HR 586 IHCommentsClose CommentsPermalink

To restore fairness in the provision of incentives for oil and gas production, and for other purposes.CommentsClose CommentsPermalink

January 19, 2007

Mr. HINCHEY introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Natural Resources, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concernedCommentsClose CommentsPermalink

To restore fairness in the provision of incentives for oil and gas production, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; ETC.

(a) Short Title- This Act may be cited as the `Energy Fairness for America Act'.CommentsClose CommentsPermalink





(b) Amendment of 1986 Code- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.CommentsClose CommentsPermalink





(c) Table of Contents- The table of contents for this Act is as follows:CommentsClose CommentsPermalink





Sec. 1. Short title; etc.CommentsClose CommentsPermalink





Sec. 2. Termination of deduction for intangible drilling and development costs.CommentsClose CommentsPermalink





Sec. 3. Termination of percentage depletion allowance for oil and gas wells.CommentsClose CommentsPermalink





Sec. 4. Termination of enhanced oil recovery credit.CommentsClose CommentsPermalink





Sec. 5. Termination of certain provisions of the Energy Policy Act of 2005.CommentsClose CommentsPermalink





Sec. 6. Termination of certain tax provisions of the Energy Policy Act of 2005.CommentsClose CommentsPermalink





Sec. 7. Revaluation of LIFO inventories of large integrated oil companies.CommentsClose CommentsPermalink





Sec. 8. Modifications of foreign tax credit rules applicable to dual capacity taxpayers.CommentsClose CommentsPermalink





Sec. 9. Rules relating to foreign oil and gas income.CommentsClose CommentsPermalink





Sec. 10. Elimination of deferral for foreign oil and gas extraction income.CommentsClose CommentsPermalink

SEC. 2. TERMINATION OF DEDUCTION FOR INTANGIBLE DRILLING AND DEVELOPMENT COSTS.

(a) In General- Section 263(c) is amended by adding at the end the following new sentence: `This subsection shall not apply to any taxable year beginning after the date of the enactment of this sentence.'.CommentsClose CommentsPermalink





(b) Conforming Amendments- Paragraphs (2) and (3) of section 291(b) are each amended by striking `section 263(c), 616(a),' and inserting `section 616(a)'.CommentsClose CommentsPermalink





(c) Effective Date- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 3. TERMINATION OF PERCENTAGE DEPLETION ALLOWANCE FOR OIL AND GAS WELLS.

(a) In General- Section 613A is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





`(f) Termination- For purposes of any taxable year beginning after the date of the enactment of this subsection, the allowance for percentage depletion shall be zero.'.CommentsClose CommentsPermalink





(b) Effective Date- The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 4. TERMINATION OF ENHANCED OIL RECOVERY CREDIT.

(a) In General- Section 43 is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





`(f) Termination- This section shall not apply to any taxable year beginning after the date of the enactment of this subsection.'.CommentsClose CommentsPermalink





(b) Effective Date- The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 5. TERMINATION OF CERTAIN PROVISIONS OF THE ENERGY POLICY ACT OF 2005.

(a) In General- The following provisions of the Energy Policy Act of 2005 are repealed on and after the date of the enactment of this Act:CommentsClose CommentsPermalink





(1) Section 342 (relating to program on oil and gas royalties in-kind).CommentsClose CommentsPermalink





(2) Section 343 (relating to marginal property production incentives).CommentsClose CommentsPermalink





(3) Section 344 (relating to incentives for natural gas production from deep wells in the shallow waters of the Gulf of Mexico).CommentsClose CommentsPermalink





(4) Section 345 (relating to royalty relief for deep water production).CommentsClose CommentsPermalink





(5) Section 357 (relating to comprehensive inventory of OCS oil and natural gas resources).CommentsClose CommentsPermalink





(b) Termination of Alaska Offshore Royalty Suspension-CommentsClose CommentsPermalink





(1) IN GENERAL- Section 8(a)(3)(B) of the Outer Continental Shelf Lands Act (43 U.S.C. 1337(a)(3)(B)) is amended by striking `and in the Planning Areas offshore Alaska'.CommentsClose CommentsPermalink





(2) EFFECTIVE DATE- The amendment made by this subsection shall take effect on and after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 6. TERMINATION OF CERTAIN TAX PROVISIONS OF THE ENERGY POLICY ACT OF 2005.

(a) Electric Transmission Property Treated as 15-Year Property- Section 168(e)(3)(E)(vii) is amended by inserting `, and before the date of the enactment of the Energy Fairness for America Act' after `April 11, 2005'.CommentsClose CommentsPermalink





(b) Temporary Expensing of Equipment Used in Refining Liquid Fuels- Section 179C(c)(1) is amended--CommentsClose CommentsPermalink





(1) by striking `January 1, 2012' and inserting `the date of the enactment of the Energy Fairness for America Act', andCommentsClose CommentsPermalink





(2) by striking `January 1, 2008' and inserting `the date of the enactment of the Energy Fairness for America Act'.CommentsClose CommentsPermalink





(c) Natural Gas Distribution Lines Treated as 15-Year Property- Section 168(e)(3)(E)(viii) is amended by striking `January 1, 2011' and inserting `the date of the enactment of the Energy Fairness for America Act'.CommentsClose CommentsPermalink





(d) Natural Gas Gathering Lines Treated as 7-Year Property- Section 168(e)(3)(C)(iv) is amended by inserting `, and before the date of the enactment of the Energy Fairness for America Act' after `April 11, 2005'.CommentsClose CommentsPermalink





(e) Determination of Small Refiner Exception to Oil Depletion Deduction- Section 1328(b) of the Energy Policy Act of 2005 is amended by inserting `and beginning before the date of the enactment of the Energy Fairness for America Act' after `this Act'.CommentsClose CommentsPermalink





(f) Amortization of Geological and Geophysical Expenditures- Section 167(h) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(5) TERMINATION- This subsection shall not apply to any taxable year beginning after the date of the enactment of the Energy Fairness for America Act.'.CommentsClose CommentsPermalink





(g) Effective Date- The amendments made by this section shall take effect on and after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 7. REVALUATION OF LIFO INVENTORIES OF LARGE INTEGRATED OIL COMPANIES.

(a) 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 2006, the taxpayer shall--CommentsClose CommentsPermalink





(1) 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, andCommentsClose CommentsPermalink





(2) decrease its cost of goods sold for such taxable year by the aggregate amount of the increases under paragraph (1).CommentsClose CommentsPermalink





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.CommentsClose CommentsPermalink





(b) Layer Adjustment Amount- For purposes of this section--CommentsClose CommentsPermalink





(1) IN GENERAL- The term `layer adjustment amount' means, with respect to any historic LIFO layer, the product of--CommentsClose CommentsPermalink





(A) $18.75, andCommentsClose CommentsPermalink





(B) 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.CommentsClose CommentsPermalink





(2) 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).CommentsClose CommentsPermalink





(c) Application of Requirement-CommentsClose CommentsPermalink





(1) NO CHANGE IN METHOD OF ACCOUNTING- Any adjustment required by this section shall not be treated as a change in method of accounting.CommentsClose CommentsPermalink





(2) 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.CommentsClose CommentsPermalink





(d) Applicable Integrated Oil Company- For purposes of this section, 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 2006. 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.CommentsClose CommentsPermalink

SEC. 8. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO DUAL CAPACITY TAXPAYERS.

(a) In General- Section 901 (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:CommentsClose CommentsPermalink





`(m) Special Rules Relating To Dual Capacity Taxpayers-CommentsClose CommentsPermalink





`(1) GENERAL RULE- Notwithstanding any other provision of this chapter, any amount paid or accrued by a dual capacity taxpayer to a foreign country or possession of the United States for any period shall not be considered a tax--CommentsClose CommentsPermalink





`(A) if, for such period, the foreign country or possession does not impose a generally applicable income tax, orCommentsClose CommentsPermalink





`(B) to the extent such amount exceeds the amount (determined in accordance with regulations) which--CommentsClose CommentsPermalink





`(i) is paid by such dual capacity taxpayer pursuant to the generally applicable income tax imposed by the country or possession, orCommentsClose CommentsPermalink





`(ii) would be paid if the generally applicable income tax imposed by the country or possession were applicable to such dual capacity taxpayer.CommentsClose CommentsPermalink





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).CommentsClose CommentsPermalink





`(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--CommentsClose CommentsPermalink





`(A) is subject to a levy of such country or possession, andCommentsClose CommentsPermalink





`(B) receives (or will receive) directly or indirectly a specific economic benefit (as determined in accordance with regulations) from such country or possession.CommentsClose CommentsPermalink





`(3) GENERALLY APPLICABLE INCOME TAX- For purposes of this subsection--CommentsClose CommentsPermalink





`(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.CommentsClose CommentsPermalink





`(B) EXCEPTIONS- Such term shall not include a tax unless it has substantial application, by its terms and in practice, to--CommentsClose CommentsPermalink





`(i) persons who are not dual capacity taxpayers, andCommentsClose CommentsPermalink





`(ii) persons who are citizens or residents of the foreign country or possession.'CommentsClose CommentsPermalink





(b) Effective Date-CommentsClose CommentsPermalink





(1) IN GENERAL- The amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after the date of the enactment of this Act.CommentsClose CommentsPermalink





(2) CONTRARY TREATY OBLIGATIONS UPHELD- The amendments made by this section shall not apply to the extent contrary to any treaty obligation of the United States.CommentsClose CommentsPermalink

SEC. 9. RULES RELATING TO FOREIGN OIL AND GAS INCOME.

(a) Separate Basket for Foreign Tax Credit- Paragraph (1) of section 904(d), as in effect for years beginning after 2006, is amended by striking `and' at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting `, and', and by adding at the end the following:CommentsClose CommentsPermalink





`(C) foreign oil and gas income.'CommentsClose CommentsPermalink





(b) Definition- Section 904(d)(2), as in effect for years after 2006, is amended by redesignating subparagraphs (J) and (K) as subparagraphs (K) and (L) and by inserting after subparagraph (I) the following:CommentsClose CommentsPermalink





`(J) FOREIGN OIL AND GAS INCOME- For purposes of this section--CommentsClose CommentsPermalink





`(i) IN GENERAL- The term `foreign oil and gas income' has the meaning given such term by section 954(g).CommentsClose CommentsPermalink





`(ii) COORDINATION- Passive category income and general category income shall not include foreign oil and gas income (as so defined).'CommentsClose CommentsPermalink





(c) Conforming Amendments-CommentsClose CommentsPermalink





(1) Section 904(d)(3)(F)(i) is amended by striking `or (E)' and inserting `(E), or (I)'.CommentsClose CommentsPermalink





(2) Section 907(a) is hereby repealed.CommentsClose CommentsPermalink





(3) Section 907(c)(4) is hereby repealed.CommentsClose CommentsPermalink





(4) Section 907(f) is hereby repealed.CommentsClose CommentsPermalink





(d) Effective Dates-CommentsClose CommentsPermalink





(1) IN GENERAL- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.CommentsClose CommentsPermalink





(2) TRANSITIONAL RULES-CommentsClose CommentsPermalink





(A) SEPARATE BASKET TREATMENT- Any taxes paid or accrued in a taxable year beginning on or before the date of the enactment of this Act, with respect to income which was described in subparagraph (B) of section 904(d)(1) of such Code (as in effect on the day before the date of the enactment of this Act), shall be treated as taxes paid or accrued with respect to foreign oil and gas income to the extent the taxpayer establishes to the satisfaction of the Secretary of the Treasury that such taxes were paid or accrued with respect to foreign oil and gas income.CommentsClose CommentsPermalink





(B) CARRYOVERS- Any unused oil and gas extraction taxes which under section 907(f) of such Code (as so in effect) would have been allowable as a carryover to the taxpayer's first taxable year beginning after the date of the enactment of this Act (without regard to the limitation of paragraph (2) of such section 907(f) for first taxable year) shall be allowed as carryovers under section 904(c) of such Code in the same manner as if such taxes were unused taxes under such section 904(c) with respect to foreign oil and gas extraction income.CommentsClose CommentsPermalink





(C) LOSSES- The amendment made by subsection (c)(3) shall not apply to foreign oil and gas extraction losses arising in taxable years beginning on or before the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 10. ELIMINATION OF DEFERRAL FOR FOREIGN OIL AND GAS EXTRACTION INCOME.

(a) General Rule- Paragraph (1) of section 954(g) (defining foreign base company oil related income) is amended to read as follows:CommentsClose CommentsPermalink





`(1) IN GENERAL- Except as otherwise provided in this subsection, the term `foreign oil and gas income' means any income of a kind which would be taken into account in determining the amount of--CommentsClose CommentsPermalink





`(A) foreign oil and gas extraction income (as defined in section 907(c)), orCommentsClose CommentsPermalink





`(B) foreign oil related income (as defined in section 907(c)).'CommentsClose CommentsPermalink





(b) Conforming Amendments-CommentsClose CommentsPermalink





(1) Subsections (a)(5), (b)(5), and (b)(6) of section 954, and section 952(c)(1)(B)(ii)(I), are each amended by striking `base company oil related income' each place it appears (including in the heading of subsection (b)(8)) and inserting `oil and gas income'.CommentsClose CommentsPermalink





(2) Subsection (b)(4) of section 954 is amended by striking `base company oil-related income' and inserting `oil and gas income'.CommentsClose CommentsPermalink





(3) The subsection heading for subsection (g) of section 954 is amended by striking `Foreign Base Company Oil Related Income' and inserting `Foreign Oil and Gas Income'.CommentsClose CommentsPermalink





(4) Subparagraph (A) of section 954(g)(2) is amended by striking `foreign base company oil related income' and inserting `foreign oil and gas income'.CommentsClose CommentsPermalink





(c) Effective Date- The amendments made by this section shall apply to taxable years of foreign corporations beginning after the date of the enactment of this Act, and to taxable years of United States shareholders ending with or within such taxable years of foreign corporations.CommentsClose CommentsPermalink