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The 'Repeal big oil tax subsidies act' repeals five tax subsidies for the five largest integrated oil and gas companies

USA
2 Mar 2012
On March 19, Senator Menendez (D-NJ) introduced S.2204, the “Repeal Big Oil Tax Subsidies Act.” On the same day, Majority leader Harry Reid (D-NV) began the process to put the bill on the Senate's Calendar of Business pursuant to rule XIV, which is a rarely used procedural device that allows a bill to effectively bypass a referral or report from a standing committee of the Senate.

The bill would repeal five tax subsidies for the five largest integrated oil and gas companies (“companies”), and use the resulting revenue to extend expired and expiring renewable energy tax incentives. 

The following provisions would be repealed or altered: 

  • the amount of creditable foreign taxes available to the companies would be limited to the amount of foreign income taxes that would have been payable if the taxpayer wasn't a dual capacity taxpayer (i.e., a taxpayer that is subject to a derived by the companies from the sale, exchange, or other disposition of oil, natural gas, or a primary product thereof would be excluded from the definition of “domestic production” for purposes of the Code Sec. 199 domestic manufacturing deduction);
  • intangible drilling costs would be capitalized as depreciable or depletable property rather than immediately expensed under Code Sec. 263(c);
  • instead of depreciating an oil and gas well based on fixed percentage of gross income, under which the total deductions can potentially exceed the basis in the property, the companies would be required to use the cost depletion method; and
  •  the companies would be unable to deduct under Code Sec. 193 the costs of tertiary injectants used in enhanced oil recovery, and would instead be required to capitalize these costs. 

The resulting revenue would be used to extend expired and expiring renewable energy tax incentives, including the Code Sec. 25C credit for energy-efficient existing homes, the Code Sec. 30(f) credit for certain plug-in electric vehicles, the Code Sec. 30C(g) credit for alternative fuel vehicle refueling property, and the Code Sec. 45M(b) credit for energy-efficient appliances. 

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