Due to the new guidance provided in IRS Notice 2018-52, energy taxpayers can now calculate the marginal well credit for natural gas production on 2017 tax returns.
The Internal Revenue Service notice, released on May 29, 2018, announced a reference price for natural gas of $2.17 and the associated tax credit of $0.51 per mcf. These amounts are applicable for taxpayers wishing to claim the marginal well credit (MWC) for 2017 tax returns. The notice also gave the inflation adjustment factor of 1.2518, which is used to calculate to the phaseout limit when determining the MWC. IRS Notice 2018-52 only references the MWC for natural gas producing properties since the credit is currently not available for oil.
There are other important components and qualifications to the MWC that should be considered and accounted for properly when calculating the credit.
Sectors and Business Development Leader, PwC US