Oil Subsidy Elimination Act of 2006 - Requires oil companies with annual gross receipts of $1 billion or more and average daily crude oil production levels of at least 500,000 barrels (defined as large integrated oil companies) to revalue, according to a specified formula, their 2005 LIFO inventories of crude oil, natural gas, or other petroleum products.
Amends the Internal Revenue Code to deny large integrated oil companies: (1) amortization of geological and geophysical expenditures; and (2) foreign tax credits for certain payments made to foreign countries.
Repeals provisions of the Energy Policy Act of 2005 relating to: (1) expensing of crude oil refinery property; (2) exemptions from limitations on oil depletion deductions for certain small crude oil refiners; and (3) amortization of geological and geophysical expenditures.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5234 Introduced in House (IH)]
109th CONGRESS
2d Session
H. R. 5234
To amend the Internal Revenue Code of 1986 to repeal certain tax
incentives for oil companies.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 27, 2006
Mr. Larson of Connecticut (for himself, Mr. McDermott, Mr. Hinchey, Mr.
Allen, Ms. Hooley, Mr. Grijalva, Ms. DeLauro, Mr. Honda, Mr. Nadler,
and Ms. Lee) introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to repeal certain tax
incentives for oil companies.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Oil Subsidy Elimination Act of
2006''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) On Friday April 21, 2006, the trading price for a
barrel of oil reached a new record high of $75.17. As a result
the price of gasoline in many areas around the country jumped
to $3 per gallon or higher.
(2) According to the Energy Information Administration
(EIA) of the Department of Energy, gas prices are expected to
rise nationally by at least another 25 cents in the short term.
(3) Oil companies are receiving record profits as a result
of high gas prices. In 2005, ExxonMobil--the Nation's largest
oil company--earned a net income of $36.1 billion, up 31
percent from the year before. In the fourth quarter of 2005
alone, ExxonMobile earned $10 billion, up from the previous
record of $9.92 billion set by ExxonMobile in the third quarter
of 2005.
(4) While high energy prices are squeezing the American
middle class, oil executives are receiving record compensation
and retirement packages. For example, the retiring chairman of
ExxonMobil was recently given a $400 million retirement
package--one of the largest in history.
(5) In the 108th and 109th Congresses, the United States
Congress passed, and the President signed, legislation giving
billions in taxpayer dollars away to the oil industry in the
form of tax breaks--even as this industry continues to garner
record breaking profits.
(6) At a November 9, 2005, joint hearing of the Committee
on Energy and Natural Resources and the Committee on
Environment and Public Works of the Senate, the chief executive
officers of the top five oil companies testified that their
companies did not need the Federal tax incentives included in
the Energy Policy Act of 2005 (Public Law 109-58).
(7) On April 25, 2006, President Bush stated ``Record oil
prices and large cash flows also mean that Congress has got to
understand that these energy companies don't need unnecessary
tax breaks like the write-offs of certain geological and
geophysical expenditures, or the use of taxpayers' money to
subsidize energy companies research into deep water drilling.
I'm looking forward to Congress to take about $2 billion of
these tax breaks out of the budget over a 10-year period of
time. Cash flows are up. Taxpayers don't need to be paying for
certain of these expenses on behalf of the energy companies.''.
SEC. 2. REQUIREMENTS FOR CERTAIN LARGE INTEGRATED OIL COMPANIES.
(a) Revaluation of LIFO Inventories of Large Integrated Oil
Companies.--
(1) General rule.--Notwithstanding any other provision of
law, if a taxpayer is an applicable integrated oil company for
its last taxable year ending in calendar year 2005, the
taxpayer shall--
(A) increase, effective as of the close of such
taxable year, the value of each historic LIFO layer of
inventories of crude oil, natural gas, or any other
petroleum product (within the meaning of section 4611)
by the layer adjustment amount, and
(B) decrease its cost of goods sold for such
taxable year by the aggregate amount of the increases
under paragraph (1).
If the aggregate amount of the increases under paragraph (1)
exceed the taxpayer's cost of goods sold for such taxable year,
the taxpayer's gross income for such taxable year shall be
increased by the amount of such excess.
(2) Layer adjustment amount.--For purposes of this
section--
(A) In general.--The term ``layer adjustment
amount'' means, with respect to any historic LIFO
layer, the product of--
(i) $18.75, and
(ii) the number of barrels of crude oil (or
in the case of natural gas or other petroleum
products, the number of barrel-of-oil
equivalents) represented by the layer.
(B) Barrel-of-oil equivalent.--The term ``barrel-
of-oil equivalent'' has the meaning given such term by
section 29(d)(5) (as in effect before its redesignation
by the Energy Tax Incentives Act of 2005).
(3) Application of requirement.--
(A) No change in method of accounting.--Any
adjustment required by this section shall not be
treated as a change in method of accounting.
(B) Underpayments of estimated tax.--No addition to
the tax shall be made under section 6655 of the
Internal Revenue Code of 1986 (relating to failure by
corporation to pay estimated tax) with respect to any
underpayment of an installment required to be paid with
respect to the taxable year described in subsection (a)
to the extent such underpayment was created or
increased by this section.
(4) Applicable integrated oil company.--For purposes of
this subsection, the term ``applicable integrated oil company''
means an integrated oil company (as defined in section
291(b)(4) of the Internal Revenue Code of 1986) which has an
average daily worldwide production of crude oil of at least
500,000 barrels for the taxable year and which had gross
receipts in excess of $1,000,000,000 for its last taxable year
ending during calendar year 2005. For purposes of this
subsection all persons treated as a single employer under
subsections (a) and (b) of section 52 of the Internal Revenue
Code of 1986 shall be treated as 1 person and, in the case of a
short taxable year, the rule under section 448(c)(3)(B) shall
apply.
(b) Elimination of Amortization of Geological and Geophysical
Expenditures for Major Integrated Oil Companies.--
(1) In general.--Section 167(h) of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
paragraph:
``(5) Nonapplication to major integrated oil companies.--
This subsection shall not apply with respect to any expenses
paid or incurred for any taxable year by any integrated oil
company (as defined in section 291(b)(4)) which has an average
daily worldwide production of crude oil of at least 500,000
barrels for such taxable year.''.
(2) Effective date.--The amendment made by this section
shall take effect as if included in the amendment made by
section 1329(a) of the Energy Policy Act of 2005.
(c) Modifications of Foreign Tax Credit Rules Applicable to Large
Integrated Oil Companies Which Are Dual Capacity Taxpayers.--
(1) In general.--Section 901 of the Internal Revenue Code
of 1986 (relating to credit for taxes of foreign countries and
of possessions of the United States) is amended by
redesignating subsection (m) as subsection (n), and by
inserting after subsection (l) the following new subsection:
``(m) Special Rules Relating to Large Integrated Oil Companies
Which Are Dual Capacity Taxpayers.--
``(1) General rule.--Notwithstanding any other provision of
this chapter, any amount paid or accrued by a dual capacity
taxpayer which is a large integrated oil company to a foreign
country or possession of the United States for any period shall
not be considered a tax--
``(A) if, for such period, the foreign country or
possession does not impose a generally applicable
income tax, or
``(B) to the extent such amount exceeds the amount
(determined in accordance with regulations) which--
``(i) is paid by such dual capacity
taxpayer pursuant to the generally applicable
income tax imposed by the country or
possession, or
``(ii) would be paid if the generally
applicable income tax imposed by the country or
possession were applicable to such dual
capacity taxpayer.
Nothing in this paragraph shall be construed to imply
the proper treatment of any such amount not in excess
of the amount determined under subparagraph (B).
``(2) Dual capacity taxpayer.--For purposes of this
subsection, the term `dual capacity taxpayer' means, with
respect to any foreign country or possession of the United
States, a person who--
``(A) is subject to a levy of such country or
possession, and
``(B) receives (or will receive) directly or
indirectly a specific economic benefit (as determined
in accordance with regulations) from such country or
possession.
``(3) Generally applicable income tax.--For purposes of
this subsection--
``(A) In general.--The term `generally applicable
income tax' means an income tax (or a series of income
taxes) which is generally imposed under the laws of a
foreign country or possession on income derived from
the conduct of a trade or business within such country
or possession.
``(B) Exceptions.--Such term shall not include a
tax unless it has substantial application, by its terms
and in practice, to--
``(i) persons who are not dual capacity
taxpayers, and
``(ii) persons who are citizens or
residents of the foreign country or possession.
``(4) Large integrated oil company.--For purposes of this
subsection, the term `large integrated oil company' means, with
respect to any taxable year, an integrated oil company (as
defined in section 291(b)(4)) which--
``(A) had gross receipts in excess of
$1,000,000,000 for such taxable year, and
``(B) has an average daily worldwide production of
crude oil of at least 500,000 barrels for such taxable
year.''
(2) Effective date.--
(A) In general.--The amendments made by this
subsection shall apply to taxes paid or accrued in
taxable years beginning after the date of the enactment
of this Act.
(B) Contrary treaty obligations upheld.--The
amendments made by this subsection shall not apply to
the extent contrary to any treaty obligation of the
United States.
SEC. 3. REPEAL OF TAX SUBSIDIES ENACTED BY THE ENERGY POLICY ACT OF
2005 FOR OIL AND GAS.
(a) Repeal.--The following provisions, and amendments made by such
provisions, of the Energy Policy Act of 2005 are hereby repealed:
(1) Section 1323 (relating to temporary expensing for
equipment used in refining of liquid fuels).
(2) Section 1328 (relating to determination of small
refiner exception to oil depletion deduction).
(3) Section 1329 (relating to amortization of geological
and geophysical expenditures).
(b) Administration of Internal Revenue Code of 1986.--The Internal
Revenue Code of 1986 shall be applied and administered as if the
provisions, and amendments, specified in subsection (a) had never been
enacted.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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