IRS keeps 15% depletion rate for marginal oil and gas properties

The IRS kept the 15% depletion rate in place for marginal oil and gas properties, and that made the 2026 planning season look steadier on paper than it may feel inside energy tax teams. Notice 2026-35, included in Internal Revenue Bulletin 2026-25, said the applicable percentage under section 613A remains 15% for calendar year 2026.

For KPMG practitioners working with producers, the significance is less about the number itself than about what it protects. The 15% rate supports the depletion allowance under section 611 for oil and natural gas produced from marginal properties, so clients with mature wells and other legacy production assets avoid a bigger shift in estimated taxes, reserve assumptions and near-term cash flow. That helps operators that rely on a predictable minimum rate, while it does not help clients who were hoping the formula would move higher and increase deductions.

The reason the percentage did not change is mechanical. Section 613A(c)(6)(C) ties the applicable percentage to the prior-year crude oil reference price, and the IRS said the 2025 reference price under section 45K(d)(2)(C) was $63.40. That left the statutory formula at the floor, so the 15% applicable percentage carried over for 2026. The IRS describes the Internal Revenue Bulletin as its authoritative instrument for announcing official rulings and procedures, which makes the notice a routine release with immediate planning impact.

For KPMG energy tax teams, the practical job now is to fold the unchanged rate into client conversations rather than treat it as a non-event. Internal calculators may need a refresh, workpapers need to reflect the 2026 bulletin instead of prior-year assumptions, and estimated tax reviews should confirm whether a client’s depletion position changed because of asset mix, jurisdiction or deal activity. The notice also matters in merger, asset sale and portfolio-rationalization work, where depletion calculations often come up in seller-side diligence and tax structuring.

The flat result does not mean the economics are static. It gives teams a clean explanation for clients: the market moved, but the formula did not. IRS guidance for 2025 also set the applicable percentage at 15%, based on a 2024 reference price of $74.48, and 2021 guidance showed the same 15% rate. For KPMG’s energy specialists, that is a signal of stability in the short run and a reminder to revisit longer-term assumptions before year-end planning gets locked in.