We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
Natural Gas Sold Under a Fixed Contract [Internal Revenue]
Understanding Natural Gas Sold Under a Fixed Contract [Internal Revenue]
Definition & Meaning
The term natural gas sold under a fixed contract refers to domestic natural gas that is sold by a producer under a specific contract that was in effect on February 1, 1975, and continues to be valid. Under this type of contract, the price of the gas cannot be adjusted to account for any increases in the seller's tax liabilities due to changes in tax laws, specifically the repeal of percentage depletion for gas. This definition also applies to gas that was previously classified as regulated natural gas.
Price increases after February 1, 1975, are generally assumed to consider tax liabilities unless the seller can provide clear evidence to the contrary. If the contract allows for price adjustments that reflect potential increases in federal income tax liabilities, then the gas sold under that contract does not qualify as being sold under a fixed contract.
Table of content
Legal Use & context
This term is primarily used in tax law and regulations concerning the sale of natural gas. It is relevant for producers and sellers of natural gas who need to understand how their contracts may impact tax deductions and liabilities. Users may find it beneficial to utilize legal forms and templates to ensure compliance with tax regulations related to fixed contracts.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
For instance, a natural gas producer has a contract dated February 1, 1975, that stipulates a fixed price for gas sales. If the producer sells gas under this contract without adjusting the price for tax liabilities, it qualifies as natural gas sold under a fixed contract. Conversely, if the contract allows for price renegotiation based on tax changes, it does not meet the criteria.
Relevant laws & statutes
Pursuant to 26 CFR 1.613A-7(d), this definition and its implications are outlined in the U.S. Internal Revenue Code, specifically concerning income tax deductions for natural resources.
Comparison with related terms
Term
Definition
Regulated Natural Gas
Gas that is subject to government regulation regarding pricing and sales.
Variable Price Contract
A contract that allows for price adjustments based on market conditions or tax liabilities.
Common misunderstandings
What to do if this term applies to you
If you are involved in the sale of natural gas under a fixed contract, it is crucial to review your contract terms carefully. Ensure that any price adjustments do not violate the fixed contract criteria. For assistance, consider using US Legal Forms to access templates and resources that can help you navigate these regulations. If your situation is complex, consulting a legal professional is advisable.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.