II
113th CONGRESS
1st Session
S. 307
IN THE SENATE OF THE UNITED STATES
February 13, 2013
Mr. Menendez(for himself,Mr. Lautenberg,Mr. Durbin,Mr. Schumer,Ms. Stabenow,Mr. Cardin,Mrs. McCaskill,Mrs. Gillibrand,Mr. Whitehouse,Mrs. Shaheen,Mr. Franken,Mr. Reed,Mr. Nelson,Ms. Klobuchar,Mr. Brown,Mr. Leahy, andMr. Merkley) introduced the following bill; which was read twice and referred to theCommittee on Finance
A BILL
To reduce the Federal budget deficit by closing big oil tax loopholes, and for other purposes.
Short title; table of contents
Short title
This Act may be cited
as the
Close Big Oil Tax Loopholes
Act
.
Table of contents
The table of contents of this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—Close big oil tax loopholes
Sec. 101. Modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers.
Sec. 102. Limitation on section 199 deduction attributable to oil, natural gas, or primary products thereof.
Sec. 103. Limitation on deduction for intangible drilling and development costs; amortization of disallowed amounts.
Sec. 104. Limitation on percentage depletion allowance for oil and gas wells.
Sec. 105. Limitation on deduction for tertiary injectants.
Sec. 106. Modification of definition of major integrated oil company.
TITLE II—Outer Continental Shelf oil and natural gas
Sec. 201. Repeal of outer Continental Shelf deep water and deep gas royalty relief.
TITLE III—Miscellaneous
Sec. 301. Deficit reduction.
Sec. 302. Budgetary effects.
Close big oil tax loopholes
Modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers
In general
Section 901 of the Internal Revenue Code of 1986is amended by redesignatingsubsection (n)assubsection (o)and by inserting aftersubsection (m)the following new subsection:
Special rules relating to major integrated oil companies which are dual capacity taxpayers
General rule
Notwithstanding any other provision of this chapter, any amount paid or accrued by a dual capacity taxpayer which is a major integrated oil company (within the meaning ofsection 167(h)(5)) to a foreign country or possession of the United States for any period shall not be considered a tax—
if, for such period, the foreign country or possession does not impose a generally applicable income tax, or
to the extent such amount exceeds the amount (determined in accordance with regulations) which—
is paid by such dual capacity taxpayer pursuant to the generally applicable income tax imposed by the country or possession, or
would be paid if the generally applicable income tax imposed by the country or possession were applicable to such dual capacity taxpayer.
Dual capacity taxpayer
For purposes of this subsection, the termdual capacity taxpayermeans, with respect to any foreign country or possession of the United States, a person who—
is subject to a levy of such country or possession, and
receives (or will receive) directly or indirectly a specific economic benefit (as determined in accordance with regulations) from such country or possession.
Generally applicable income tax
For purposes of this subsection—
In general
The termgenerally applicable income taxmeans 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.
Exceptions
Such term shall not include a tax unless it has substantial application, by its terms and in practice, to—
persons who are not dual capacity taxpayers, and
persons who are citizens or residents of the foreign country or possession.
.
Effective Date
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.
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.
Limitation on section 199 deduction attributable to oil, natural gas, or primary products thereof
Denial of deduction
Paragraph (4) of section 199(c) of the Internal Revenue Code of 1986is amended by adding at the end the following new subparagraph:
Special rule for certain oil and gas income
In the case of any taxpayer who is a major integrated oil company (within the meaning ofsection 167(h)(5)) for the taxable year, the termdomestic production gross receiptsshall not include gross receipts from the production, refining, processing, transportation, or distribution of oil, gas, or any primary product (within the meaning ofsubsection (d)(9)) thereof.
.
Effective date
The amendment made by this section shall apply to taxable years beginning after December 31, 2013.
Limitation on deduction for intangible drilling and development costs; amortization of disallowed amounts
In general
Section 263(c) of the Internal Revenue Code of 1986is amended to read as follows:
Intangible drilling and development costs in the case of oil and gas wells and geothermal wells
In general
Notwithstandingsubsection (a), and except as provided insubsection (i), regulations shall be prescribed by theSecretaryunder this subtitle corresponding to the regulations which granted the option to deduct as expenses intangible drilling and development costs in the case of oil and gas wells and which were recognized and approved by theCongressinHouse Concurrent Resolution 50, Seventy-ninth Congress. Such regulations shall also grant the option to deduct as expenses intangible drilling and development costs in the case of wells drilled for any geothermal deposit (as defined insection 613(e)(2)) to the same extent and in the same manner as such expenses are deductible in the case of oil and gas wells. This subsection shall not apply with respect to any costs to which any deduction is allowed undersection 59(e)or291.
Exclusion
In general
This subsection shall not apply to amounts paid or incurred by a taxpayer in any taxable year in which such taxpayer is a major integrated oil company (within the meaning ofsection 167(h)(5)).
Amortization of amounts not allowable as deductions under subparagraph (A)
The amount not allowable as a deduction for any taxable year by reason ofsubparagraph (A)shall be allowable as a deduction ratably over the 60-month period beginning with the month in which the costs are paid or incurred. For purposes ofsection 1254, any deduction under this subparagraph shall be treated as a deduction under this subsection.
.
Effective date
The amendment made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2013.
Limitation on percentage depletion allowance for oil and gas wells
In general
Section 613A of the Internal Revenue Code of 1986is amended by adding at the end the following new subsection:
Application with respect to major integrated oil companies
In the case of any taxable year in which the taxpayer is a major integrated oil company (within the meaning ofsection 167(h)(5)), the allowance for percentage depletion shall be zero.
.
Effective date
The amendment made by this section shall apply to taxable years beginning after December 31, 2013.
Limitation on deduction for tertiary injectants
In general
Section 193 of the Internal Revenue Code of 1986is amended by adding at the end the following new subsection:
Application with respect to major integrated oil companies
In general
This section shall not apply to amounts paid or incurred by a taxpayer in any taxable year in which such taxpayer is a major integrated oil company (within the meaning ofsection 167(h)(5)).
Amortization of amounts not allowable as deductions under paragraph (1)
The amount not allowable as a deduction for any taxable year by reason ofparagraph (1)shall be allowable as a deduction ratably over the 60-month period beginning with the month in which the costs are paid or incurred.
.
Effective date
The amendment made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2013.
Modification of definition of major integrated oil company
In general
Paragraph (5) of section 167(h) of the Internal Revenue Code of 1986is amended by adding at the end the following new subparagraph:
Certain successors in interest
For purposes of this paragraph, the termmajor integrated oil companyincludes any successor in interest of a company that was described insubparagraph (B)in any taxable year, if such successor controls more than 50 percent of the crude oil production or natural gas production of such company.
.
Conforming amendments
In general
Subparagraph (B) of section 167(h)(5) of the Internal
Revenue Code of 1986is amended by insertingexcept as provided insubparagraph (C),
afterFor purposes of this
paragraph,
.
Taxable years tested
Clause (iii) of section 167(h)(5)(B) of such Codeis amended—
by strikingdoes not apply by reason ofparagraph (4) of section 613A(d)
and
insertingdid not apply by reason ofparagraph (4) of section 613A(d)for any taxable year after 2004
, and
by strikingdoes not apply
insubclause (II)and insertingdid not
apply for the taxable year
.
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2013.
Outer Continental Shelf oil and natural gas
Repeal of outer Continental Shelf deep water and deep gas royalty relief
In general
Sections 344and345 of the Energy Policy Act of 2005(42 U.S.C. 15904,15905) are repealed.
Administration
TheSecretary of the Interiorshall not be required to provide for royalty relief in the lease sale terms beginning with the first lease sale held on or after the date of enactment of this Act for which a final notice of sale has not been published.
Miscellaneous
Deficit reduction
The net amount of any savings realized as a result of the enactment of this Act and the amendments made by this Act (after any expenditures authorized by this Act and the amendments made by this Act) shall be deposited in the Treasury and used for Federal budget deficit reduction or, if there is no Federal budget deficit, for reducing the Federal debt in such manner as theSecretary of the Treasuryconsiders appropriate.
Budgetary effects
The budgetary effects
of this Act, for the purpose of complying with theStatutory Pay-As-You-Go Act
of 2010, shall be determined by reference to the latest statement titledBudgetary Effects of PAYGO Legislation
for this Act, submitted
for printing in the Congressional Record by theChairman of the Senate Budget
Committee, provided that such statement has been submitted prior to the vote on
passage.
