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Publication Title | Section 29 Tax Credits

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Sunday, September 10, 2000 Google Search: section 29 Page: 1

Section 29 Tax Credits
Internal Revenue Code allows companies to claim a tax credit
Section 29 of the for fuel produced from nonconventional means. These companies are also permitted to sell these tax credits to individuals or corporations. This little-understood investment opportunity provides a relatively stable return with very little risk.

Please click HERE if you have tax credits to SELL or if you NEED tax credits for the tax year 2000.

This web site provides basic information about Internal Revenue Code section 29 tax credits, and describes how individuals

and corporations can profit from them.

Overview of the Section 29 Tax Credit


How to File the Credit

The Difference Between a Tax Credit and a Tax Deduction

Tax Credits are NOT Write-Offs! They are Three Times as Valuable Calculation of the Section 29 Tax Credit

What's a Tax Credit Worth?

Tax Credits are a Dollar-for-Dollar Reduction of Your Tax Bill

Hedging a Tax Credit Investment

Low-Income Housing Credits Compared With Nonconventional Fuel Credits Additional Readings

Overview of the Section 29 Tax Credit

Section 29 of the Internal Revenue Code authorizes an income tax credit for producing fuel from a nonconventional source. The amount of credit allowed in a given year is based on the amount of qualified fuel produced in that year.

Because many nonconventional fuel producers can not utilize the full value of their tax credits, they have restructured themselves in order to transfer these credits to other parties.

One such arrangement is the limited partnership, where net income along with tax credits are allocated to the partners in proportion to their respective interests in gross sales. Under this arrangement, each partner receives an annual form K-1 on which appears his or her allocation of the tax credits generated for that year. These credits are then placed directly in line 43 of the investor's form 1040, as described on page 23 of the form 1040 instructions.

Another strategy has been the royalty trust, where each member of the trust acquires a nonoperating net profit interest in the property. Tax credits available for fuel produced on the property are then allocated to the members in proportion to their interest in the royalty trust. There are currently eight publicly-traded oil and gas royalty trusts that pass nonconventional fuels tax credits to investors.

Section 29 of the Internal Revenue Code describes the following fuels as eligible for the tax credit:

oil produced from shale,

oil produced from tar sands,

gas produced from geopressured brine,

gas produced from Devonian shale,

gas produced from coal seams,

gas produced from a tight formation,

gas produced from biomass, and

liquid, gaseous, or solid fuels produced from coal.

Generally, in order to qualify for the credit, these fuels must be either produced from wells that were drilled after 1979 and before 1993, or produced in facilities placed in service during the same time period. Furthermore, the credit is allowed only safe=off

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