Notice 2016-44

(9) Total chapter 4 withholding for the population;
(10) Total chapter 3 withholding for the sample;
(11) Total backup withholding for the sample; and
(12) Total chapter 4 withholding for the sample.
Additionally, the reviewer should note a reconciliation of amounts included in the sample population to payments and
withholdings of reportable amounts as detailed in Part IV sections E (Reconciliations of Reporting on Payments of Reportable
Amounts) and F (Reconciliation of Withholding on Reportable Amounts) of Appendix I to the QI Agreement.

2015 Section 45K(d)(2)(C)
Reference Price
Notice 2016 – 43
SECTION 1. PURPOSE
This notice publishes the reference
price under § 45K(d)(2)(C) of the Internal
Revenue Code for calendar year 2015.
The credit period for the nonconventional
source production credit under § 45K
ended on December 31, 2013, for facilities producing coke or coke gas (other
than from petroleum based products).
However, the reference price continues to
apply in determining the amount of the
enhanced oil recovery credit under § 43,
the marginal well production credit under
§ 45I, and the percentage depletion in case
of oil and natural gas produced from marginal properties under § 613A.
SECTION 2. BACKGROUND
Section 45K(d)(2)(C) provides that the
term “reference price” means, with respect to a calendar year, the Secretary’s
estimate of the annual average wellhead
price per barrel for all domestic crude oil
the price of which is not subject to regulation by the United States.
Section 43(a) provides that, for purposes of § 38, the enhanced oil recovery
credit for any taxable year is an amount
equal to 15 percent of the taxpayer’s qualified enhanced oil recovery costs for such
taxable year.
Section 43(b)(1) provides that the
amount of enhanced oil recovery credit
for any taxable year shall be reduced by
an amount which bears the same ratio to
the amount of such credit (determined
without regard to this paragraph) as - (A)
the amount by which the reference price
for the calendar year preceding the calendar year in which the taxable year begins
exceeds $28, bears to (B) $6. Section

July 18, 2016

43(b)(2) provides that the term “reference
price” means, with respect to any calendar
year, the reference price determined for
such calendar year under § 45K(d)(2)(C).
Section 45I(a) provides that, for purposes of § 38, the marginal well production credit for any taxable year is an
amount equal to the product of the credit
amount and the qualified crude oil production and the qualified natural gas production which is attributable to the taxpayer.
Section 45I(b)(1) provides that the
amount of the marginal well production
credit is $3 per barrel of qualified crude
oil production, and 50 cents per 1,000
cubic feet of qualified natural gas production.
Section 45I(b)(2) provides that the $3
and 50 cents amounts under § 45I(b)(1)
shall each be reduced (but not below zero)
by an amount which bears the same ratio
to such amount (determined without regard to this paragraph) as – (i) the excess
(if any) of the applicable reference price
over $15 ($1.67 for qualified natural gas
production), bears to (ii) $3 ($0.33 for
qualified natural gas production). The applicable reference price for a taxable year
is the reference price of the calendar year
preceding the calendar year in which the
taxable year begins.
Section 45I(c) provides that the term
reference price means, with respect to any
calendar year – (i) in the case of qualified
crude oil production, the reference price
determined under § 45K(d)(2)(C).
Section 613A(c)(6)(A) provides, in
general, the allowance for depletion under
§ 611 shall be computed in accordance
with § 613 with respect to - (i) so much of
the taxpayer’s average daily marginal production of domestic crude oil as does not
exceed the taxpayer’s depletable oil quantity (determined without regard to paragraph (3)(A)(ii)), and (ii) so much of the
taxpayer’s average daily marginal production of domestic natural gas as does not

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exceed the taxpayer’s depletable natural
gas quantity (determined without regard
to paragraph (3)(A)(ii)), and the applicable percentage shall be deemed to be specified in subsection (b) of § 613 for purposes of subsection (a) of that section.
Section 613A(c)(6)(C) provides that
the term “applicable percentage” means
the percentage (not greater than 25 percent) equal to the sum of - (i) 15 percent,
plus (ii) 1 percentage point for each whole
dollar by which $20 exceeds the reference
price for crude oil for the calendar year
preceding the calendar year in which the
taxable year begins. For purposes of this
paragraph, the term “reference price”
means, with respect to any calendar year,
the reference price determined for such
calendar year under § 45K(d)(2)(C).
SECTION 3. REFERENCE PRICE
The reference price under § 45K(d)(2)(C)
for calendar year 2015 is $44.39.
SECTION 4. DRAFTING
INFORMATION
The principal author of this notice is
Martha M. Garcia of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Ms. Garcia on
(202) 317-6853 (not a toll-free number).

2016 Section 43 Inflation
Adjustment
Notice 2016 – 44
Section 43(b)(3)(B) of the Internal
Revenue Code requires the Secretary to
publish an inflation adjustment factor. The
enhanced oil recovery credit under § 43
for any taxable year is reduced if the
“reference price,” determined under
§ 45K(d)(2)(C), for the calendar year preceding the calendar year in which the tax-

Bulletin No. 2016 –29

able year begins is greater than $28 multiplied by the inflation adjustment factor
for that year.
The term “inflation adjustment factor”
means, with respect to any calendar year,
a fraction the numerator of which is the
GNP implicit price deflator for the preceding calendar year and the denominator of

which is the GNP implicit price deflator
for 1990.
Because the reference price for the
2015 calendar year ($44.39) does not exceed $28 multiplied by the inflation adjustment factor for the 2015 calendar year
($28 multiplied by 1.6464 ⫽ $46.01), the
enhanced oil recovery credit for qualified

costs paid or incurred in 2016 is determined without regard to the phase-out for
crude oil price increases.
Table 1 contains the GNP implicit
price deflator used for the 2016 calendar
year, as well as the previously published
GNP implicit price deflators used for the
1991 through 2015 calendar years.

Notice 2016–44 TABLE 1
GNP IMPLICIT PRICE DEFLATORS
Calendar Year
GNP Implicit Price Deflator
1990
112.9 (used for 1991)
1991
117.0 (used for 1992)
1992
120.9 (used for 1993)
1993
124.1 (used for 1994)
1994
126.0 (used for 1995)*
1995
107.5 (used for 1996)
1996
109.7 (used for 1997)**
1997
112.35 (used for 1998)
1998
112.64 (used for 1999)***
1999
104.59 (used for 2000)
2000
106.89 (used for 2001)
2001
109.31 (used for 2002)
2002
110.63 (used for 2003)
2003
105.67 (used for 2004)****
2004
108.23 (used for 2005)
2005
112.129 (used for 2006)
2006
116.036 (used for 2007)
2007
119.656 (used for 2008)
2008
122.407 (used for 2009)
2009
109.764 (used for 2010)*****
2010
110.654 (used for 2011)
2011
113.347 (used for 2012)******
2012
115.387 (used for 2013)
2013
106.710 (used for 2014)*******
2014
108.407 (used for 2015)********
2015
109.868 (used for 2016)
* Beginning in 1995, the GNP implicit price deflator was rebased relative to 1992. The 1990 GNP implicit price deflator
used to compute the 1996 § 43 inflation adjustment factor is 93.6.
** Beginning in 1997, two digits follow the decimal point in the GNP implicit price deflator. The 1990 GNP price deflator
used to compute the 1998 § 43 inflation adjustment factor is 93.63.
*** Beginning in 1999, the GNP implicit price deflator was rebased relative to 1996. The 1990 GNP implicit price deflator used to compute the 2000 § 43 inflation adjustment factor is 86.53.
**** Beginning in 2003, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to
compute the 2004 § 43 inflation adjustment factor is 81.589.
***** Beginning in 2009, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to
compute the 2010 § 43 inflation adjustment factor is 72.199.

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****** Beginning in 2011, the 1990 GNP implicit price deflator used to compute the 2012 § 43 inflation adjustment factor is 72.260.
******* Beginning in 2013, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used
to compute the 2014 § 43 inflation adjustment factor is 66.803.
******** Beginning in 2014, the 1990 GNP implicit price deflator used to compute the 2015 § 43 inflation adjustment
factor is 66.732.
Table 2 contains the inflation adjustment factor and the phase-out amount for taxable years beginning in the 2016 calendar year
as well as the previously published inflation adjustment factors and phase-out amounts for taxable years beginning in the 1991
through 2015 calendar years.

Calendar Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Notice 2016–44 TABLE 2
INFLATION ADJUSTMENT FACTORS AND PHASE-OUT AMOUNTS
Inflation Adjustment Factor
1.0000
1.0363
1.0708
1.0992
1.1160
1.1485
1.1720
1.1999
1.2030
1.2087
1.2353
1.2633
1.2785
1.2952
1.3266
1.3743
1.4222
1.4666
1.5003
1.5203
1.5326
1.5686
1.5968
1.5974
1.6245
1.6464

Phase-out Amount
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100 percent
100 percent
100 percent
100 percent
100 percent
100 percent
100 percent
100 percent
100 percent
100 percent
0

DRAFTING INFORMATION
The principal author of this notice is Martha M. Garcia of the Office of Associate Chief Counsel (Passthroughs and Special
Industries). For further information regarding this notice, contact Ms. Garcia at (202) 317-6853 (not a toll-free number).

July 18, 2016

134

Bulletin No. 2016 –29