‘‘(ii) 1 percentage point for each
whole dollar by which $20 exceeds the ref-
erence price for crude oil for the calendar
year preceding the calendar year in which
the taxable year begins.
For purposes of this paragraph, the term ‘ref-
erence price’ means, with respect to any cal-
endar year, the reference price determined for
such calendar year under section 29(d)(2)(C).
‘‘(C) MARGINAL PRODUCTION.—The term
‘marginal production’ means domestic crude oil
or domestic natural gas which is produced dur-
ing any taxable year from a property which—
‘‘(i) is a stripper well property for the
calendar year in which the taxable year be-
gins, or
‘‘(ii) is a property substantially all of
the production of which during such cal-
endar year is heavy oil.
‘‘(D) STRIPPER
WELL
PROPERTY.—For
purposes of this paragraph, the term ‘stripper
well property’ means, with respect to any cal-
endar year, any property with respect to which
the amount determined by dividing—
‘‘(i) the average daily production of
domestic crude oil and domestic natural
gas from producing wells on such property
for such calendar year, by
‘‘(ii) the number of such wells,
is 15-barrel equivalents or less.
‘‘(E) HEAVY OIL.—For purposes of this
paragraph, the term ‘heavy oil’ means domestic
crude oil produced from any property if such
crude oil had a weighted average gravity of 20
degrees API or less (corrected to 60 degrees
Fahrenheit).’’
(b) CONFORMING AMENDMENT.—Paragraph (3) of
section 613A(c) (defining depletable oil quantity) is
amended to read as follows:
‘‘(3) DEPLETABLE
OIL
QUANTITY.—For pur-
poses of paragraph (1), the taxpayer’s depletable oil
quantity is 1,000 barrels.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 203. ALLOCATION OF DEPLETABLE QUANTITIES.
(a) IN GENERAL.—Subparagraphs (A) and (B) of
section 613A(c)(7) (relating to special rules for production
in excess of depletable quantities) are each amended by
inserting ‘‘of such quantity allocated to the property by
the taxpayer, or, if the taxpayer elects not to make the
allocation, that amount’’ after ‘‘shall be that amount’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 204. PERCENTAGE DEPLETION RATE FOR MARGINAL
PRODUCTION.
(a) IN GENERAL.—Subparagraph (B) of section
613A(c)(6), as amended by section 202(a), is amended to
read as follows:
‘‘(B) 
APPLICABLE
PERCENTAGE.—For
purposes of this paragraph, the term ‘applicable
percentage’ means the percentage (not greater
than 25 percent) equal to the sum of—
‘‘(i) 15 percent, plus
‘‘(ii) 1 percentage point for each
whole dollar by which $20 exceeds the ref-
erence price for crude oil for calendar year
1994 
(determined 
under 
section
29(d)(2)(C)).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
TITLE III—OTHER PROVISIONS
SEC. 301. ELECTION TO EXPENSE GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES.
(a) IN GENERAL.—Section 263 (relating to capital
expenditures) is amended by adding at the end the follow-
ing new subsection:
‘‘(j) GEOLOGICAL
AND
GEOPHYSICAL
EXPENDI-
TURES FOR DOMESTIC OIL AND GAS WELLS.—Notwith-
standing subsection (a), a taxpayer may elect to treat geo-
logical and geophysical expenses incurred in connection
with the exploration for, or development of, oil or gas with-
in the United States (as defined in section 638) as ex-
penses which are not chargeable to capital account. Any
expenses so treated shall be allowed as a deduction in the
taxable year in which paid or incurred.’’
(b) CONFORMING AMENDMENT.—Section 263A(c)(3)
is amended by inserting ‘‘263(j),’’ after ‘‘263(i),’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to expenses paid or incurred
after the date of the enactment of this Act.
(2) TRANSITION RULE.—In the case of any ex-
penses described in section 263(j) of the Internal
Revenue Code of 1986 which were paid or incurred
on or before the date of the enactment of this Act,
the taxpayer may elect, at such time and in such
manner as the Secretary of the Treasury may pre-
scribe, to amortize the unamortized portion of such
expenses over the 36-month period beginning with
the month in which the date of the enactment of this
Act occurs. For purposes of this paragraph, the
unamortized portion of any expense is the amount
remaining unamortized as of the first day of the 36-
month period.
SEC. 302. ENHANCED OIL RECOVERY CREDIT.
(a) EXPANSION OF PROJECTS ELIGIBLE FOR CRED-
IT.—
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section
43(c)(2)(A) (defining qualified enhanced oil recovery
project) is amended to read as follows:
‘‘(i) which involves the application (in
accordance with sound engineering prin-
ciples) of 1 or more secondary or tertiary
recovery methods which can reasonably be
expected to result in more than an insig-
nificant increase in the amount of crude oil
or natural gas which ultimately will be re-
covered,’’.
(2) CONFORMING AMENDMENTS.—
(A) Subparagraph (C) of section 43(c)(1)
is amended to read as follows:
‘‘(C) Any cost paid or incurred (whether or
not chargeable to capital account) for any
injectant or other costs which are used as part
of a qualified enhanced oil recovery project,
other than a recoverable hydrocarbon injectant
described in section 193(b)(2).’’
(B) Section 43(c)(4) is amended to read as
follows:
‘‘(4) SECONDARY
AND
TERTIARY
RECOVERY
METHODS.—For purposes of paragraph (2), second-
ary and tertiary recovery methods shall include—
‘‘(A) tertiary recovery methods described
in section 193(b)(3),
‘‘(B) immiscible nonhydrocarbon gas dis-
placement, and
‘‘(C) other secondary and tertiary recovery
methods certified in accordance with paragraph
(2)(B).’’
(b) CREDIT ALLOWABLE AGAINST MINIMUM TAX.—
(1) IN GENERAL.—Subsection (c) of section 38
(relating to limitation based on amount of tax), as
amended by section 101(c), is amended by redesig-
nating paragraph (4) as paragraph (5) and by in-
serting after paragraph (3) the following new para-
graph:
‘‘(4) SPECIAL RULES FOR ENHANCED OIL RE-
COVERY CREDIT.—
‘‘(A) IN GENERAL.—In the case of the en-
hanced oil recovery credit—
‘‘(i) this section and section 39 shall
be applied separately with respect to the
credit, and
‘‘(ii) in applying paragraph (1) to the
credit—
‘‘(I) subparagraph (A) shall not
apply, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable year (other than the enhanced
oil recovery credit).
‘‘(B) ENHANCED
OIL
RECOVERY
CRED-
IT.—For purposes of this subsection, the term
‘enhanced oil recovery credit’ means the credit
allowable under subsection (a) by reason of sec-
tion 43(a).’’
(2) CONFORMING AMENDMENTS.—
(A) 
Subclause 
(II) 
of 
section
38(c)(2)(A)(ii), as amended by section 101(c),
is amended by striking ‘‘or the oil and gas pro-
duction credit’’ and inserting ‘‘, the oil and gas
production credit, or the enhanced oil recovery
credit’’.
(B) 
Subclause 
(II) 
of 
section
38(c)(3)(A)(ii) is amended by inserting ‘‘or the
enhanced oil recovery credit’’ after ‘‘production
credit’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 303. ELECTION FOR OPTIONAL 5-YEAR WRITEOFF OF
INTANGIBLE DRILLING COSTS.
(a) OPTIONAL ELECTION FOR MINIMUM TAX PUR-
POSES.—
(1) IN GENERAL.—Section 56(a) is amended by
adding at the end the following new paragraph:
‘‘(9) INTANGIBLE DRILLING COSTS.—If the tax-
payer elects to have this paragraph apply, the tax-
payer may disregard, for purposes of computing the
taxpayer’s alternative minimum taxable income, an
election under section 59(e) with respect to any por-
tion of any qualified expenditure described in section
59(e)(2)(C).’’
(2) CONFORMING AMENDMENT.—Section 59(e)
is amended by adding at the end the following new
paragraph:
‘‘(7) EXCEPTION
FOR
INTANGIBLE
DRILLING
COSTS.—
‘‘For election not to have this subsection apply in
computing alternative minimum taxable income, see
section 56(a)(9).’’
(b) TIME FOR MAKING ELECTIONS.—Subparagraph
(B) of section 59(e)(4) is amended to read as follows:
‘‘(B) TIME FOR MAKING ELECTION.—
‘‘(i) IN GENERAL.—An election under
this subsection may be made or revoked at
any time before the period for filing a
claim for credit or refund (determined
after any extension) expires.
‘‘(ii) PERIOD OF LIMITATION FOR AS-
SESSMENT.—The period for assessing a
deficiency attributable to any election
under clause (i) (or any revocation thereof)
shall not expire before the date 1 year
after the date the Secretary is notified of
the election (or revocation).’’
(c) EFFECT OF ELECTION.—Paragraph (6) of section
59(e) is amended by adding at the end the following: ‘‘Any
deductions with respect to such portion shall not be treat-
ed as directly attributable to oil and gas properties for
purposes of section 57(a)(2)(C).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 304. ALLOCATION OF DEDUCTIONS IN DETERMINING
NET INCOME.
(a) IN GENERAL.—Clause (ii) of section 57(a)(2)(C)
is amended by striking ‘‘allocable’’ and inserting ‘‘directly
attributable’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
Æ
HR 985 IH——2