H.R. 8034 modifies tax deductions for small oil and gas producers by increasing percentage depletion allowances on marginal oil and gas wells. Specifically, the bill raises the depletion rate from a base of 15 percent to potentially up to 25 percent, with the rate increasing by one percentage point for each dollar that crude oil prices fall below $70 per barrel (adjusted for inflation after 2027). The bill also doubles the threshold for qualifying as a "marginal property" from 1,000 barrels to 2,000 barrels of daily production and removes income limitations on these depletion deductions. These changes primarily benefit small independent oil and gas operators and rural communities that depend on energy production, and take effect for tax years beginning after December 31, 2026.
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