US President Barack Obama pledged to make the wealthiest American businesses and individuals pay higher taxes as he sent his proposed legislation to Congress on Sept. 12.
The package included $50 billion of tax increases aimed at the oil and gas industry that the White House has included in its past few federal budget requests.
“This legislation is fully paid for,” Obama said in a letter accompanying his proposals. “The legislation includes specific offsets to close corporate tax loopholes and asks the wealthiest Americans to pay their fair share that more than cover the cost of the jobs measures.”
The American Petroleum Institute and the National Petrochemical and Refiners Association both expressed disappointment.
The legislation’s Subtitle D, called “Repeal Oil Subsidies”, proposed ending the deduction for intangible drilling and development costs for wells, the tertiary injectants deduction, percentage depletion, the enhanced oil recovery credit, the marginal well production credit, and the oil and gas working interest exception to passive activity rules.
It also proposed not allowing the oil and gas industry to take the federal tax code’s Section 199 manufacturing deduction, and moving the allowable amortization period for geological and geophysical expenditures back to seven years.
US oil and gas companies with overseas operations also would be affected by Subtitle E, “Dual Capacity Taxpayers,” and its two provisions modifying foreign tax credit rules and creating a separate basket treatment for taxes paid on foreign oil and gas income. All of the proposed increases affecting oil and gas would be effective after Dec. 31, 2012.
Industry reacts
“The administration is not just turning its back on oil and gas jobs,” API President Jack N. Gerard said. “It is proposing more taxes on an industry doing one of the best jobs of creating them while also delivering more than $86 million a day in revenue to the government.”
NPRA President Charles T. Drevna said the oil and gas industry represents “some of the biggest taxpayers and biggest employers in America.”
Drevna said industry is not seeking preferential tax treatment but rather wants equal treatment with other companies that get deductions for business expenses.
“The best way to get more tax revenues from energy companies and enable us to hire more American workers is to remove roadblocks preventing us from producing and manufacturing more,” Drevna said.
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