Perspectives

IRS issues guidance on imposition of the Federal Oil Spill Tax on tight oil

Multistate tax alert | February 24, 2015

This alert summarizes the Federal Oil Spill Liability Trust Fund tax and IRS Program Manager Technical Assistance 2014-10.

PMTA 2014-10

The Internal Revenue Service (“IRS”) Office of Chief Counsel recently issued IRS Program Manager Technical Assistance 2014-10 (“PMTA 2014-10”),1 which provides guidance on the imposition of the Federal Oil Spill Liability Trust Fund tax (“Oil Spill Tax”) on “tight oil”2 extracted from the Bakken Formation underlying parts of Montana and North Dakota in the United States and Saskatchewan and Manitoba in Canada. Although PMTAs do not constitute precedential authority, they indicate the position the IRS may take when subsequently addressing the same issue. In PMTA 2014-10, the IRS concluded that tight oil extracted from the Bakken Formation is subject to the Oil Spill Tax.

In this Tax Alert we summarize the Oil Spill Tax and PMTA 2014-10.

1 PMTA 2014-10 (dated Jun. 23, 2014, with a release date of Jan. 26, 2015) is accessible at: http://www.irs.gov/pub/lanoa/PMTA-2014-10.pdf

2 “Tight oil” is “oil produced from petroleum-bearing formations with low permeability . . . that must be hydraulically fractured to produce oil at commercial rates.” U.S. ENERGY INFO. ADMIN., http://www.eia.gov/tools/glossary/index.cfm?id=T (last visited Feb. 24, 2015).

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