Washington -US Senator Menendez (D-NJ) released the following statement today after Speaker Boehner made public declarations in support of ending certain tax loopholes for Oil companies yesterday and President Obama sent a letter to the Congressional leadership in response urging Congress to take immediate action on this issue:
"I applaud Speaker Boehner and President Obama for finding common ground and coming together to end the unfair tax subsidies that simply deepen our federal deficit. I have fought hard to end these unjustified and wasteful subsidies. Oil companies are not using their enormous revenues and subsidies to drive down prices, but areinstead pocketing these subsidies to further boost their outrageous profits. I pledge to continue to work with Congressional leaders and President Obama to see the Close Big Oil Tax Loopholes Act become law."
Close Big Oil Tax Loopholes Act
Menendez's Close Big Oil Tax Loopholes Act has been scored by the Joint Tax Committee and would raise $33 billion over 10 years. The bill does contain important safeguards to allow refineries and oil companies with yearly revenues of less than $100 million to retain certain tax credits and deductions.
Background on legislation:
• Recoup Royalty Revenue Lost to Contract Loopholes: This proposal would create an excise tax on oil and gas produced on federal lands on the Outer Continental Shelf (OCS) in order to pay back American taxpayers for contract loopholes whereby oil and gas companies avoided paying royalties on certain oil and gas produced in the Gulf of Mexico.
• End Oil Companies Abuse of Foreign Tax Credits: Would require that a dual capacity taxpayer establish that the foreign country generally impose an income tax to be able to claim a foreign levy as a creditable tax.
• Repeal Expensing of Intangible Drilling Costs: Would repeal the deduction for IDCs and require such costs be capitalized as a cost of the well or tangible property and recovered through depreciation or depletion, as applicable. Oil companies with yearly revenues of less than $100 million would retain the use of this deduction.
• Repeal Percentage Depletion for Oil and Gas Wells: This proposal would repeal percentage depletion for oil and gas properties. Oil companies with yearly revenues of less than $100 million would retain the use of this deduction.
• Repeal Deduction for Tertiary Injectants: The proposal would repeal the current deduction and instead allow oil companies to capitalize and depreciate or deplete costs for tertiary injectants. For example, supply costs would be capitalized and deducted when consumed or as part of cost of goods sold. Oil companies with yearly revenues of less than $100 million would retain the use of this deduction.
• Repeal Exemption of Passive Loss Limitations for Interests in Oil and Gas Properties: The proposal would end the exemption from passive loss rules for oil companies so they must operate under the same tax rules as other corporations. Oil companies with yearly revenues of less than $100 million would retain the use of this exemption.
• Repeal Domestic Manufacturing Deduction for Oil and Gas Production: This proposal would repeal the ability of oil and gas companies to claim oil and gas production as manufacturing, thus making the production activities ineligible for the domestic production activities deduction. Oil companies with yearly revenues of less than $100 million would retain the use of this deduction. The deduction would also be retained for oil refining and natural gas processing.
• Match Geological and Geophysical Amortization Periods for All Oil and Gas Companies: This proposal would create more uniform amortization rules for geological and geophysical costs. G&G costs are costs incurred in obtaining and accumulating data that serves as the basis for acquiring and retaining oil and gas properties. Oil companies with yearly revenues of less than $100 million could amortize geological and geophysical costs over two years. All others would amortize these costs over 7 years.