SPECIAL ENERGY DEDUCTION FOR MINIMUM TAX.

SEC. 11531. SPECIAL ENERGY DEDUCTION FOR MINIMUM TAX. (a) In General.— Section 56 (relating to adjustments in computing alternative minimum taxable income) is amended by adding at the end thereof the following new subsection: “(h) Adjustment Based on Energy Preferences.— “(1) In general.— In computing the alternative minimum taxable income of any taxpayer other than an integrated oil company for any taxable year beginning after 1990, there shall be allowed as a deduction an amount equal to the lesser of— “(A) the alternative tax energy preference deduction, or “(B) 40 percent of alternative minimum taxable income. “(2) Phase-out of deduction as oil prices increase.— The amount of the deduction under paragraph (1) (determined without regard to this paragraph) shall be reduced (but not below zero) by the amount which bears the same ratio to such amount as— “(A) the excess of the reference price of crude oil for the calendar year preceding the calendar year in which the taxable year begins over $28, bears to “(B) $6. For purposes of this paragraph, the reference price for any calendar year shall be determined under section 29(d)(2)(O and the $28 amount under subparagraph (A) shall be adjusted at the same time and in the same manner as under section 43(b)(3). “(3) Alternative tax energy preference deduction.— For purposes of paragraph (1), the term ‘alternative tax energy preference deduction’ means an amount equal to the sum of— “(A) in the case of the intangible drilling cost preference, an amount equal to the sum of— “(i) 75 percent of the portion of the intangible drilling cost preference attributable to qualified exploratory costs, plus “(ii) 15 percent of the excess (if any) of— “(I) the intangible drilling cost preference, over “(II) the portion of the intangible drilling cost preference attributable to qualified exploratory costs, plus “(B) 50 percent of the marginal production depletion preference. “(4) Intangible drilling cost preference.— For purposes of this subsection— “(A) In general.— The term ‘intangible drilling cost preference’ means the amount by which alternative minimum taxable income would be reduced if it were computed without regard to section 57(a)(2) and subsection (g)(4)(D)(i). “(B) Portion attributable to qualified exploratory costs.— For purposes of subparagraph (A), the portion of the intangible drilling cost preference attributable to qualified exploratory costs is an amount which bears the same ratio to the intangible drilling cost preference as— “(i) the qualified exploratory costs of the taxpayer for the taxable year, bear to 104 STAT. 1388–489 “(ii) the total intangible drilling and development costs with respect to which the taxpayer may make an election under section 263(c) for the taxable year. “(5) Marginal production depletion preference.— For purposes of this subsection, the term ‘marginal production depletion preference’ means the amount by which alternative minimum taxable income would be reduced if it were computed as if section 57(a)(1) and subsection (g)(4)(G) did not apply to any allowance for depletion determined under section 613A(c)(6). “(6) Qualified exploratory costs.— For purposes of this subsection— “(A) In general.— The term ‘qualified exploratory costs’ means intangible drilling and development costs of a tax-payer other than an integrated oil company which— “(i) the taxpayer may elect to deduct as expenses under section 263(c), and “(ii) are paid or incurred in connection with the drilling of an exploratory well located in the United States (within the meaning of section 638(1)). “(B) Exploratory well.— The term ‘exploratory well’ means any of the following oil or gas wells: “(i) An oil or gas well which is completed (or if not completed, with respect to which drilling operations cease) before the completion of any other well which— “(I) is located within 1.25 miles from the well, and “(II) is capable of production in commercial quantities. “(ii) An oil or gas well which is not described in clause (i) but which has a total depth which is at least 800 feet below the deepest completion depth of any well within 1.25 miles which is capable of production in commercial quantities. “(iii) An oil or gas well capable of production in commercial quantities which is not described in clause (i) or (ii) but which is completed into a new reservoir, except that this clause shall not apply to a gas well if the gas is produced (or to be produced) from Devonian shale, coal seams, or a tight formation (determined in a manner similar to the manner under section 29(c)(2)). A well shall not be treated as an exploratory well unless the operator submits to the Secretary (at such time and in such manner as the Secretary may provide) a certification from a petroleum engineer that the well is described in one of the preceding clauses. “(C) Certain costs not included.— The term ‘qualified exploratory costs’ shall not include any cost paid or incurred— “(i) in constructing, acquiring, transporting, erecting, or installing an offshore platform, or “(ii) with respect to the drilling of a well from an offshore platform unless it is the first well which penetrates a reservoir. “(D) Integrated oil company.— For purposes of this paragraph, the term ‘integrated oil company’ means, with respect to any taxable year, any producer of crude oil to 104 STAT. 1388–490whom subsection (c) of section 613A does not apply by reason of paragraph (2) or (4) of section 613A(d). “(7) Special rules.— “(A) Alternative minimum taxable income.— For purposes of paragraphs (1)(B), (4)(A), and (5), alternative mini-mum taxable income shall be determined without regard to the deduction allowable under this subsection and the alter-native tax net operating loss deduction under subsection (a)(4). “(B) Geothermal deposits.— For purposes of this subsection, intangible drilling and development costs shall not include costs with respect to wells drilled for any geothermal deposits (as defined in section 613(e)(3)). “(8) Regulations.— The Secretary may by regulation provide for appropriate adjustments in computing alternative minimum taxable income or adjusted current earnings for any taxable year following a taxable year for which a deduction was allowed under this subsection to ensure that no double benefit is allowed by reason of such deduction.” (b) Conforming Amendments.— (1) Section 56(d)(1)(A) is amended to read as follows: “(A) the amount of such deduction shall not exceed the excess (if any) of— “(i) 90 percent of alternative minimum taxable income determined without regard to such deduction and the deduction under subsection (h), over “(ii) the deduction under subsection (h), and”. (2) Section 59(a)(2)(A)(ii) is amended by inserting “and the alternative tax energy preference deduction under section 56(h)” after “deduction”. (3) Section 59A(b)(1) is amended by inserting “or the alter-native tax energy preference deduction under section 56(h)” before “, and”. (c) Effective Date.— The amendments made by this section shall apply to taxable years beginning after December 31, 1990.