I
105TH CONGRESS
1ST SESSION
H. R. 1648
To encourage production of oil and gas within the United States by providing
tax incentives, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 15, 1997
Mr. WATKINS introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To encourage production of oil and gas within the United
States by providing tax incentives, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘National Energy Secu-
rity Act of 1997’’.
SEC. 2. ELIMINATION OF NET INCOME LIMITATION ON PER-
CENTAGE DEPLETION FOR OIL AND GAS.
(a) ELIMINATION.—
(1) IN GENERAL.—Section 613A(d)(1) of the
Internal Revenue Code of 1986 (relating to the limi-
tation based on taxable income for percentage deple-
tion in the case of oil and gas wells) is repealed.
(2) OTHER PRODUCTION.—The second sentence
of section 613(a) of the Internal Revenue Code of
1986 (relating to percentage depletion) is amended
to read as follows: ‘‘Except in the case of oil and gas
wells, such allowance shall not exceed 50 percent of
the taxpayer’s taxable income from the property
(computed without allowance for depletion).’’
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after December 31, 1997.
(2) TRANSITION RULE.—
(A) DEDUCTION.—To the extent a deduc-
tion under section 613A of the Internal Reve-
nue Code of 1986 is disallowed under sub-
section (d)(1) of such section for any taxable
year ending on or before December 31, 1997,
the amount so disallowed shall be treated under
subsection (c) of such section as an amount al-
lowable as a deduction ratably over the 5-year
period beginning with the first taxable year be-
ginning after December 31, 1997.
(B) CERTAIN
ADJUSTMENTS.—The last
sentence of subsection (d)(1) of section 613A of
such Code, as in effect immediately before the
repeal made by subsection (a)(1) of this section,
shall apply with respect to amounts allowable as
a deduction under subsection (c) of such section
by reason of subparagraph (A) of this para-
graph.
SEC. 3. HYDRO INJECTION INCLUDED AS TERTIARY RECOV-
ERY METHOD.
(a) IN GENERAL.—Paragraph (2) of section 43(c) of
the Internal Revenue Code of 1986 is amended by adding
at the end the following new subparagraph:
‘‘(C) TERTIARY RECOVERY METHOD.—For
purposes of subparagraph (A), the term ‘ter-
tiary recovery method’ shall include hydro injec-
tion.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to injections com-
mencing after December 31, 1997.
SEC. 4. ELECTION TO EXPENSE GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES.
(a) IN GENERAL.—Section 263 of the Internal Reve-
nue Code of 1986 (relating to capital expenditures) is
amended by adding at the end the following new sub-
section:
‘‘(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)
of the Internal Revenue Code of 1986 is amended by in-
serting ‘‘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 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, as added by this section,
which were paid or incurred on or before the date
of enactment of this Act, the taxpayer may elect, at
such time and in such manner as the Secretary of
the Treasury may prescribe, to amortize the