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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 5198 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  2d Session
                                S. 5198

   To amend the Internal Revenue Code of 1986 to provide for oil and 
 natural gas well remediation and restoration accounts, and for other 
                               purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 25, 2024

 Mr. Marshall (for himself and Mr. Lankford) 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 oil and 
 natural gas well remediation and restoration accounts, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Energy Producers Performance 
Enhancement Act''.

SEC. 2. OIL AND NATURAL GAS WELL REMEDIATION AND RESTORATION ACCOUNTS.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new section:

``SEC. 199B. OIL AND NATURAL GAS REMEDIATION AND RESTORATION ACCOUNTS.

    ``(a) In General.--In the case of an eligible small producer, there 
shall be allowed as a deduction for the taxable year an amount equal to 
the aggregate amount paid in cash during such taxable year to an oil 
and natural gas remediation and restoration account for which the 
eligible small producer is the account beneficiary.
    ``(b) Limitation.--
            ``(1) In general.--The amount allowable as a deduction 
        under subsection (a) to any taxpayer shall not exceed $35,000.
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2025, the $35,000 amount in paragraph 
                (1) shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2024' 
                        for `calendar year 2016' in subparagraph 
                        (A)(ii) thereof.
                    ``(B) Rounding.--Any increase determined under 
                subparagraph (A) which is not a multiple of $1,000 
                shall be rounded to the nearest multiple of $1,000.
    ``(c) Eligible Small Producer.--For purposes of this section--
            ``(1) In general.--The term `eligible small producer' 
        means, with respect to any taxable year, any taxpayer--
                    ``(A) which had no more than 500 full-time 
                equivalent employees (as defined in section 45R(d)) for 
                the preceding taxable year, and
                    ``(B) which--
                            ``(i) is allowed a deduction under section 
                        611 with respect any oil or gas well, and
                            ``(ii) computes all such deductions in 
                        accordance with section 613 by reason of the 
                        application of subsections (b) or (c) of 
                        section 613A.
            ``(2) Aggregation.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52 or 
        subsection (m) or (o) of section 414 shall be treated as one 
        person for purposes of paragraph (1).
    ``(d) Oil and Natural Gas Remediation and Restoration Account.--For 
purposes of this section--
            ``(1) In general.--The term `oil and natural gas 
        remediation and restoration account' means a trust created or 
        organized in the United States as an oil and natural gas 
        remediation and restoration account exclusively for the purpose 
        of paying the qualified well capping, closing, and remediation 
        costs of the account beneficiary, but only if the written 
        governing instrument creating the trust meets the following 
        requirements:
                    ``(A) Except in the case of a rollover contribution 
                described in subsection (f)(5), no contribution will be 
                accepted--
                            ``(i) unless it is in cash, or
                            ``(ii) to the extent it exceeds the dollar 
                        amount in effect under subsection (b).
                    ``(B) The trustee is a bank (as defined in section 
                408(n)) or such other person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such other person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
                    ``(D) The interest of an account beneficiary in the 
                balance in the account is nonforfeitable.
            ``(2) Qualified well capping, closing, and remediation 
        costs.--The term `qualified well capping, closing, and 
        remediation costs' means amounts paid or incurred by an account 
        beneficiary which are related to the capping, closing, and 
        remediation of oil producing, injection, and natural gas wells, 
        including--
                    ``(A) costs associated with meeting Federal, state, 
                or tribal regulatory and permitting requirements 
                associated with capping, closing, and remediating an 
                oil producing, injection, or natural gas well,
                    ``(B) labor costs associated with removing oil 
                producing, injection, and natural gas well 
                infrastructure,
                    ``(C) the cost of materials used to cap, close, and 
                remediate an oil producing, injection, or natural gas 
                well, and
                    ``(D) labor costs associated with the application 
                of materials and the use of equipment to prepare, cap, 
                close, and remediate an oil producing, injection, or 
                natural gas well.
    ``(e) Tax Treatment of Accounts.--
            ``(1) In general.--An oil and natural gas remediation and 
        restoration account is exempt from taxation under this 
        subtitle. Notwithstanding the preceding sentence, any such 
        account is subject to the taxes imposed by section 511 
        (relating to imposition of tax on unrelated business income of 
        charitable, etc. organizations).
            ``(2) Account terminations.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 408(e) shall apply to oil and 
        natural gas remediation and restoration accounts, and any 
        amount treated as distributed under such rules shall be treated 
        as not used to pay qualified well capping, closing, and 
        remediation costs.
    ``(f) Treatment of Distributions.--
            ``(1) Amounts used for qualified well capping, closing, and 
        remediation costs.--Any amount paid or distributed out of an 
        oil and natural gas remediation and restoration account which 
        is used exclusively to pay qualified well capping, closing, and 
        remediation costs of any account beneficiary shall not be 
        includible in gross income.
            ``(2) Inclusion of amounts not used for qualified well 
        capping, closing and remediation costs.--Any amount paid or 
        distributed out of an oil and natural gas remediation and 
        restoration account which is not used exclusively to pay the 
        qualified well capping, closing, and remediation costs of the 
        account beneficiary shall be included in the gross income of 
        such beneficiary.
            ``(3) Treatment of excess contributions returned before due 
        date of return.--Rules similar to the rules of section 
        223(f)(3) shall apply for purposes of this section.
            ``(4) Additional tax on distributions not used for 
        qualified well capping, closing, and remediation costs.--The 
        tax imposed by this chapter on the account beneficiary for any 
        taxable year in which there is a payment or distribution from 
        an oil and natural gas remediation and restoration account of 
        such beneficiary which is includible in gross income under 
        paragraph (2) shall be increased by 25 percent of the amount 
        which is so includible.
            ``(5) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of subparagraphs (A) and (B).
                    ``(A) In general.--Paragraph (2) shall not apply to 
                any amount paid or distributed from an oil and natural 
                gas remediation and restoration account to the account 
                beneficiary to the extent the amount received is paid 
                into an oil and natural gas remediation and restoration 
                account for the benefit of such beneficiary not later 
                than the 60th day after the day on which the 
                beneficiary receives the payment or distribution.
                    ``(B) Limitation.--This paragraph shall not apply 
                to any amount described in subparagraph (A) received by 
                an individual from an oil and natural gas remediation 
                and restoration account if, at any time during the 1-
                year period ending on the day of such receipt, such 
                individual received any other amount described in 
                subparagraph (A) from an oil and natural gas 
                remediation and restoration account which was not 
                includible in the individual's gross income because of 
                the application of this paragraph.
    ``(g) Natural Gas.--For purposes of this section, the term `natural 
gas' has the meaning given such term under section 613A(e)(2).''.
    (b) Excess Contributions.--
            (1) In general.--Section 4973(a) of the Internal Revenue 
        Code of 1986 is amended by striking ``or'' at the end of 
        paragraph (5), by inserting ``or'' at the end of paragraph (6), 
        and by inserting after paragraph (6) the following new 
        paragraph:
            ``(7) an oil and natural gas remediation and restoration 
        account (within the meaning of section 199B),''.
            (2) Excess contributions.--Section 4973 of such Code is 
        amended by adding at the end the following new subsection:
    ``(i) Excess Contributions to Oil and Natural Gas Remediation and 
Restoration Accounts.--
            ``(1) In general.--In the case of an oil and natural gas 
        remediation and restoration account, the term `excess 
        contributions' means the amount by which the amount contributed 
        for the taxable year to such account (other than contributions 
        under section 199B(f)(5)) exceeds the contribution limitation 
        determined under section 199B(d)(1)(A)(ii).
            ``(2) Special rule.--For purposes of this subsection, any 
        contribution which is distributed out of the account in a 
        distribution to which section 199B(f)(3) applies shall be 
        treated as an amount not contributed.''.
    (c) Application of Prohibited Transaction Rules.--
            (1) In general.--Section 4975(e)(1) of the Internal Revenue 
        Code of 1986 is amended by striking ``or'' at the end of 
        subparagraph (F), by redesignating subparagraph (G) as 
        subparagraph (H), and by inserting after subparagraph (F) the 
        following new subparagraph:
                    ``(G) an oil and natural gas remediation and 
                restoration account described in section 199B, or''.
            (2) Special rule.--Section 4975(c) of such Code is amended 
        by adding at the end the following new paragraph:
            ``(8) Special rule for oil and natural gas remediation and 
        restoration accounts.--An individual for whose benefit an oil 
        and natural gas remediation and restoration account (within the 
        meaning of section 199B) is established shall be exempt from 
        the tax imposed by this section with respect to any transaction 
        concerning such account (which would otherwise be taxable under 
        this section) if, with respect to such transaction, the account 
        ceases to be an oil and natural gas remediation and restoration 
        account by reason of the application of section 199B(d)(2) to 
        such account.''.
    (d) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new item:

``Sec. 199B. Oil and natural gas remediation and restoration 
                            accounts.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
                                 <all>
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