Federal

People Over Petroleum Act

Source: Congress.gov · 6,546 words in original text

What This Bill Does

This bill removes certain tax breaks that oil companies currently receive. It also creates a one-time payment to individuals in 2022 to help with gas prices. The bill changes how the federal government taxes oil and gas production activities. ##

Who It Affects

* Oil and gas companies that produce crude oil * Individual taxpayers filing tax returns for 2022 * People who receive dependent benefits * U.S. territories with tax systems tied to federal tax law * The Internal Revenue Service (the federal tax agency) ##

Key Provisions

* Oil and gas companies can no longer deduct certain exploration and drilling costs immediately from their taxes. Instead, these costs must be spread over seven years starting January 1, 2023. (Sec. 2) * A tax credit (money back) for producing oil from low-producing wells is eliminated starting January 1, 2023. (Sec. 3) * A tax credit for enhanced oil recovery projects is eliminated starting January 1, 2023. (Sec. 4) * Oil and gas companies cannot use a specific accounting method called LIFO (last-in, first-out) starting January 1, 2023, but only if the company produces at least 500,000 barrels of crude oil daily and has annual income over $1,000,000,000. (Sec. 10) * Eligible individuals receive a one-time payment of $500 (or $1,000 for joint returns) plus $500 per dependent child age 16 or older for tax year 2022. (Sec. 13) ##

What Changes

**For Oil and Gas Companies:** Starting January 1, 2023, several existing tax deductions and credits disappear. Companies can no longer immediately write off intangible drilling costs (upfront expenses that don't create physical property). The percentage depletion deduction (a reduction in taxable income based on resource depletion) is eliminated. Tax credits for marginal well production and enhanced oil recovery no longer exist. Large, integrated oil companies cannot use LIFO accounting for inventory valuation. Additionally, oil companies can no longer claim certain foreign tax credits in specific situations involving dual capacity taxpayers (companies that both pay taxes and receive economic benefits from a foreign country). **For Individual Taxpayers:** Eligible individuals receive advance payments in 2022 and can claim a credit on their tax return. The payments are based on their filing status and number of dependents. People cannot claim the credit if they are dependents of someone else, nonresident aliens, or estates and trusts. **For Definition of Oil Products:** Tar sands oil and oil shale products are now specifically included in the definition of crude oil for federal excise tax purposes (a tax on manufacture or sale). ##

Important Definitions

* **Eligible Individual:** Any U.S. resident (not a nonresident alien) who is not claimed as a dependent and is not an estate or trust. (Sec. 13) * **Major Integrated Oil Company:** A company that produces at least 500,000 barrels of crude oil daily, has annual income over $1,000,000,000, and refines more than 75,000 barrels daily. (Sec. 10) * **Dependent:** Has the meaning given by section 152 of the tax code, generally meaning a child or relative you support financially. (Sec. 13) * **Related Person:** A person with significant ownership in the other party or a third party with significant ownership in both, where significant ownership means 5 to 15 percent depending on the entity type. (Sec. 6 and Sec. 10) * **Dual Capacity Taxpayer:** A person who pays taxes to a foreign country and receives a specific economic benefit from that country. (Sec. 11) * **Crude Oil:** Now includes crude oil condensates, natural gasoline, bitumen, tar sands oil, and kerogen-bearing products like oil shale. (Sec. 12) ##

Effective Date

Most provisions take effect for tax years beginning after December 31, 2022. The tar sands and oil shale definition change takes effect on the date the bill is signed into law. (Various sections)

I 118TH CONGRESS 1ST SESSION H. R. 1743 To amend the Internal Revenue Code of 1986 to repeal fossil fuel subsidies for oil companies, to establish gas price rebates to individuals for 2022, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MARCH 23, 2023 Mr. CASTEN (for himself, Mr. BLUMENAUER, Mr. LEVIN, and Mrs. MCCLEL- LAN) 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, to establish gas price rebates to individuals for 2022, and for other pur- poses. 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 ‘‘People Over Petroleum 4 Act’’. 5 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 1743 IH SEC. 2. AMORTIZATION OF GEOLOGICAL AND GEO- 1 PHYSICAL EXPENDITURES. 2 (a) IN GENERAL.—Section 167(h) of the Internal 3 Revenue Code of 1986 is amended— 4 (1) by striking ‘‘24-month period’’ in paragraph 5 (1) and inserting ‘‘7-year period’’, and 6 (2) by striking paragraph (5). 7 (b) EFFECTIVE DATE.—The amendment made by 8 this section shall apply to amounts paid or incurred in tax- 9 able years beginning after December 31, 2022. 10 SEC. 3. PRODUCING OIL AND GAS FROM MARGINAL WELLS. 11 (a) IN GENERAL.—Subpart D of part IV of sub- 12 chapter A of chapter 1 of the Internal Revenue Code of 13 1986 is amended by striking section 45I (and by striking 14 the item relating to such section in the table of sections 15 for such subpart). 16 (b) CONFORMING AMENDMENT.—Section 38(b) of 17 such Code is amended by striking paragraph (19). 18 (c) EFFECTIVE DATE.—The amendment made by 19 subsection (a) shall apply to credits determined for taxable 20 years beginning after December 31, 2022. 21 SEC. 4. ENHANCED OIL RECOVERY CREDIT. 22 (a) IN GENERAL.—Subpart D of part IV of sub- 23 chapter A of chapter 1 of the Internal Revenue Code of 24 1986 is amended by striking section 43 (and by striking 25 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 1743 IH the item relating to such section in the table of sections 1 for such subpart). 2 (b) CONFORMING AMENDMENT.—Section 38(b) of 3 such Code is amended by striking paragraph (6). 4 (c) EFFECTIVE DATE.—The amendments made by 5 this section shall apply to amounts paid or incurred in tax- 6 able years beginning after December 31, 2022. 7 SEC. 5. INTANGIBLE DRILLING AND DEVELOPMENT COSTS 8 IN THE CASE OF OIL AND GAS WELLS. 9 (a) IN GENERAL.—Section 263(c) of the Internal 10 Revenue Code of 1986 is amended by adding at the end 11 the following new sentence: ‘‘This subsection shall not 12 apply to amounts paid or incurred by a taxpayer with re- 13 spect to an oil or gas well after December 31, 2022.’’. 14 (b) EFFECTIVE DATE.—The amendment made by 15 this section shall apply to amounts paid or incurred in tax- 16 able years beginning after December 31, 2022. 17 SEC. 6. REPEAL OF PERCENTAGE DEPLETION FOR OIL AND 18 GAS WELLS. 19 (a) IN GENERAL.—Part I of subchapter I of chapter 20 1 of the Internal Revenue Code of 1986 is amended by 21 striking section 613A (and the table of sections of such 22 part is amended by striking the item relating to such sec- 23 tion). 24 (b) CONFORMING AMENDMENTS.— 25 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 1743 IH (1) Section 45H(d) of such Code is amended— 1 (A) by striking ‘‘For purposes of this sec- 2 tion’’ and inserting the following: 3 ‘‘(1) IN GENERAL.—For purposes of this sec- 4 tion’’, 5 (B) by striking ‘‘(within the meaning of 6 section 613A(d)(3))’’, and 7 (C) by adding at the end the following new 8 paragraph: 9 ‘‘(2) RELATED PERSON.—For purposes of this 10 subsection, a person is a related person with respect 11 to the taxpayer if a significant ownership interest in 12 either the taxpayer or such person is held by the 13 other, or if a third person has a significant owner- 14 ship interest in both the taxpayer and such person. 15 For purposes of the preceding sentence, the term 16 ‘significant ownership interest’ means— 17 ‘‘(A) with respect to any corporation, 5 18 percent or more in value of the outstanding 19 stock of such corporation, 20 ‘‘(B) with respect to a partnership, 5 per- 21 cent or more interest in the profits or capital of 22 such partnership, and 23 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 1743 IH ‘‘(C) with respect to an estate or trust, 5 1 percent or more of the beneficial interests in 2 such estate or trust. 3 For purposes of determining a significant ownership 4 interest, an interest owned by or for a corporation, 5 partnership, trust, or estate shall be considered as 6 owned directly both by itself and proportionately by 7 its shareholders, partners, or beneficiaries, as the 8 case may be.’’. 9 (2) Section 57(a)(1) of such Code is amended 10 by striking the last sentence. 11 (3) Section 291(b)(4) of such Code is amended 12 by adding at the end the following: ‘‘Any reference 13 in the preceding sentence to section 613A shall be 14 treated as a reference to such section as in effect 15 prior to the date of the enactment of the People 16 Over Petroleum Act.’’. 17 (4) Section 613(d) of such Code is amended by 18 striking ‘‘Except as provided in section 613A, in the 19 case of’’ and inserting ‘‘In the case of’’. 20 (5) Section 613(e) of such Code is amended— 21 (A) by striking ‘‘or section 613A’’ in para- 22 graph (2), and 23 (B) by striking ‘‘any amount described in 24 section 613A(d)(5)’’ in paragraph (3) and in- 25 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •HR 1743 IH serting ‘‘any lease bonus, advance royalty, or 1 other amount payable without regard to produc- 2 tion from property’’. 3 (6) Section 705(a) of such Code is amended— 4 (A) by inserting ‘‘and’’ at the end of para- 5 graph (1)(C), 6 (B) by striking ‘‘; and’’ at the end of para- 7 graph (2)(B) and inserting a period, and 8 (C) by striking paragraph (3). 9 (7) Section 993(c)(2)(C) of such Code is 10 amended by striking ‘‘section 613 or 613A’’ and in- 11 serting ‘‘section 613 (determined without regard to 12 subsection (d) thereof)’’. 13 (8) Section 1202(e)(3)(D) of such Code is 14 amended by striking ‘‘section 613 or 613A’’ and in- 15 serting ‘‘section 613 (determined without regard to 16 subsection (d) thereof)’’. 17 (9) Section 1367(a)(2) of such Code is amended 18 by inserting ‘‘and’’ at the end of subparagraph (C), 19 by striking ‘‘, and’’ at the end of subparagraph (D) 20 and inserting a period, and by striking subparagraph 21 (E). 22 (10) Section 1446(c) of such Code is amended 23 by striking paragraph (2) and by redesignating 24 paragraph (3) as paragraph (2). 25 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •HR 1743 IH (c) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to property placed in service after 2 December 31, 2022. 3 SEC. 7. REPEAL OF DEDUCTION FOR TERTIARY 4 INJECTANTS. 5 (a) IN GENERAL.—Part VI of subchapter B of chap- 6 ter 1 of the Internal Revenue Code of 1986 is amended 7 by striking section 193 (and the table of sections of such 8 subpart is amended by striking the item relating to such 9 section). 10 (b) EFFECTIVE DATE.—The amendments made by 11 this section shall apply to taxable years beginning after 12 December 31, 2022. 13 SEC. 8. REPEAL OF EXCEPTION TO PASSIVE LOSS LIMITA- 14 TIONS FOR WORKING INTERESTS IN OIL AND 15 GAS PROPERTIES. 16 (a) IN GENERAL.—Section 469(c)(3) of the Internal 17 Revenue Code of 1986 is amended by adding at the end 18 the following new subparagraph: 19 ‘‘(C) TERMINATION.—Subparagraph (A) 20 shall not apply with respect to any taxable year 21 beginning after the date of the enactment of 22 this Act.’’. 23 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •HR 1743 IH (b) EFFECTIVE DATE.—The amendment made by 1 this section shall apply to taxable years beginning after 2 December 31, 2022. 3 SEC. 9. DEDUCTION FOR QUALIFIED BUSINESS INCOME 4 NOT ALLOWED WITH RESPECT TO OIL AND 5 GAS ACTIVITIES. 6 (a) IN GENERAL.—Section 199A(c)(3)(B) of the In- 7 ternal Revenue Code of 1986 is amended by redesignating 8 clause (vii) as clause (viii), and by inserting after clause 9 (vi) the following new clause: 10 ‘‘(vii) The production, refining, proc- 11 essing, transportation, or distribution of 12 oil, gas, or any primary product thereof.’’. 13 (b) EFFECTIVE DATE.—The amendments made by 14 this section shall apply to taxable years beginning after 15 December 31, 2022. 16 SEC. 10. PROHIBITION ON USING LAST-IN, FIRST-OUT AC- 17 COUNTING FOR OIL AND GAS COMPANIES. 18 (a) IN GENERAL.—Section 472 of the Internal Rev- 19 enue Code of 1986 is amended by adding at the end the 20 following new subsection: 21 ‘‘(h) OIL AND GAS COMPANIES.— 22 ‘‘(1) IN GENERAL.—Notwithstanding any other 23 provision of this section, a major integrated oil com- 24 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •HR 1743 IH pany may not use the method provided in subsection 1 (b) in inventorying of any goods. 2 ‘‘(2) MAJOR INTEGRATED OIL COMPANY.—For 3 purposes of this subsection, the term ‘major inte- 4 grated oil company’ means, with respect to any tax- 5 able year, a producer of crude oil— 6 ‘‘(A) which has an average daily worldwide 7 production of crude oil of at least 500,000 bar- 8 rels for the taxable year, 9 ‘‘(B) which has gross receipts in excess of 10 $1,000,000,000 for the taxable year, and 11 ‘‘(C) the average daily refinery runs of the 12 taxpayer and related persons for the taxable 13 year exceed 75,000 barrels. 14 ‘‘(3) SPECIAL RULES.— 15 ‘‘(A) CRUDE PRODUCTION AND GROSS RE- 16 CEIPTS.—For purposes of subparagraphs (A) 17 and (B) of paragraph (2)— 18 ‘‘(i) CONTROLLED GROUPS AND COM- 19 MON CONTROL.—All persons treated as a 20 single employer under subsections (a) and 21 (b) of section 52 shall be treated as 1 per- 22 son. 23 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •HR 1743 IH ‘‘(ii) SHORT TAXABLE YEARS.—In 1 case of a short taxable year, the rule under 2 section 448(c)(3)(B) shall apply. 3 ‘‘(B) AVERAGE DAILY REFINERY RUNS.— 4 For purposes of paragraph (2)(C)— 5 ‘‘(i) IN GENERAL.—The average daily 6 refinery runs for any taxable year shall be 7 determined by dividing the aggregate refin- 8 ery runs for the taxable year by the num- 9 ber of days in the taxable year. 10 ‘‘(ii) RELATED PERSONS.—A person 11 is a related person with respect to the tax- 12 payer if a significant ownership interest in 13 either the taxpayer or such person is held 14 by the other, or if a third person has a sig- 15 nificant ownership interest in both the tax- 16 payer and such person. 17 ‘‘(iii) SIGNIFICANT OWNERSHIP IN- 18 TEREST.—For purposes of clause (ii), the 19 term ‘significant ownership interest’ 20 means— 21 ‘‘(I) with respect to any corpora- 22 tion, 15 percent or more in value of 23 the outstanding stock of such corpora- 24 tion, 25 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 11 •HR 1743 IH ‘‘(II) with respect to a partner- 1 ship, 15 percent or more interest in 2 the profits or capital of such partner- 3 ship, and 4 ‘‘(III) with respect to an estate 5 or trust, 15 percent or more of the 6 beneficial interests in such estate or 7 trust. 8 For purposes of determining a significant 9 ownership interest, an interest owned by or 10 for a corporation, partnership, trust, or es- 11 tate shall be considered as owned directly 12 both by itself and proportionately by its 13 shareholders, partners, or beneficiaries, as 14 the case may be.’’. 15 (b) EFFECTIVE DATE AND SPECIAL RULE.— 16 (1) IN GENERAL.—The amendment made by 17 subsection (a) shall apply to taxable years beginning 18 after December 31, 2022. 19 (2) CHANGE IN METHOD OF ACCOUNTING.—In 20 the case of any taxpayer required by the amendment 21 made by this section to change its method of ac- 22 counting for its first taxable year beginning after the 23 date of the enactment of this Act— 24 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 12 •HR 1743 IH (A) such change shall be treated as initi- 1 ated by the taxpayer, 2 (B) such change shall be treated as made 3 with the consent of the Secretary of the Treas- 4 ury, and 5 (C) the net amount of the adjustments re- 6 quired to be taken into account by the taxpayer 7 under section 481 of the Internal Revenue Code 8 of 1986 shall be taken into account ratably over 9 a period (not greater than 8 taxable years) be- 10 ginning with such first taxable year. 11 SEC. 11. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 12 APPLICABLE TO DUAL CAPACITY TAXPAYERS. 13 (a) IN GENERAL.—Section 901 of the Internal Rev- 14 enue Code of 1986 is amended by redesignating subsection 15 (n) as subsection (o) and by inserting after subsection (m) 16 the following new subsection: 17 ‘‘(n) SPECIAL RULES RELATING TO DUAL CAPACITY 18 TAXPAYERS.— 19 ‘‘(1) GENERAL RULE.—Notwithstanding any 20 other provision of this chapter, any amount paid or 21 accrued by a dual capacity taxpayer to a foreign 22 country or possession of the United States for any 23 period with respect to combined foreign oil and gas 24 income (as defined in section 907(b)(1)) shall not be 25 VerDate Sep 11 2014 01:51 Jun 21, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1743.IH H1743 pbinns on DSKJLVW7X2PROD with $$_JOB 13 •HR 1743 IH considered a tax to the extent such amount exceeds 1 the amount (determined in accordance with regula- 2 tions) which would have been required to be paid if 3 the taxpayer were not a dual capacity taxpayer. 4 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur- 5 poses of this subsection, the term ‘d [Text truncated for display. Full text available on Congress.gov.]

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