This bill creates a new tax deduction for small oil and natural gas producers to set aside money in dedicated accounts for cleaning up and closing their wells. Eligible producers are those with no more than 500 employees that use the percentage depletion method for tax purposes. Each year, these producers can deduct up to $35,000 (adjusted for inflation after 2025) in contributions to their remediation accounts. The money in these accounts must be held in trusts managed by banks or other approved trustees and can only be used to pay for costs related to capping, closing, and remediating oil and natural gas wells, including labor, materials, permitting, and regulatory compliance. Distributions from the accounts used for these qualified purposes are not taxable, but any other withdrawals are subject to income tax plus an additional 25 percent penalty. The provisions take effect for tax years beginning after the bill's enactment.
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