Tax Incentives

With the passage of the Tax Reform Act of 1986 (the “Act”). Oil and Gas ventures remain one of the few tax-advantaged investments available to American taxpayers. In fact, the Act specifically exempts Oil and Gas working interests from being classified as “Passive Income.” In addition to this, the following potential tax advantages are exclusive to the Oil and Gas industry:

• Intangible Drilling Costs: 100% tax deductible during the year incurred.

• Tangible Drilling Costs: 100% tax deductible over the life of the well.

• Depletion Allowance: 15% of gross production revenue is tax-free over the life of the well.

• Active Income Deductions can be deducted against business income, salaries, capital gross income, interest income, etc.