shall be treated as paid or in10 curred on the mid-point of such taxable year. 

11 ‘‘(3) EXCLUSIVE METHOD.—Except as provided 

12 in this subsection, no depreciation or amortization 

13 deduction shall be allowed with respect to such pay14 ments. 

15 ‘‘(4) TREATMENT UPON ABANDONMENT.—If 

16 any property to which a delay rental payment relates 

17 is retired or abandoned during the 24-month period 

18 described in paragraph (1), no deduction shall be al19 lowed on account of such retirement or abandon20 ment and the amortization deduction under this sub21 section shall continue with respect to such payment. 

22 ‘‘(5) DELAY RENTAL PAYMENTS.—For purposes 

23 of this subsection, the term ‘delay rental payment’ 

24 means an amount paid for the privilege of deferring 
3 

•S 280 IS 

1 development of an oil or gas well under an oil or gas 

2 lease.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to amounts paid or incurred in tax5 able years beginning after the date of the enactment of 

6 this Act. 

7 SEC. 2. AMORTIZATION OF GEOLOGICAL AND GEO8 PHYSICAL EXPENDITURES. 

9 (a) IN GENERAL.—Section 167 of the Internal Rev10 enue Code of 1986 (relating to depreciation), as amended 

11 by this Act, is amended by redesignating subsection (i) 

12 as subsection (j) and by inserting after subsection (h) the 

13 following new subsection: 

14 ‘‘(i) AMORTIZATION OF GEOLOGICAL AND GEO15 PHYSICAL EXPENDITURES.— 

16 ‘‘(1) IN GENERAL.—Any geological and geo17 physical expenses paid or incurred in connection 

18 with the exploration for, or development of, oil or 

19 gas within the United States (as defined in section 

20 638) shall be allowed as a deduction ratably over the 

21 24-month period beginning on the date that such ex22 pense was paid or incurred. 

23 ‘‘(2) SPECIAL RULES.—For purposes of this 

24 subsection, rules similar to the rules of paragraphs 

25 (2), (3), and (4) of subsection (h) shall apply.’’. 
4 

•S 280 IS 

1 (b) CONFORMING AMENDMENT.—Section 263A(c)(3) 

2 of the Internal Revenue Code of 1986 is amended by in3 serting ‘‘167(h), 167(i),’’ after ‘‘under section’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to amounts paid or incurred in tax6 able years beginning after the date of the enactment of 

7 this Act. 

Æ