"Amends the Internal Revenue Code to deny to oil companies with gross receipts in excess of $1 billion in a taxable year and an average daily worldwide production of crude oil of at least 500,000 barrels a year: (1) a foreign tax credit if such company is a dual capacity taxpayer, as defined by this Act; (2) the tax deduction for income attributable to domestic production of oil, natural gas, or primary products thereof; (3) the tax deduction for intangible drilling and development costs; (4) the percentage depletion allowance for oil and gas wells; and (5) the tax deduction for qualified tertiary injectant expenses."
So, "big oil" means more than $1 billion of gross receipts.
Talk of reducing the corporate tax rate in a revenue neutral manner as President Obama has suggested, will mean that favorable tax rules that are not key to defining taxable income will need to be reduced or repealed. This includes those for large oil companies. Percentage completion is not needed to measure taxable income (just regular depletion is needed), so it could be repealed. Why the difficulty in repealing unnecessary tax expenditures? (I don't call them loopholes because these provisions are being used as intended. Typically, the term "loophole" is just used to help sell the public on the idea that these are bad provisions.)
- There is some illusion that we can lower tax rates without removing or reducing tax expenditures. I don't think the public will buy in on this, particularly when it comes to corporations. I don't see how it will improve our budget problems.
- Congress wants to just have one bill that lowers the corporate rate and includes all of the tax expenditure reductions for all businesses rather than have piecemeal bills. This is a good idea. So what was the point of the grandstanding on this oil tax break bill? Sounds like a waste of time to me and it plays on the reality that people don't see that ultimately all taxes are paid by individuals. Higher taxes for oil companies will mean less return for investors, or wages for employees or higher prices for customers, or some combination of all of these things that will affect individuals.
I don't think there is any positive value in using public concern over higher gasoline prices with a limited effort to reform the tax law. [For some of the rationale for S. 940, see this excerpt from the Congressional Record of May 16, 2011.]
What do you think?