1

Intangible Drilling Costs (IDCs)

Deduct up to 90+% of investment costs in Year 1, as allowed under Section 263(c) of the Internal Revenue Code. Applies to expenses like labor, chemicals and equipment costs incurred to prepare wells for production.

Requirement: Drilling must commence within 90 days of the tax year-end for this deduction to be eligible.

2

Percentage Depletion Allowance

Receive a tax-free return by deducting a percentage of gross income generated from oil and gas wells. This deduction applies annually and lasts for the productive life of the well.

The deduction is applied regardless of investment costs, effectively reducing taxable income over time.

3

Alternative Minimum Tax Relief

IDCs that are not capitalized or amortized are not treated as preference items for AMT purposes. Investors can deduct these costs up to 40% of their alternative minimum taxable income.

This ensures tax efficiency, even for investors subject to AMT.

INVESTMENT TYPE

General Partner (GP Units)

Limited Partner (LP Units)

Limited Liability Company (LLC Units)

TAX BENEFIT

2026 tax deduction on investment

Passive income deductions with carry-

forward losses

UBTI exemption for retirement accounts