Ep. 103 | Unlocking Oil & Gas Investments: Tax Benefits Unveiled

Teaching Tax Flow: The Podcast

About the Guest: Alec Hutchin

Alec is the Vice President of Investments for MDS Energy Development, LLC. He holds a degree in economics and has a deep-rooted passion for the natural gas industry, having grown up in western Pennsylvania’s “Gasland.” Alec's career in the oil and gas sector began after an intriguing conversation with Michael Snyder of Snyder Brothers, leading to his pivotal role in raising investments for alternative energy projects. Known for his comprehensive understanding of the industry and the tax benefits associated with oil and gas investments, Alec is an avid supporter of his local economy and an enthusiastic Pittsburgh sports fan.

Episode Summary:

In this episode of the Teaching Tax Flow podcast, hosts Chris Picciurro and John engage in an enlightening conversation with Alec Hutchin, Vice President of Investments for MDS Energy Development, LLC. The discussion delves deep into the intriguing world of oil and gas investment, an area known to offer significant tax benefits but often perceived as exclusive to wealthy individuals. Alec demystifies these tax advantages, explaining concepts like intangible drilling costs (IDC), percentage depletion allowance, and the potential for using oil and gas investments as a strategy for failed 1031 exchanges. This episode not only highlights the financial perks but also emphasizes the broader economic and community benefits of investing in domestic energy production.

Throughout the discussion, Alec shares his journey from aspiring economist to key player in Pennsylvania’s natural gas industry, underscoring the pivotal role of unconventional energy investments in driving local economies. He provides listeners with essential insights into the tax dynamics of oil and gas investments, such as the 100% deduction of IDCs in the first year and the 15% income exclusion via percentage depletion allowance. Alec also gives practical advice on what to look for when considering such investments, making this episode a valuable resource for both current and potential investors interested in diversifying their portfolios and optimizing their tax strategies.

Key Takeaways:

• Intangible Drilling Costs (IDC): Investors in oil and gas projects can claim up to 100% of their investment as a deduction in the first year of drilling.
• Percentage Depletion Allowance: 15% of the income received from oil and gas investments is tax-free, enhancing the investment’s appeal.
• Failed 1031 Exchange Strategy: Oil and gas investments can serve as an effective remedy for managing the tax burden from a failed 1031 exchange.
• Investment Accessibility: Modern scalability and financial models have made oil and gas investments more accessible to a broader range of investors.
• Critical Considerations: Key aspects to evaluate include project leverage, geological understanding of the drilling location, and the experience of the operating team.

Notable Quotes:

1. Alec Hutchin: "We're really excited for what we have in place currently in the states, to be able to really boost and help these tax strategies that you have that you're forming right now."
2. Chris Picciurro: "It's kind of like bonus depreciation that you don't have to recapture."
3. Alec Hutchin: "One of the most powerful codes in the Internal Revenue Code today."
4. Alec Hutchin: "We need affordable energy to make sure that single moms can feed their kids and to make sure that we can still continue to maintain a really prosperous life for the middle class."
5. Chris Picciurro: "It's really cool that you have stayed close to home."

Episode Sponsor:
REPStracker

www.repstracker.com/affiliate/teachingtaxflow (CODE: IFG)

• (00:00) - Tax Benefits of Investing in Oil and Gas
• (03:51) - From Economics to Natural Gas: A Journey Back Home
• (08:54) - Tax Advantages of Intangible Drilling Cost Deductions in Oil Investments
• (15:39) - Tax Benefits and Strategies for Oil and Gas Investments
• (20:24) - Key Considerations for Investing in Oil and Gas
• (22:43) - Exploring Alternative Investments and Their Impact on America