Federal

End Oil and Gas Tax Subsidies Act of 2023

Source: Congress.gov · 3,133 words in original text

What This Bill Does

This bill removes several tax breaks that oil and gas companies currently receive under federal tax law. The bill amends the tax code to eliminate deductions, credits and accounting methods that benefit oil and gas producers.

Who It Affects

Oil and gas companies, including major integrated oil companies (large producers that also refine and distribute oil). Individuals or businesses that own interests in oil and gas wells or properties.

Key Provisions

• Oil and gas companies must spread out certain exploration costs over seven years instead of 24 months when calculating their taxes (Sec. 2) • A tax credit for producing oil from marginal wells (very small or declining oil wells) is removed (Sec. 3) • A tax credit for enhanced oil recovery (injecting liquids into oil fields to increase production) is removed (Sec. 4) • Companies can no longer deduct intangible drilling and development costs (expenses that don't create a physical asset) for oil and gas wells (Sec. 5) • The percentage depletion allowance (a deduction based on the amount of oil or gas extracted) for oil and gas wells is repealed (Sec. 6) • Companies can no longer deduct costs for tertiary injectants (liquids used to extract additional oil) (Sec. 7) • Oil and gas owners lose an exception that previously allowed them to deduct losses from oil and gas activities against other income (Sec. 8) • Owners of oil and gas businesses cannot claim the qualified business income deduction for income from oil and gas activities (Sec. 9) • Large oil companies cannot use last-in, first-out accounting (a method for calculating inventory value that can lower tax bills) (Sec. 10) • Foreign taxes paid by oil and gas companies on certain foreign oil and gas income receive different treatment under foreign tax credit rules (Sec. 11) • Tar sands oil is now explicitly included in the definition of crude oil subject to an oil excise tax (Sec. 12)

What Changes

These tax benefits disappear for oil and gas companies, making their federal tax obligations larger. Companies must now report more income and cannot use certain deductions and credits they previously claimed. Large integrated oil companies must change their accounting methods for inventory. Foreign tax credits for dual capacity taxpayers (companies that both pay foreign taxes and receive economic benefits from foreign governments) become more limited.

Important Definitions

• Major integrated oil company: A crude oil producer that produces at least 500,000 barrels of crude oil per day, has gross receipts exceeding $1,000,000,000 per year, and operates refineries processing more than 75,000 barrels per day (Sec. 10) • Dual capacity taxpayer: A person subject to foreign taxes in a country or U.S. possession while also receiving a specific economic benefit from that country or possession (Sec. 11) • Crude oil: Includes crude oil, condensates, natural gasoline, bitumen (thick petroleum), oil from tar sands, and oil from oil shale (Sec. 12)

Effective Date

Most provisions apply to taxable years beginning after December 31, 2022 (Secs. 2, 3, 4, 5, 6, 7, 8, 9, 10, 11). The tar sands definition change takes effect on the date the bill becomes law (Sec. 12).

I 118TH CONGRESS 1ST SESSION H. R. 1483 To amend the Internal Revenue Code of 1986 to repeal fossil fuel subsidies for oil companies, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MARCH 9, 2023 Mr. BLUMENAUER (for himself, Mr. CASTEN, and Ms. PORTER) 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 fossil fuel subsidies for oil companies, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘End Oil and Gas Tax 4 Subsidies Act of 2023’’. 5 SEC. 2. AMORTIZATION OF GEOLOGICAL AND GEO- 6 PHYSICAL EXPENDITURES. 7 (a) IN GENERAL.—Section 167(h) of the Internal 8 Revenue Code of 1986 is amended— 9 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 1483 IH (1) by striking ‘‘24-month period’’ in paragraph 1 (1) and inserting ‘‘7-year period’’, and 2 (2) by striking paragraph (5). 3 (b) EFFECTIVE DATE.—The amendment made by 4 this section shall apply to amounts paid or incurred in tax- 5 able years beginning after December 31, 2022. 6 SEC. 3. PRODUCING OIL AND GAS FROM MARGINAL WELLS. 7 (a) IN GENERAL.—Subpart D of part IV of sub- 8 chapter A of chapter 1 of the Internal Revenue Code of 9 1986 is amended by striking section 45I (and by striking 10 the item relating to such section in the table of sections 11 for such subpart). 12 (b) CONFORMING AMENDMENT.—Section 38(b) of 13 such Code is amended by striking paragraph (19). 14 (c) EFFECTIVE DATE.—The amendment made by 15 subsection (a) shall apply to credits determined for taxable 16 years beginning after December 31, 2022. 17 SEC. 4. ENHANCED OIL RECOVERY CREDIT. 18 (a) IN GENERAL.—Subpart D of part IV of sub- 19 chapter A of chapter 1 of the Internal Revenue Code of 20 1986 is amended by striking section 43 (and by striking 21 the item relating to such section in the table of sections 22 for such subpart). 23 (b) CONFORMING AMENDMENT.—Section 38(b) of 24 such Code is amended by striking paragraph (6). 25 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 1483 IH (c) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to amounts paid or incurred in tax- 2 able years beginning after December 31, 2022. 3 SEC. 5. INTANGIBLE DRILLING AND DEVELOPMENT COSTS 4 IN THE CASE OF OIL AND GAS WELLS. 5 (a) IN GENERAL.—Subsection (c) of section 263 of 6 the Internal Revenue Code of 1986 is amended by adding 7 at the end the following new sentence: ‘‘This subsection 8 shall not apply to amounts paid or incurred by a taxpayer 9 with respect to an oil or gas well after December 31, 10 2022.’’. 11 (b) EFFECTIVE DATE.—The amendment made by 12 this section shall apply to amounts paid or incurred in tax- 13 able years beginning after December 31, 2022. 14 SEC. 6. REPEAL OF PERCENTAGE DEPLETION FOR OIL AND 15 GAS WELLS. 16 (a) IN GENERAL.—Part I of subchapter I of chapter 17 1 of the Internal Revenue Code of 1986 is amended by 18 striking section 613A (and the table of sections of such 19 part is amended by striking the item relating to such sec- 20 tion). 21 (b) CONFORMING AMENDMENTS.— 22 (1) Subsection (d) of section 45H of such Code 23 is amended— 24 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 1483 IH (A) by striking ‘‘For purposes of this sec- 1 tion’’ and inserting the following: 2 ‘‘(1) IN GENERAL.—For purposes of this sec- 3 tion’’, 4 (B) by striking ‘‘(within the meaning of 5 section 613A(d)(3))’’, and 6 (C) by adding at the end the following new 7 paragraph: 8 ‘‘(2) RELATED PERSON.—For purposes of this 9 subsection, a person is a related person with respect 10 to the taxpayer if a significant ownership interest in 11 either the taxpayer or such person is held by the 12 other, or if a third person has a significant owner- 13 ship interest in both the taxpayer and such person. 14 For purposes of the preceding sentence, the term 15 ‘significant ownership interest’ means— 16 ‘‘(A) with respect to any corporation, 5 17 percent or more in value of the outstanding 18 stock of such corporation, 19 ‘‘(B) with respect to a partnership, 5 per- 20 cent or more interest in the profits or capital of 21 such partnership, and 22 ‘‘(C) with respect to an estate or trust, 5 23 percent or more of the beneficial interests in 24 such estate or trust. 25 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 1483 IH For purposes of determining a significant ownership 1 interest, an interest owned by or for a corporation, 2 partnership, trust, or estate shall be considered as 3 owned directly both by itself and proportionately by 4 its shareholders, partners, or beneficiaries, as the 5 case may be.’’. 6 (2) Section 57(a)(1) of such Code is amended 7 by striking the last sentence. 8 (3) Section 291(b)(4) of such Code is amended 9 by adding at the end the following: ‘‘Any reference 10 in the preceding sentence to section 613A shall be 11 treated as a reference to such section as in effect 12 prior to the date of the enactment of the End Oil 13 and Gas Tax Subsidies Act of 2023.’’. 14 (4) Section 613(d) of such Code is amended by 15 striking ‘‘Except as provided in section 613A, in the 16 case of’’ and inserting ‘‘In the case of’’. 17 (5) Section 613(e) of such Code is amended— 18 (A) by striking ‘‘or section 613A’’ in para- 19 graph (2), and 20 (B) by striking ‘‘any amount described in 21 section 613A(d)(5)’’ in paragraph (3) and in- 22 serting ‘‘any lease bonus, advance royalty, or 23 other amount payable without regard to produc- 24 tion from property’’. 25 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •HR 1483 IH (6) Section 705(a) of such Code is amended— 1 (A) by inserting ‘‘and’’ at the end of para- 2 graph (1)(C), 3 (B) by striking ‘‘; and’’ at the end of para- 4 graph (2)(B) and inserting a period, and 5 (C) by striking paragraph (3). 6 (7) Section 993(c)(2)(C) of such Code is 7 amended by striking ‘‘section 613 or 613A’’ and in- 8 serting ‘‘section 613 (determined without regard to 9 subsection (d) thereof)’’. 10 (8) Section 1202(e)(3)(D) of such Code is 11 amended by striking ‘‘section 613 or 613A’’ and in- 12 serting ‘‘section 613 (determined without regard to 13 subsection (d) thereof)’’. 14 (9) Section 1367(a)(2) of such Code is amended 15 by inserting ‘‘and’’ at the end of subparagraph (C), 16 by striking ‘‘, and’’ at the end of subparagraph (D) 17 and inserting a period, and by striking subparagraph 18 (E). 19 (10) Section 1446(c) of such Code is amended 20 by striking paragraph (2) and by redesignating 21 paragraph (3) as paragraph (2). 22 (c) EFFECTIVE DATE.—The amendments made by 23 this section shall apply to property placed in service after 24 December 31, 2022. 25 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •HR 1483 IH SEC. 7. REPEAL OF DEDUCTION FOR TERTIARY 1 INJECTANTS. 2 (a) IN GENERAL.—Part VI of subchapter B of chap- 3 ter 1 of the Internal Revenue Code of 1986 is amended 4 by striking section 193 (and the table of sections of such 5 subpart is amended by striking the item relating to such 6 section). 7 (b) EFFECTIVE DATE.—The amendments made by 8 this section shall apply to taxable years beginning after 9 December 31, 2022. 10 SEC. 8. REPEAL OF EXCEPTION TO PASSIVE LOSS LIMITA- 11 TIONS FOR WORKING INTERESTS IN OIL AND 12 GAS PROPERTIES. 13 (a) IN GENERAL.—Section 469(c)(3) of the Internal 14 Revenue Code of 1986 is amended by adding at the end 15 the following new subparagraph: 16 ‘‘(C) TERMINATION.—Subparagraph (A) 17 shall not apply with respect to any taxable year 18 beginning after the date of the enactment of 19 this Act.’’. 20 (b) EFFECTIVE DATE.—The amendment made by 21 this section shall apply to taxable years beginning after 22 December 31, 2022. 23 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •HR 1483 IH SEC. 9. DEDUCTION FOR QUALIFIED BUSINESS INCOME 1 NOT ALLOWED WITH RESPECT TO OIL AND 2 GAS ACTIVITIES. 3 (a) IN GENERAL.—Section 199A(c)(3)(B) of the In- 4 ternal Revenue Code of 1986 is amended by redesignating 5 clause (vii) as clause (viii), and by inserting after clause 6 (vi) the following new clause: 7 ‘‘(vii) The production, refining, proc- 8 essing, transportation, or distribution of 9 oil, gas, or any primary product thereof.’’. 10 (b) EFFECTIVE DATE.—The amendments made by 11 this section shall apply to taxable years beginning after 12 December 31, 2022. 13 SEC. 10. PROHIBITION ON USING LAST-IN, FIRST-OUT AC- 14 COUNTING FOR OIL AND GAS COMPANIES. 15 (a) IN GENERAL.—Section 472 of the Internal Rev- 16 enue Code of 1986 is amended by adding at the end the 17 following new subsection: 18 ‘‘(h) OIL AND GAS COMPANIES.— 19 ‘‘(1) IN GENERAL.—Notwithstanding any other 20 provision of this section, a major integrated oil com- 21 pany may not use the method provided in subsection 22 (b) in inventorying of any goods. 23 ‘‘(2) MAJOR INTEGRATED OIL COMPANY.—For 24 purposes of this subsection, the term ‘major inte- 25 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •HR 1483 IH grated oil company’ means, with respect to any tax- 1 able year, a producer of crude oil— 2 ‘‘(A) which has an average daily worldwide 3 production of crude oil of at least 500,000 bar- 4 rels for the taxable year, 5 ‘‘(B) which has gross receipts in excess of 6 $1,000,000,000 for the taxable year, and 7 ‘‘(C) the average daily refinery runs of the 8 taxpayer and related persons for the taxable 9 year exceed 75,000 barrels. 10 ‘‘(3) SPECIAL RULES.— 11 ‘‘(A) CRUDE PRODUCTION AND GROSS RE- 12 CEIPTS.—For purposes of subparagraphs (A) 13 and (B) of paragraph (2)— 14 ‘‘(i) CONTROLLED GROUPS AND COM- 15 MON CONTROL.—All persons treated as a 16 single employer under subsections (a) and 17 (b) of section 52 shall be treated as 1 per- 18 son. 19 ‘‘(ii) SHORT TAXABLE YEARS.—In 20 case of a short taxable year, the rule under 21 section 448(c)(3)(B) shall apply. 22 ‘‘(B) AVERAGE DAILY REFINERY RUNS.— 23 For purposes of paragraph (2)(C)— 24 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •HR 1483 IH ‘‘(i) IN GENERAL.—The average daily 1 refinery runs for any taxable year shall be 2 determined by dividing the aggregate refin- 3 ery runs for the taxable year by the num- 4 ber of days in the taxable year. 5 ‘‘(ii) RELATED PERSONS.—A person 6 is a related person with respect to the tax- 7 payer if a significant ownership interest in 8 either the taxpayer or such person is held 9 by the other, or if a third person has a sig- 10 nificant ownership interest in both the tax- 11 payer and such person. 12 ‘‘(iii) SIGNIFICANT OWNERSHIP IN- 13 TEREST.—For purposes of clause (ii), the 14 term ‘significant ownership interest’ 15 means— 16 ‘‘(I) with respect to any corpora- 17 tion, 15 percent or more in value of 18 the outstanding stock of such corpora- 19 tion, 20 ‘‘(II) with respect to a partner- 21 ship, 15 percent or more interest in 22 the profits or capital of such partner- 23 ship, and 24 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 11 •HR 1483 IH ‘‘(III) with respect to an estate 1 or trust, 15 percent or more of the 2 beneficial interests in such estate or 3 trust. 4 For purposes of determining a significant 5 ownership interest, an interest owned by or 6 for a corporation, partnership, trust, or es- 7 tate shall be considered as owned directly 8 both by itself and proportionately by its 9 shareholders, partners, or beneficiaries, as 10 the case may be.’’. 11 (b) EFFECTIVE DATE AND SPECIAL RULE.— 12 (1) IN GENERAL.—The amendment made by 13 subsection (a) shall apply to taxable years beginning 14 after December 31, 2022. 15 (2) CHANGE IN METHOD OF ACCOUNTING.—In 16 the case of any taxpayer required by the amendment 17 made by this section to change its method of ac- 18 counting for its first taxable year beginning after the 19 date of the enactment of this Act— 20 (A) such change shall be treated as initi- 21 ated by the taxpayer, 22 (B) such change shall be treated as made 23 with the consent of the Secretary of the Treas- 24 ury, and 25 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 12 •HR 1483 IH (C) the net amount of the adjustments re- 1 quired to be taken into account by the taxpayer 2 under section 481 of the Internal Revenue Code 3 of 1986 shall be taken into account ratably over 4 a period (not greater than 8 taxable years) be- 5 ginning with such first taxable year. 6 SEC. 11. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 7 APPLICABLE TO DUAL CAPACITY TAXPAYERS. 8 (a) IN GENERAL.—Section 901 of the Internal Rev- 9 enue Code of 1986 is amended by redesignating subsection 10 (n) as subsection (o) and by inserting after subsection (m) 11 the following new subsection: 12 ‘‘(n) SPECIAL RULES RELATING TO DUAL CAPACITY 13 TAXPAYERS.— 14 ‘‘(1) GENERAL RULE.—Notwithstanding any 15 other provision of this chapter, any amount paid or 16 accrued by a dual capacity taxpayer to a foreign 17 country or possession of the United States for any 18 period with respect to combined foreign oil and gas 19 income (as defined in section 907(b)(1)) shall not be 20 considered a tax to the extent such amount exceeds 21 the amount (determined in accordance with regula- 22 tions) which would have been required to be paid if 23 the taxpayer were not a dual capacity taxpayer. 24 VerDate Sep 11 2014 23:49 Mar 21, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1483.IH H1483 pbinns on DSKJLVW7X2PROD with $$_JOB 13 •HR 1483 IH ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur- 1 poses of this subsection, the term ‘dual capacity tax- 2 payer’ means, with respect to any foreign cou [Text truncated for display. Full text available on Congress.gov.]

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