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Entering intangible drilling costs (IDC) in ProConnect Tax

by Intuit• Updated 4 weeks ago

The program doesn't have the ability to calculate excess IDC automatically. For passthrough entities, you can enter IDC in the appropriate Passthrough K-1's screen under the Income section of ProConnect Tax.

Follow these steps to enter excess IDC:

  1. Go to the Input Return tab.
  2. From the left of the screen, select Income and choose Passthrough K-1's.
  3. Select the applicable Partnership (1065 K-1) Info or S-Corporate (1120S K-1) Info screen.
  4. From the top of the screen, select Lines 11-20 for the Partnership (1065 K-1) Info screen or Lines 11-17 for the S-Corporate (1120S K-1) Info screen.
  5. Scroll down to the Alternative Minimum Tax (AMT section)
  6. Scroll down to the (F) Other Adjustments lines.
  7. Enter any IDC in the Excess intangible drilling cost field.

The entire excess intangible drilling costs (IDC) does not appear directly on Form 6251. The tentative preference item is the amount by which excess intangible drilling costs exceed 65% of the net income from oil and gas properties.

This tentative excess IDC amount is then used to calculate a tentative alternative minimum taxable income (AMTI). The excess IDC (Form 6251, line 26) is the amount by which the tentative excess IDC exceeds 40% of the tentative AMTI (Form 6251, lines 1-26).

  1. Go to the Input Return tab.
  2. From the left of the screen, select Taxes and choose Alternative Minimum Tax (6251).
  3. Under the Adjustments and Preferences section, enter the amount in Intangible drilling costs [Adjust].
    • This will adjust the automatic calculation on Form 4626, line 2.

Starting in tax year 2024, California law does not allow the IRC Section 263(c) deduction for intangible drilling and development costs in the case of oil and gas wells paid or incurred on or after January 1, 2024. Also, California no longer allows the calculation of depletion as a percentage of gross income from the property for specified natural resources, including coal, oil shale, oil and gas wells. Cost Depletion must be used.

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