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                                                                                          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

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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)