II 110th CONGRESS 1st Session S. 1238 IN THE SENATE OF THE UNITED STATES April 26, 2007 Mr. Casey (for himself and Mr. Webb) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To repeal certain provisions of the Energy Policy Act of 2005, close tax loopholes, impose windfall profits tax on major integrated oil companies, provide a reserve fund for biofuels research and infrastructure, and payments for low-income households.

1.

Short title; amendment of 1986 Code

(a)

Short title

This Act may be cited as the Energy Security and Corporate Accountability Act of 2007. (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.

2.

Revaluation of LIFO inventories of major integrated oil companies

(a)

General rule

Notwithstanding any other provision of law, if a taxpayer is a major integrated oil company (as defined in section 167(h)(5)(B)) for its last taxable year ending in calendar year 2006, 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 45K. (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 (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.

3.

Modifications of foreign tax credit rules applicable to major integrated oil companies which are 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 major integrated oil companies which are dual capacity taxpayers

(1)

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 (as defined in section 167(h)(5)(B)) 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.

4.

7-year amortization of geological and geophysical expenditures for certain major integrated oil companies

(a)

In general

Subparagraph (A) of section 167(h)(5) (relating to special rule for major integrated oil companies) is amended by striking 5-year and inserting 7-year. (b)

Effective date

The amendment made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.

5.

Suspension of royalty relief

(a)

Repeals

Sections 344 and 345 of the Energy Policy Act of 2005 (42 U.S.C. 15904, 15905) are repealed. (b)

Termination of Alaska Offshore Royalty Suspension

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.

6.

National Energy Security Research and Investment Reserve

(a)

Establishment

For budgetary purposes, for each fiscal year, an amount equal to the total net amount of savings to the Federal Government for the fiscal year resulting from the amendments made by sections 2, 3, 4, and 5, as determined by the Secretary of the Treasury, shall be held in a separate account in the Treasury of the United States, to be known as the National Energy Security Research and Investment Reserve (referred to in this section as the Reserve). (b)

Use

Of the amounts in the Reserve— (1)50 percent shall be available to offset the cost of legislation enacted after the date of enactment of this Act to carry out energy research in the United States, including research relating to— (A)ethanol, and (B)biodiesel, and (2)50 percent shall be available to offset the cost of legislation enacted after the date of enactment of this Act to carry out the development, purchase, and installation of infrastructure (including new fueling pumps, retrofitting of existing fueling pumps, and equipment necessary for the transportation of biofuels) necessary to deliver new fuels to consumers. (c)

Procedure for adjustments

(1)

Budget Committee Chairman

After the reporting of a bill or joint resolution, or the offering of an amendment to the bill or joint resolution or the submission of a conference report for the bill or joint resolution, providing funding for the purposes described in subsection (b) in excess of the amounts provided for those purposes for fiscal year 2007, the chairman of the Committee on the Budget of the applicable House of Congress shall make the adjustments required under paragraph (2) for the amount of new budget authority and outlays in the measure and the outlays flowing from that budget authority. (2)

Matters to be adjusted

The adjustments referred to in paragraph (1) are to be made to— (A)the discretionary spending limits, if any, set forth in the appropriate concurrent resolution on the budget, (B)the allocations made pursuant to the appropriate concurrent resolution on the budget pursuant to section 302(a) of the Congressional Budget Act of 1974 (2 U.S.C. 633(a)), and (C)the budget aggregates contained in the appropriate concurrent resolution on the budget as required by section 301(a) of the Congressional Budget Act of 1974 (2 U.S.C. 632(a)). (3)

Amounts of adjustments

The adjustments referred to in paragraphs (1) and (2) shall not exceed the receipts estimated by the Congressional Budget Office that are attributable to sections 2, 3, 4, and 5 (and the amendments made by such sections) for the fiscal year in which the adjustments are made.

7.

Windfall profits tax

(a)

In general

Subtitle E (relating to alcohol, tobacco, and certain other excise taxes) is amended by adding at the end the following new chapter: 56

Windfall profits on crude oil

Sec. 5896. Imposition of tax. Sec. 5897. Windfall profit; removal price; adjusted base price; qualified investment. Sec. 5898. Special rules and definitions.

5896.

Imposition of tax

(a)

In general

In addition to any other tax imposed under this title, there is hereby imposed on any major integrated oil company (as defined in section 167(h)(5)(B)) an excise tax equal to the excess of— (1)the amount equal to 50 percent of the windfall profit from all barrels of taxable crude oil removed from the property during each taxable year, over (2)the amount of qualified investment by such company during such taxable year. (b)

Fractional part of barrel

In the case of a fraction of a barrel, the tax imposed by subsection (a) shall be the same fraction of the amount of such tax imposed on the whole barrel. (c)

Tax paid by producer

The tax imposed by this section shall be paid by the producer of the taxable crude oil.

5897.

Windfall profit; removal price; adjusted base price; qualified investment

(a)

General rule

For purposes of this chapter, the term windfall profit means the excess of the removal price of the barrel of taxable crude oil over the adjusted base price of such barrel. (b)

Removal price

For purposes of this chapter— (1)

In general

Except as otherwise provided in this subsection, the term removal price means the amount for which the barrel of taxable crude oil is sold. (2)

Sales between related persons

In the case of a sale between related persons, the removal price shall not be less than the constructive sales price for purposes of determining gross income from the property under section 613. (3)

Oil removed from property before sale

If crude oil is removed from the property before it is sold, the removal price shall be the constructive sales price for purposes of determining gross income from the property under section 613. (4)

Refining begun on property

If the manufacture or conversion of crude oil into refined products begins before such oil is removed from the property— (A)such oil shall be treated as removed on the day such manufacture or conversion begins, and (B)the removal price shall be the constructive sales price for purposes of determining gross income from the property under section 613. (5)

Property

The term property has the meaning given such term by section 614. (c)

Adjusted base price defined

(1)

In general

For purposes of this chapter, the term adjusted base price means $50 for each barrel of taxable crude oil plus an amount equal to— (A)such base price, multiplied by (B)the inflation adjustment for the calendar year in which the taxable crude oil is removed from the property. The amount determined under the preceding sentence shall be rounded to the nearest cent.(2)

Inflation adjustment

(A)

In general

For purposes of paragraph (1), the inflation adjustment for any calendar year after 2008 is the percentage by which— (i)the implicit price deflator for the gross national product for the preceding calendar year, exceeds (ii)such deflator for the calendar year ending December 31, 2007. (B)

First revision of price deflator used

For purposes of subparagraph (A), the first revision of the price deflator shall be used. (d)

Qualified investment

For purposes of this chapter— (1)

In general

The term qualified investment means any amount paid or incurred with respect to— (A)section 263(c) costs, (B)qualified refinery property (as defined in section 179C(c) and determined without regard to any termination date), (C)any qualified facility described in paragraph (1), (2), (3), or (4) of section 45(d) (determined without regard to any placed in service date), (D)any facility for the production of alcohol used as a fuel (within the meaning of section 40) or biodiesel or agri-biodiesel used as a fuel (within the meaning of section 40A). (2)

Section 263(c) costs

For purposes of this subsection, the term section 263(c) costs means intangible drilling and development costs incurred by the taxpayer which (by reason of an election under section 263(c)) may be deducted as expenses for purposes of this title (other than this paragraph). Such term shall not include costs incurred in drilling a nonproductive well.

5898.

Special rules and definitions

(a)

Withholding and deposit of tax

The Secretary shall provide such rules as are necessary for the withholding and deposit of the tax imposed under section 5896 on any taxable crude oil. (b)

Records and information

Each taxpayer liable for tax under section 5896 shall keep such records, make such returns, and furnish such information (to the Secretary and to other persons having an interest in the taxable crude oil) with respect to such oil as the Secretary may by regulations prescribe. (c)

Return of windfall profit tax

The Secretary shall provide for the filing and the time of such filing of the return of the tax imposed under section 5896. (d)

Definitions

For purposes of this chapter— (1)

Producer

The term producer means the holder of the economic interest with respect to the crude oil. (2)

Crude oil

(A)

In general

The term crude oil includes crude oil condensates and natural gasoline. (B)

Exclusion of newly discovered oil

Such term shall not include any oil produced from a well drilled after the date of the enactment of this chapter, except with respect to any oil produced from a well drilled after such date on any proven oil or gas property (within the meaning of section 613A(c)(9)(A), as in effect before the date of the enactment of the Omnibus Budget Reconciliation Act of 1990). (3)

Barrel

The term barrel means 42 United States gallons. (e)

Adjustment of removal price

In determining the removal price of oil from a property in the case of any transaction, the Secretary may adjust the removal price to reflect clearly the fair market value of oil removed. (f)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this chapter.

. (b)

Clerical amendment

The table of chapters for subtitle E is amended by adding at the end the following new item: Chapter 56. Windfall profit on crude oil . (c)

Deductibility of windfall profit tax

The first sentence of section 164(a) (relating to deduction for taxes) is amended by inserting after paragraph (5) the following new paragraph: (6)The windfall profit tax imposed by section 5896. . (d)

Effective date

(1)

In general

The amendments made by this subsection shall apply to crude oil removed after the date of the enactment of this Act, in taxable years ending after such date. (2)

Transitional rules

For the period ending December 31, 2007, the Secretary of the Treasury or the Secretary's delegate shall prescribe rules relating to the administration of chapter 56. To the extent provided in such rules, such rules shall supplement or supplant for such period the administrative provisions contained in chapter 56 (or in so much of subtitle F as relates to such chapter 56).

8.

Low-Income Transportation Energy Assistance Program

(a)

Definitions

In this section: (1)

Eligible household

The term eligible household means— (A)a household in which 1 or more individuals are receiving assistance or payments referred to in any of clauses (i) through (iv) of section 2605(b)(2)(A) of the Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8624(b)(2)(A)); (B)a household that provides such documentation of costs incurred for eligible transportation expenses as the Secretary may reasonably require; and (C)a low-income household. (2)

Eligible transportation expense

The term eligible transportation expense means the cost incurred by an individual or family in purchasing— (A)gasoline or diesel fuel for use by the individual or family for transportation purposes; or (B)a bus pass, train ticket, or other mass-transit fare for use by the individual or family. (3)

Fund

The term Fund means the Low-Income Transportation Energy Assistance Fund established by subsection (f)(1). (4)

Indian tribe

The term Indian tribe has the meaning given the term in section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b). (5)

Low-income household

The term low-income household means a household with a total annual household income that does not exceed the greater of— (A)an amount equal to 150 percent of the poverty level of a State; or (B)an amount equal to 60 percent of the State median income. (6)

Poverty level

The term poverty level has the meaning given the term in section 2603 of the Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8622). (7)

Program

The term program means the Low-Income Transportation Energy Assistance Program established under subsection (b). (8)

Secretary

The term Secretary means the Secretary of Health and Human Services. (9)

State

The term State means— (A)a State; and (B)the District of Columbia. (10)

State median income

The term State median income has the meaning given the term in section 2603 of the Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8622). (b)

Establishment

The Secretary shall establish and carry out a program, to be known as the Low-Income Transportation Energy Assistance Program, under which the Secretary shall use amounts in the Fund to allocate funds to States for use in assisting low-income households in paying eligible transportation expenses. (c)

Allocations

(1)

Allocations to States

(A)

In general

Subject to subparagraph (B) and paragraphs (2) and (3), in carrying out the program for each fiscal year, the Secretary shall allocate to each State an amount to be used by the State in accordance with subsection (b) that is equal to the proportion that, as determined by the Secretary— (i)the total expenditures on eligible transportation expenses by low-income individuals and families in the State for the fiscal year; bears to (ii)the total expenditures on eligible transportation expenses by low-income individuals and families in all States for the fiscal year. (B)

Set-aside for Indian tribes

If, with respect to any State, the Secretary receives a request from the governing body of an Indian tribe within the State that assistance under the program be made available directly to the Indian tribe, and the Secretary determines that the members of the Indian tribe would be better served by means of grants made directly to provide benefits under the program, the Secretary shall reserve from amounts that would otherwise be payable to the State under this paragraph for the fiscal year, and pay directly to the Indian tribe— (i)an amount equal to the proportion that, as determined by the Secretary— (I)the number of Indian households in the State that are eligible households; bears to (II)the number of Indian households in all States that are eligible households; or (ii)such greater amount upon which the Indian tribe, and the State in which the Indian tribe is located, may agree. (2)

Allocations to territories and possessions

Subject to paragraph (3), before making the allocations under paragraph (1) for a fiscal year, the Secretary shall apportion, on the basis of need, as determined by the Secretary, not less than 0.1 percent and not more than 0.5 percent of the amounts made available to carry out this section for the fiscal year among— (A)American Samoa; (B)the Commonwealth of the Northern Mariana Islands; (C)the Commonwealth of Puerto Rico; (D)Guam; and (E)the United States Virgin Islands. (3)

Pro rata reduction

If the amounts made available to carry out this section for a fiscal year are not sufficient to pay in full the total amount allocated under paragraphs (1) and (2), the Secretary shall make an equitable pro-rata reduction to the amount allocated to each State under paragraph (1), and each territory and possession under paragraph (2), for the fiscal year. (d)

Requirements

To receive an allocation under the program, a State, Indian tribe, or territory or possession shall— (1)submit to the Secretary an application, in such form and by such date as the Secretary may specify, that contains— (A)a plan describing the means by which the State, Indian tribe, or territory or possession will distribute and ensure proper use of funds made available under the program; and (B)such other information as the Secretary may require; and (2)agree— (A)to use the allocation to provide to eligible households, for use in paying eligible transportation expenses— (i)not more than $1500 for a fiscal year per eligible household, if the eligible household is comprised of a single individual; or (ii)not more than $2500 for a fiscal year per eligible household, if the eligible household is comprised of 2 or more individuals; (B)to conduct, as soon as practicable after September 30 of the fiscal year for which the State, Indian tribe, or territory or possession first receives an allocation under the program, and annually thereafter before each other allocation to the State, Indian tribe, or territory or possession under the program, a public hearing with respect to the proposed use and distribution of funds under the program for each fiscal year; (C)to conduct outreach activities to ensure, to the maximum extent practicable, that eligible households, particularly eligible households with elderly individuals, disabled individuals, or both, and households with high transportation expenses, are informed of the assistance available under the program; (D)to coordinate activities under this section with similar and related Federal and State programs; (E)to establish such fiscal control and accounting procedures as are necessary to ensure proper disbursal of and accounting for Federal funds allocated to the State, Indian tribe, or territory or possession under the program; and (F)to comply with such other requirements as the Secretary may establish. (e)

Nondiscrimination

Section 2606 of the Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8625) shall apply to each State, Indian tribe, and territory or possession that receives an allocation and provides grants to eligible households under the program. (f)

Low-Income Transportation Energy Assistance Fund

(1)

Establishment

There is established in the Treasury of the United States a fund, to be known as the Low-Income Transportation Energy Assistance Fund, consisting of such amounts as may be appropriated or credited to the Fund under paragraph (2). (2)

Transfers to Fund

(A)

In general

There are appropriated to the Fund amounts equivalent to amounts collected in the Treasury as revenue under section 5896 of the Internal Revenue Code of 1986. (B)

Rules regarding transfers to and management of the Fund

For purposes of this subsection, rules similar to the rules of sections 9601 and 9602 of the Internal Revenue Code of 1986 shall apply. (3)

Expenditures from Fund

(A)

In general

Subject to subparagraph (B), on request by the Secretary with respect to any fiscal year beginning after September 30, 2007, the Secretary of the Treasury shall transfer from the Fund to the Secretary such amounts as the Secretary determines are necessary to allocate funds to States under the program for such fiscal year. (B)

Administrative expenses

An amount not exceeding 5 percent of the amounts in the Fund shall be available for each fiscal year to pay the administrative expenses necessary to carry out this section.