TAX CREDIT FOR ENHANCED OIL RECOVERY.

SEC. 11511. TAX CREDIT FOR ENHANCED OIL RECOVERY. (a) In General.— Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by adding at the end thereof the following new section: “SEC. 43. ENHANCED OIL RECOVERY CREDIT. “(a) General Rule.— For purposes of section 38, the enhanced oil recovery credit for any taxable year is an amount equal to 15 percent of the taxpayer’s qualified enhanced oil recovery costs for such taxable year. “(b) Phase-Out of Credit as Crude Oil Prices Increase.— “(1) In general.— The amount of the credit determined under subsection (a) for any taxable year shall be reduced by an amount which bears the same ratio to the amount of such credit (determined without regard to this paragraph) as— “(A) the amount by which the reference price for the calendar year preceding the calendar year in which the taxable year begins exceeds $28, bears to “(B) $6. “(2) Reference price.— For purposes of this subsection, the term ‘reference price’ means, with respect to any calendar year, the reference price determined for such calendar year under section 29(d)(2)(C). “(3) Inflation adjustment.— “(A) In general.— In the case of any taxable year beginning in a calendar year after 1991, there shall be substituted for the $28 amount under paragraph (1)(A) an amount equal to the product of— “(i) $28, multiplied by “(ii) the inflation adjustment factor for such calendar year. “(B) Inflation adjustment factor.— The term ‘inflation adjustment factor’ means, with respect to any calendar year, a fraction the numerator of which is the GNP implicit price deflator for the preceding calendar year and the denominator of which is the GNP implicit price deflator for 1990. For purposes of the preceding sentence, the term ‘GNP implicit price deflator’ means the first revision of the implicit price deflator for the gross national product as computed and published by the Secretary of Commerce. Not later than April 1 of any calendar year, the Secretary shall publish the inflation adjustment factor for the preceding calendar year. “(c) Qualified Enhanced Oil Recovery Costs.— For purposes of this section— “(1) In general.— The term ‘qualified enhanced oil recovery costs’ means any of the following: 104 STAT. 1388–484 “(A) Any amount paid or incurred during the taxable year for tangible property— “(i) which is an integral part of a qualified enhanced oil recovery project, and “(ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable under this chapter. “(B) Any intangible drilling and development costs— “(i) which are paid or incurred in connection with a qualified enhanced oil recovery project, and “(ii) with respect to which the taxpayer may make an election under section 263(c) for the taxable year. “(C) Any qualified tertiary injectant expenses which are paid or incurred in connection with a qualified enhanced oil recovery project and for which a deduction is allowable under section 193 for the taxable year. “(2) Qualified enhanced on, recovery project.— For purposes of this subsection— “(A) In general.— The term ‘qualified enhanced oil recovery project’ means any project— (i) which involves the application (in accordance with sound engineering principles) of 1 or more tertiary recovery methods (as defined in section 193(b)(3)) which can reasonably be expected to result in more than an insignificant increase in the amount of crude oil which will ultimately be recovered, “(ii) which is located within the United States (within the meaning of section 638(1)), and “(iii) with respect to which the first injection of liquids, gases, or other matter commences after December 31, 1990. “(B) Certification.— A project shall not be treated as a qualified enhanced oil recovery project unless the operator submits to the Secretary (at such times and in such manner as the Secretary provides) a certification from a petroleum engineer that the project meets (and continues to meet) the requirements of subparagraph (A). “(3) At-risk limitation.— For purposes of determining qualified enhanced oil recovery costs, rules similar to the rules of section 49(a)(D, section 49(a)(2),_and section 49(b) shall apply. “(4) Special rule for certain gas displacement projects.— For purposes of this section, immiscible non-hydrocarbon gas displacement shall be treated as a tertiary recovery method under section 193(b)(3). “(d) Other Rules.— “(1) Disallowance of deduction.— Any deduction allowable under this chapter for any costs taken into account in computing the amount of the credit determined under subsection (a) shall be reduced by the amount of such credit attributable to such costs. “(2) Basis adjustments.— For purposes of this subtitle, if a credit is determined under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed. “(e) Election To Have Credit Not Apply.— 104 STAT. 1388–485 “(1) In general.— A taxpayer may elect to have this section not apply for any taxable year. “(2) Time for making election.— An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last date prescribed by law for filing the return for such taxable year (determined without regard to extensions). “(3) Manner of making election.— An election under paragraph (1) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe.” (b) Addition to General Business Credit.— (1) In general.— Section 38(b) (defining current year business credit) is amended by striking “plus” at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting “, plus”, and by adding at the end thereof the following new paragraph: “(6) the enhanced oil recovery credit under section 43(a).” (2) Carrybacks.— Section 39(d) is amended by adding at the end thereof the following new paragraph: “(5) No carryback of enhanced oil recovery credit before 1991.— No portion of the unused business credit for any taxable year which is attributable to the credit determined under section 43(a) (relating to enhanced oil recovery credit) may be carried to a taxable year beginning before January 1, 1991.” (3) Deduction for unused credit.— Section 196(c) is amended by striking “and” at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting “, and”, and by adding at the end thereof the following new paragraph: “(5) the enhanced oil recovery credit determined under section 43(a).” (c) Conforming Amendments.— (1) The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end thereof the following new item: “Sec. 43. Enhanced oil recovery credit.” (2) Subsection (m) of section 6501 is amended by striking “44B” each place it appears and inserting “43 or 44B”. (d) Effective Dates.— (1) In general.— The amendments made by this section shall apply to costs paid or incurred in taxable years beginning after December 31, 1990. (2) Special rule for significant expansion of projects.— For purposes of section 43(c)(2)(A)(iii) of the Internal Revenue Code of 1986 (as added by subsection (a)), any significant expansion after December 31, 1990, of a project begun before January 1, 1991, shall be treated as a project with respect to which the first injection commences after December 31, 1990.