About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

275 IRET Congressional Advisory 1 (2011)

handle is hein.taxfoundation/iretcgadv0272 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. May 12, 2011 Advisory No. 275 OIL INDUSTRY TAX HIKES Senators Menendez (D-NJ), Brown (D-OH), and McCaskill (D-MO) have introduced a bill to eliminate certain tax provisions relating to the oil and gas industry for the five largest integrated U.S. producers. The bill would affect the global operations of United States-based ExxonMobil, Chevron, and ConocoPhillips, and the U.S. sub- sidiaries of BP and Royal Dutch Shell. These provisions are supposedly inefficient or unwarranted tax breaks or subsidies. In fact, the provisions are better described as offsets to what would otherwise be situations of double taxation, or cases in which the U.S. tax system would prevent U.S. firms from competing with foreign companies either here or abroad. These longstanding provisions have been re- examined many times over the years, and have always been left in place. That is because the competitive conditions and bizarre U.S. tax structure that made them necessary in the first place still exist. The provisions affecting the Big Five U.S. oil companies Targeting five specific taxpayers for punishment is corrupt tax policy. It has the odor of a bill of attainder, of the sort outlawed by the founding fathers in the U.S. Constitution in reaction to the evils of the practice prevalent in Britain. For these five largest U.S. oil companies, the bill would: Prohibit royalty and other payments to foreign governments for drilling or production rights from being counted as income taxes for the purpose of the foreign tax credit; the payments could be taken as a deduction instead. * Deny these companies the domestic manufacturing deduction. * Eliminate their use of the deduction for intangible drilling costs (70 percent of which may be expensed instead of amortized). The big five would have to amortize the costs over time. * End their use of the percentage depletion deduction (a deduction of a portion of revenue from oil and gas sales). * Force the companies to amortize rather than expense tertiary injectants used to increase the amount of oil and gas that is recoverable from wells. International issues The United States has the second highest corporate income tax among the 34 developed nations in the OECD. Furthermore, the tax is imposed on the global income of U.S.-based companies, not just on the income they generate in the United States. The U.S. is the only major nation to utilize this global form of income tax. Other nations tax on a territorial basis, leaving income earned abroad to be taxed in the country in which it is generated. To prevent double taxation of the foreign source income of U.S. businesses, the U.S. allows firms a foreign tax credit up to the amount of tax that the g~*m * m go. g ~e

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most