PDF document

- 1 -

Userid: CPM Schema: Leadpct: 100% Pt. size: 10 Draft Ok to Print
instrx
AH XSL/XML Fileid: … ns/I8904/201812/A/XML/Cycle03/source (Init. & Date) _______

Page 1 of 2 9:34 - 24-Oct-2018

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Department of the Treasury
Internal Revenue Service
Instructions for Form 8904

(Rev. December 2018)
Credit for Oil and Gas Production From Marginal Wells

Section references are to the Internal Revenue Code Carryback and Carryforward of
unless otherwise noted.
Unused Credit
General Instructions If you have an unused credit after carrying it back to each
of the preceding 5 tax years (not just 1), then carry it
Future Developments forward to each of the 20 tax years after the year of the
For the latest information about developments related to credit.
Form 8904 and its instructions, such as legislation
Definitions
enacted after they were published, go to IRS.gov/
Form8904. Qualified marginal well means a domestic well with the
production from which during the tax year:
Purpose of Form • Is treated as marginal production under section 613A(c)
The section 45I credit for oil and gas production from (6); or
marginal wells is applicable for tax years beginning in 1. Has average daily production of not more than 25
2017 for qualified natural gas production (the credit barrel-of-oil equivalents (as defined in section 45K(d)(5)),
remains phased out for crude oil production). The credit is and
part of the section 38 general business credit.
2. Produces water at a rate not less than 95% of total
At the time these instructions were printed, the well effluent.
! credit for qualified natural gas production for tax Crude oil, natural gas, domestic, and barrel have the
CAUTION years beginning in 2018 had not been
meanings defined in section 613A(e).
determined. Go to IRS.gov/Form8904 for the latest
information. Other Rules
Partnerships and S corporations must file this form to Production attributable to the taxpayer. If a qualified
claim the credit. All other taxpayers aren’t required to marginal well has more than one owner of operating
complete or file this form if the only source of the credit is interests in the well and the crude oil or natural gas
a partnership or S corporation. Instead, they can report production exceeds the limitation under section 45I(c)(2),
the credit directly on Form 3800, General Business Credit. qualifying crude oil production or qualifying natural gas
For tax years beginning in 2017, use the 2017 Form 3800, production attributable to the taxpayer is determined on
Part III, line 1zz. the basis of the ratio of the taxpayer's revenue interest in
the production to the aggregate of the revenue interests of
Amount of Credit all operating interest owners in the production.
The credit is generally $3 per barrel of qualified crude oil Maximum production. Crude oil or natural gas
production and $0.50 per 1,000 cubic feet of qualified produced during any tax year from any well won't be
natural gas production. The $3 and $0.50 amounts are treated as qualified crude oil production or qualified
subject to a statutory reduction and must be adjusted by natural gas production to the extent production from the
the inflation adjustment factor (IAF) for the calendar year. well during the tax year exceeds 1,095 barrels or
The reduction and IAF for each calendar year will be barrel-of-oil equivalents (as defined in section 45K(d)(5)).
provided in the Internal Revenue Bulletin (IRB). For tax
years beginning in 2017, the credit amount is $0.51 per For short tax years, the maximum qualified production
thousand cubic feet of qualified natural gas production. is proportionately reduced by the ratio of the number of
See Notice 2018-52, available in IRB-2018-22. days in the short tax year to 365 days.
If a well isn't capable of production during each day of a
An owner of a marginal well may claim the credit any tax year, the maximum qualified production applicable to
time within 3 years from the due date (excluding the well is proportionately reduced by the ratio of the
extensions) of its return on either its original or an number of days of production to the total number of days
amended return. If you filed your 2017 return on or before in the tax year.
October 2, 2018, and either didn't claim the credit or
claimed the credit in an amount that differs from the Operating interest required. The credit may be claimed
amount determined using the credit amount stated in only on production which is attributable to the holder of an
Notice 2018-52, you may file an amended return using the operating interest.
applicable credit amount stated in that notice. Production from nonconventional sources excluded.
For production from a qualified marginal well which is
eligible for the section 45K nonconventional source fuel
credit for the tax year, no credit is allowable unless an

Oct 24, 2018 Cat. No. 70462A

- 2 -

Page 2 of 2 Fileid: … ns/I8904/201812/A/XML/Cycle03/source 9:34 - 24-Oct-2018

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

election is made not to claim the section 45K credit for • Schedule K-1 (Form 1065), Partner's Share of Income,
that well. Deductions, Credits, etc., box 15 (code P); and
• Schedule K-1 (Form 1120S), Shareholder's Share of
Income, Deductions, Credits, etc., box 13 (code P).
Specific Instructions
Partnerships and S corporations must report the credit
Line 2 on line 7. All other filers figuring a separate credit on
For tax years beginning in 2017, enter the credit amount earlier lines must also report the credit on line 7. All others
of $0.51 on line 2. not using earlier lines to figure a separate credit can report
the credit directly on Form 3800, as explained under
Lines 4, 5, and 6 Purpose of Form, earlier.
Reserved for future use.

Line 7
Enter total credit for oil and gas production from marginal
wells from:

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the
United States. You are required to give us the information. We need it to ensure that you’re complying with these laws
and to allow us to figure and collect the right amount of tax.
You aren’t required to provide the information requested on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be
retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax
returns and return information are confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden
for individual and business taxpayers filing this form is approved under OMB control number 1545-0074 and 1545-0123
and is included in the estimates shown in the instructions for their individual and business income tax return. The
estimated burden for all other taxpayers who file this form is shown below.

Recordkeeping 1 hr., 54 min.
Learning about the law or the form 30 min.
Preparing and sending the form to the IRS 33 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler,
we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

-2- Instructions for Form 8904 (Rev. December 2018)

PDF file checksum: 2162889148

(Plugin #1/8.13/12.0)