Section 43(a) of the Internal Revenue Code provides that for purposes of section 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 (qualified costs) for such taxable year.

Section 43(b)(1) provides that the amount of the credit determined under § 43(a) 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. The term reference price is defined

in § 43(b)(2) as, with respect to any calendar year, the reference price determined for such calendar year under § 45K(d)(2) (C). Section 45K(d)(2)(C) provides that, with respect to a calendar year, the reference price is 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(b)(3)(A) provides that, for taxable years beginning in a calendar year after 1991, the $28 amount in § 43(b)(1) (A) is adjusted for inflation by multiplying that amount by the inflation adjustment factor for that calendar year. Section 43(b) (3)(B) defines the term inflation adjust- ment factor as, 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. The term GNP implicit price deflator means the first revision of the implicit price deflator for the gross national product, as computed and published by the Secretary of Commerce.

For calendar year 2026, the GNP implicit price deflator for the preceding calendar year (2025) is 128.888 and the GNP implicit price deflator for 1990 is 59.266, yielding an inflation adjustment factor of 2.1747. Accordingly, the $28 amount in § 43(b)(1)(A) is adjusted to $60.892.

Based on data published by the United States Energy Information Administration, domestic first purchase crude oil prices averaged $63.40 per barrel in calendar year 2025. Accordingly, the reference price for calendar year 2025 is $63.40.

Because the reference price for calendar year 2025 ($63.40) exceeds $60.892 by $2.508 (that is, an amount less than $6), a portion of the enhanced oil recovery credit for qualified costs paid or incurred in 2026 is phased out using the following ratio:

$63.40 – $60.892 x

$6 15%

where solving for x = 6.27%

Therefore, the enhanced oil recovery credit is an amount equal to 8.73% (15% – 6.27%) of qualified costs paid or incurred in 2026.

Table 1 contains the GNP implicit price deflator used for calendar year 2026, as well as the previously published GNP implicit price deflators used for calendar years 1991 through 2025.