Many owners, officers, and CPAs of oil and gas companies are unaware that they are eligible for valuable federal and state Research & Development (R&D) Tax Credits. However, due to the expansive definition of R&D for tax credit purposes, many of the tooling design, extraction technique, and refinery process development projects performed by oil and gas companies often qualify for such treatment. 

Example of Qualified Activities

  • Designing new or improved refinery plants and processes
  • Developing new or improved extraction processes and techniques
  • Designing and testing on and offshore rigs and structures

199 DPAD

IRC Section 199 Domestic Production Activities Deductions (DPAD) represents a valuable tax incentive for businesses that perform domestic architecture, engineering, and construction services.  Eligible engineering and architecture services include consultation, investigation, evaluation, planning, design and supervision of construction. Construction activities must be domestic and can include residential or commercial building improvements as well as infrastructure projects. Generally, the tax deduction can be as much as 9% of taxable income.

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Other Incentives

  • Developing new or improved drilling mud formulations
  • Improving refinery yield and minimizing scrap and waste
  • Designing and manufacturing first article drill bits, pumps, and other equipment 

R&D for Oil/Gas

Ready To Explore Your Incentives?

Petroleum Pump Manufacturer Case Study

ItemAverage Annual Amount
Gross Revenues$20,000,000
Total Payroll$3,500,000
Qualified Research Expenses (QREs)$700,000
Net Federal Credits$55,000
Net State Credits$25,000
Net Federal and State Credits - 1 Year Study
4 Year Study (3 States)$295,000