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Introduction

SECTION 2. BACKGROUND

Internal Revenue Bulletin 2004-17 · 2026-10-03 edition · updated 2026-10-04 · United States

.01 Section 29 provides a credit for producing fuel from a nonconventional source. Section 29(a) provides, in part, that there shall be allowed as a credit against the tax imposed by Chapter 1 for the taxable year an amount equal to (1) $3, multiplied by (2) the barrel-of-oil equivalent of qualified fuels, the production of which is attributable to the taxpayer, that are sold by the taxpayer to an unrelated person during the taxable year.

.02 Section 29(c)(1) provides that the term “qualified fuels” means (A) oil produced from shale and tar sands, (B) gas produced from (i) geopressured brine, Devonian shale, coal seams, or a tight formation, or (ii) biomass, and (C) liquid, gaseous, or solid synthetic fuels produced from coal (including lignite), including such fuels when used as feedstocks.

.03 Section 29(f) provides that the credit provided in § 29 applies only to qualified fuels produced from a well drilled, or in a facility placed in service, after December 31, 1979, and before January 1, 1993, and only to fuels sold before January 1, 2003.

.04 Section 29(g) extends the period for which the credit is applicable for certain facilities producing (1) gas from biomass or (2) liquid, gaseous, or solid synthetic fuels from coal (including lignite).

.05 The credit under § 29 does not arise as a result of an expenditure, and the availability of the credit does not depend on a recognition of the corresponding income. Rather, the credit arises as a result of a sale of the qualified fuel “during the taxable year.” Section 29(a). Therefore, a taxpayer is entitled to the credit under § 29 in the taxable year in which the qualified fuel is sold.

.06 Typically, an RI Owner must rely upon the statement provided by the OI Owner regarding the quantity of qualified fuel that the OI Owner sold on behalf of the RI Owner’s interest. An RI Owner generally receives its share of the income one or

April 26, 2004 831 2004-17 I.R.B.

contact Jaime C. Park at (202) 622–3120 (not a toll-free call).

the RI Owner receives the income from a sale.

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▸Contents — Internal Revenue Bulletin 2004-17
Internal Revenue Bulletin 2004-17

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