[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2670 Introduced in Senate (IS)]
109th CONGRESS
2d Session
S. 2670
To restore fairness in the provision of incentives for oil and gas
production, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 27, 2006
Mr. Reid (for Mr. Kerry (for himself, Mr. Kohl, and Mr. Lieberman))
introduced the following bill; which was read twice and referred to the
Committee on Finance
_______________________________________________________________________
A BILL
To restore fairness in the provision of incentives for oil and gas
production, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Energy Fairness
for America Act''.
(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.
(c) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; etc.
Sec. 2. Termination of deduction for intangible drilling and
development costs.
Sec. 3. Termination of percentage depletion allowance for oil and gas
wells.
Sec. 4. Termination of enhanced oil recovery credit.
Sec. 5. Termination of certain provisions of the Energy Policy Act of
2005.
Sec. 6. Termination of certain tax provisions of the Energy Policy Act
of 2005.
Sec. 7. Revaluation of LIFO inventories of large integrated oil
companies.
Sec. 8. Modifications of foreign tax credit rules applicable to dual
capacity taxpayers.
Sec. 9. Rules relating to foreign oil and gas income.
Sec. 10. Elimination of deferral for foreign oil and gas extraction
income.
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.''.
(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)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
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:
``(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.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
SEC. 4. TERMINATION OF ENHANCED OIL RECOVERY CREDIT.
(a) In General.--Section 43 is amended by adding at the end the
following new subsection:
``(f) Termination.--This section shall not apply to any taxable
year beginning after the date of the enactment of this subsection.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
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:
(1) Section 342 (relating to program on oil and gas
royalties in-kind).
(2) Section 343 (relating to marginal property production
incentives).
(3) Section 344 (relating to incentives for natural gas
production from deep wells in the shallow waters of the Gulf of
Mexico).
(4) Section 345 (relating to royalty relief for deep water
production).
(5) Section 357 (relating to comprehensive inventory of OCS
oil and natural gas resources).
(6) Subtitle J of title IX (relating to ultra-deepwater and
unconventional natural gas and other petroleum resources).
(b) Termination of Alaska Offshore Royalty Suspension.--
(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''.
(2) Effective date.--The amendment made by this subsection
shall take effect on and after the date of the enactment of
this Act.
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''.
(b) Temporary Expensing of Equipment Used in Refining Liquid
Fuels.--Section 179C(c)(1) is amended--
(1) by striking ``January 1, 2012'' and inserting ``the
date of the enactment of the Energy Fairness for America Act'',
and
(2) by striking ``January 1, 2008'' and inserting ``the
date of the enactment of the Energy Fairness for America Act''.
(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''.
(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''.
(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''.
(f) Amortization of Geological and Geophysical Expenditures.--
Section 167(h) is amended by adding at the end the following new
paragraph:
``(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.''.
(g) Effective Date.--The amendments made by this section shall take
effect on and after the date of the enactment of this Act.
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 2005, the taxpayer shall--
(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,
and
(2) decrease its cost of goods sold for such taxable year
by the aggregate amount of the increases under paragraph (1).
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.
(b) Layer Adjustment Amount.--For purposes of this section--
(1) In general.--The term ``layer adjustment amount''
means, with respect to any historic LIFO layer, the product
of--
(A) $18.75, and
(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.
(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).
(c) Application of Requirement.--
(1) No change in method of accounting.--Any adjustment
required by this section shall not be treated as a change in
method of accounting.
(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.
(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 2005. 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.
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:
``(m) Special Rules Relating To Dual Capacity Taxpayers.--
``(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--
``(A) if, for such period, the foreign country or
possession does not impose a generally applicable
income tax, or
``(B) to the extent such amount exceeds the amount
(determined in accordance with regulations) which--
``(i) is paid by such dual capacity
taxpayer pursuant to the generally applicable
income tax imposed by the country or
possession, or
``(ii) would be paid if the generally
applicable income tax imposed by the country or
possession were applicable to such dual
capacity taxpayer.
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).
``(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--
``(A) is subject to a levy of such country or
possession, and
``(B) receives (or will receive) directly or
indirectly a specific economic benefit (as determined
in accordance with regulations) from such country or
possession.
``(3) Generally applicable income tax.--For purposes of
this subsection--
``(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.
``(B) Exceptions.--Such term shall not include a
tax unless it has substantial application, by its terms
and in practice, to--
``(i) persons who are not dual capacity
taxpayers, and
``(ii) persons who are citizens or
residents of the foreign country or
possession.''
(b) Effective Date.--
(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.
(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.
SEC. 9. RULES RELATING TO FOREIGN OIL AND GAS INCOME.
(a) Separate Basket for Foreign Tax Credit.--
(1) Years before 2007.--Paragraph (1) of section 904(d)
(relating to separate application of section with respect to
certain categories of income), as in effect for years beginning
before 2007, is amended by striking ``and'' at the end of
subparagraph (H), by redesignating subparagraph (I) as
subparagraph (J), and by inserting after subparagraph (H) the
following new subparagraph:
``(I) foreign oil and gas income, and''.
(2) 2007 and after.--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:
``(C) foreign oil and gas income.''
(b) Definition.--
(1) Years before 2007.--Paragraph (2) of section 904(d), as
in effect for years beginning before 2007, is amended by
redesignating subparagraphs (H) and (I) as subparagraphs (I)
and (J), respectively, and by inserting after subparagraph (G)
the following new subparagraph:
``(H) Foreign oil and gas income.--The term
`foreign oil and gas income' has the meaning given such
term by section 954(g).''
(2) 2007 and after.--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:
``(J) Foreign oil and gas income.--For purposes of
this section--
``(i) In general.--The term `foreign oil
and gas income' has the meaning given such term
by section 954(g).
``(ii) Coordination.--Passive category
income and general category income shall not
include foreign oil and gas income (as so
defined).''
(c) Conforming Amendments.--
(1) Section 904(d)(3)(F)(i) is amended by striking ``or
(E)'' and inserting ``(E), or (I)''.
(2) Section 907(a) is hereby repealed.
(3) Section 907(c)(4) is hereby repealed.
(4) Section 907(f) is hereby repealed.
(d) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after the date of the
enactment of this Act.
(2) Years after 2006.--The amendments made by paragraphs
(1)(B) and (2)(B) shall apply to taxable years beginning after
December 31, 2006.
(3) Transitional rules.--
(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 (I) 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.
(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.
(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.
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:
``(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--
``(A) foreign oil and gas extraction income (as
defined in section 907(c)), or
``(B) foreign oil related income (as defined in
section 907(c)).''
(b) Conforming Amendments.--
(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''.
(2) Subsection (b)(4) of section 954 is amended by striking
``base company oil-related income'' and inserting ``oil and gas
income''.
(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''.
(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''.
(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.
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