The Wolf Point herald. (Wolf Point, Mont.) 1913-1940, 1924-02-07
OIL MEN WOULD
AMEND TAX BILL
OPPOSE PROVISION IN MELLON
MEASURE REGARDING DEDUC-
TION FOR DEPLETION
Are Urging States Congressional
Delegation to Protect Discovery
Right Values; Affects Everyone
Interested in New Fields.

Independent oil men of Montana
are urging upon the Montana on
gressional delegation the importance
of protecting discovery right values
as regard income tax, opposing the
provision of the Mellon bill now be-
fore congress which cuts in half the
allowed deduction for depletion.
Certainly mineral or oil and gas
deposits discovered are the property
of the ~discoverer and his right for
one hundred per cent deduction for
depletion sustained as provided in the
present revenue act is considered
equitable by those friendly to the in
dustry," said a wire sent by L.. G.
Stevenson, president of the Sunburst
Oil and Gas company. 1--WE urge that
you bring every possible influence of
yourself, colleagues and friends of
these industries in other states in
support of full depletion rights pro-
vided in the present law being pre-
served"
This, in substance, is the plea of
independents throughout the state.
The present law provides that when
a discovery we'll is drilled the opera
tor may set up a discovery value and
figure depletion as the field is de-
veloped. The Mellon tax bill would
allow the operator to set up a dis
covery value but would allow only SO
per cent depletion.
The provision affects every stock
holder in an oil company which has
spent or will spend money in trying
to bring in new fields. The change
in the law will seriously affect the
companies operating in Montana and
will make a cumbersome tax burden
on the pioneer who succeeds in dis
covering a new oil field.
The present law reads:
deductions Allowed: depletion.
"Sec. PA. (a) That in computing
net income there shall be allowed as
deductions:
80. In the case of mines, oil and
gas wells, other natural deposits, and
timber, a reasonable allowance for
depletion and for depreciation of i'm
provements, according to the peculiar
condition in each case, based upon
cost, including cost of Development
not otherwise deducted. = y = Pro-
vided, further, that in the case of
mines, oil and gas wells, not acquired
as the result of purchase of a proven
tract or lease, where the fair market
value of the property is materially
disproportionate to the cost, the de-
allowance shall be based upon
the fair market value of the property
at the date of the discovery, or with
in 80 days thereafter. + = = : Such
reasonable allowance in all the above
cases to be made under rules and reg
ulations to be prescribed by the COM
missioner, with the approval of the
secretary"
Discussing the proposed change,
allowing only so per cent of discov-
cry value for depletion, Mr.. Steven
son said: "It seems hard to conceive
that anyone not %prejudiced against
the industry would fail to concede
that when an individual or a COM
pany assumes the expenditure of
time, money and hazards involved in
prospecting for mineral Or oil and
gas deposits, any discoveries made
become the property of right belong
to the discoverer, and that in de-
yeloping such mineral or oil and gas
and marketing the products
5herefrom he is gradually exhaust
ing his property and should have the
unabridged right of making deduc-
ions from the gross income derived
rom the sale of such products for
he amount of depletion or exhaus-
ion sustained through production
each year. 1t is but the inequitable
recognition of this principle hat is
embraced in the provisions of the |
'evenue act of 1921, excerpts of
which are given above. 1t is appar-
INT, therefore, that only prejudice on
he part of enemies of the industry
,r lack of appreciation of the equit-
lble principle underlying right to full
deduction for depletion sustained,
IS provided in the present law, could
cad to the reduction of the depletion
allowance from 100 per cen to SO
,er cent. If the proposed change in
his provision should be made it will
,e a very heavy tax discrimination
the mining and the oil and
,as industries and will especially af-
ect the welfare of those engaged in
hese industries in Montana and in !
'ther mining and oil producing /
|