[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 258 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                 S. 258

  To amend the Internal Revenue Code of 1986 to eliminate oil and gas 
                          company preferences.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 2, 2011

Mr. Menendez (for himself, Mr. Merkley, Mr. Whitehouse, Mr. Lautenberg, 
Mr. Reed, Mrs. Boxer, Mr. Nelson of Florida, and Mr. Leahy) introduced 
the following bill; which was read twice and referred to the Committee 
                               on Finance

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to eliminate oil and gas 
                          company preferences.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Close Big Oil Tax Loopholes Act''.

SEC. 2. LIMITATION ON DEDUCTION FOR INTANGIBLE DRILLING AND DEVELOPMENT 
              COSTS.

    (a) In General.--Section 263(c) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new sentence: ``This 
subsection shall not apply to amounts paid or incurred by a taxpayer in 
any taxable year in which such taxpayer is an applicable large taxpayer 
(as defined in section 193(d)(2)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred in taxable years beginning after December 
31, 2011.

SEC. 3. LIMITATION ON DEDUCTION FOR TERTIARY INJECTANTS.

    (a) In General.--Section 193 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(d) Application With Respect to Certain Large Taxpayers.--
            ``(1) In general.--This section shall not apply to amounts 
        paid or incurred by a taxpayer in any taxable year in which 
        such taxpayer is an applicable large taxpayer.
            ``(2) Applicable large taxpayer.--For purposes of this 
        section, the term `applicable large taxpayer' means, with 
        respect to any taxable year, any taxpayer with gross revenues 
        for such taxable year in excess of $100,000,000.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred in taxable years beginning after December 
31, 2011.

SEC. 4. LIMITATION ON EXCEPTION FROM PASSIVE ACTIVITY RULES FOR WORKING 
              INTERESTS IN OIL OR GAS PROPERTY.

    (a) In General.--Paragraph (3) of section 469(c) of the Internal 
Revenue Code of 1986 is amended--
            (1) in subparagraph (A), by striking ``the taxpayer'' and 
        inserting ``a taxpayer (other than a taxpayer who is an 
        applicable large taxpayer (as defined in section 193(d)(2)) for 
        the taxable year)'', and
            (2) in subparagraph (B), by inserting ``other than an a 
        taxpayer who is an applicable large taxpayer (as so defined) 
        for the taxable year'' after ``any taxpayer''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2011.

SEC. 5. LIMITATION ON PERCENTAGE DEPLETION ALLOWANCE FOR OIL AND GAS 
              WELLS.

    (a) In General.--Section 613A of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(f) Application With Respect to Certain Large Taxpayers.--In the 
case of any taxable year in which the taxpayer is an applicable large 
taxpayer (as defined in section 193(d)(2)), the allowance for 
percentage depletion shall be zero.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2011.

SEC. 6. LIMITATION ON DEDUCTION FOR INCOME ATTRIBUTABLE TO DOMESTIC 
              PRODUCTION OF OIL, NATURAL GAS, OR PRIMARY PRODUCTS 
              THEREOF.

    (a) Denial of Deduction.--Paragraph (4) of section 199(c) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subparagraph:
                    ``(E) Special rule for certain oil and gas 
                income.--In the case of any taxpayer who is an 
                applicable large taxpayer (as defined in section 
                193(d)(2)) for the taxable year, the term `domestic 
                production gross receipts' shall not include gross 
                receipts from the production, transportation, or 
                distribution of oil, natural gas, or any primary 
                product (within the meaning of subsection (d)(9)) 
                thereof.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2011.

SEC. 7. EXPANSION OF 7-YEAR AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL 
              EXPENDITURES TO APPLICABLE LARGE TAXPAYERS.

    (a) In General.--Subparagraph (A) of section 167(h)(5) of the 
Internal Revenue Code of 1986 is amended by inserting ``or an 
applicable large taxpayer (as defined in section 193(d)(2))'' after 
``major integrated oil company''.
    (b) Conforming Amendment.--The heading for paragraph (5) of section 
167(h) of the Internal Revenue Code of 1986 is amended by inserting 
``and applicable large taxpayers'' after ``oil companies''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2011.

SEC. 8. TAX ON CRUDE OIL AND NATURAL GAS PRODUCED FROM THE OUTER 
              CONTINENTAL SHELF IN THE GULF OF MEXICO.

    (a) In General.--Subtitle E of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new chapter:

 ``CHAPTER 56--TAX ON SEVERANCE OF CRUDE OIL AND NATURAL GAS FROM THE 
             OUTER CONTINENTAL SHELF IN THE GULF OF MEXICO

``Sec. 5896. Imposition of tax.
``Sec. 5897. Taxable crude oil or natural gas and removal price.
``Sec. 5898. Special rules and definitions.

``SEC. 5896. IMPOSITION OF TAX.

    ``(a) In General.--In addition to any other tax imposed under this 
title, there is hereby imposed a tax equal to 13 percent of the removal 
price of any taxable crude oil or natural gas removed from the premises 
during any taxable period.
    ``(b) Credit for Federal Royalties Paid.--
            ``(1) In general.--There shall be allowed as a credit 
        against the tax imposed by subsection (a) with respect to the 
        production of any taxable crude oil or natural gas an amount 
        equal to the aggregate amount of royalties paid under Federal 
        law with respect to such production.
            ``(2) Limitation.--The aggregate amount of credits allowed 
        under paragraph (1) to any taxpayer for any taxable period 
        shall not exceed the amount of tax imposed by subsection (a) 
        for such taxable period.
    ``(c) Tax Paid by Producer.--The tax imposed by this section shall 
be paid by the producer of the taxable crude oil or natural gas.

``SEC. 5897. TAXABLE CRUDE OIL OR NATURAL GAS AND REMOVAL PRICE.

    ``(a) Taxable Crude Oil or Natural Gas.--For purposes of this 
chapter, the term `taxable crude oil or natural gas' means crude oil or 
natural gas which is produced from Federal submerged lands on the outer 
Continental Shelf in the Gulf of Mexico pursuant to a lease entered 
into with the United States which authorizes the production.
    ``(b) Removal Price.--For purposes of this chapter--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `removal price' means--
                    ``(A) in the case of taxable crude oil, the amount 
                for which a barrel of such crude oil is sold, and
                    ``(B) in the case of taxable natural gas, the 
                amount per 1,000 cubic feet for which such natural gas 
                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 or gas removed from property before sale.--If 
        crude oil or natural gas 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.

``SEC. 5898. SPECIAL RULES AND DEFINITIONS.

    ``(a) Administrative Requirements.--
            ``(1) Withholding and deposit of tax.--The Secretary shall 
        provide for the withholding and deposit of the tax imposed 
        under section 5896 on a quarterly basis.
            ``(2) 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 or 
        natural gas) with respect to such oil as the Secretary may by 
        regulations prescribe.
            ``(3) Taxable periods; return of tax.--
                    ``(A) Taxable period.--Except as provided by the 
                Secretary, each calendar year shall constitute a 
                taxable period.
                    ``(B) Returns.--The Secretary shall provide for the 
                filing, and the time for filing, of the return of the 
                tax imposed under section 5896.
    ``(b) Definitions.--For purposes of this chapter--
            ``(1) Producer.--The term `producer' means the holder of 
        the economic interest with respect to the crude oil or natural 
        gas.
            ``(2) Crude oil.--The term `crude oil' includes crude oil 
        condensates and natural gasoline.
            ``(3) Premises and crude oil product.--The terms `premises' 
        and `crude oil product' have the same meanings as when used for 
        purposes of determining gross income from the property under 
        section 613.
    ``(c) Adjustment of Removal Price.--In determining the removal 
price of oil or natural gas 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 or natural gas removed.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
chapter.''.
    (b) Deductibility of Tax.--The first sentence of section 164(a) of 
the Internal Revenue Code of 1986 is amended by inserting after 
paragraph (5) the following new paragraph:
            ``(6) The tax imposed by section 5896(a) (after application 
        of section 5896(b)) on the severance of crude oil or natural 
        gas from the outer Continental Shelf in the Gulf of Mexico.''.
    (c) Clerical Amendment.--The table of chapters for subtitle E of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following new item:

                              ``Chapter 56. Tax on severance of crude 
                                        oil and natural gas from the 
                                        outer Continental Shelf in the 
                                        Gulf of Mexico.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to crude oil or natural gas removed after the date of the 
enactment of this Act.

SEC. 9. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO LARGE 
              INTEGRATED OIL COMPANIES WHICH ARE DUAL CAPACITY 
              TAXPAYERS.

    (a) In General.--Section 901 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (m) as subsection (n) and by 
inserting after subsection (l) the following new subsection:
    ``(m) Special Rules Relating to Large 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 large integrated oil company 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.
            ``(4) Large integrated oil company.--For purposes of this 
        subsection, the term `large integrated oil company' means, with 
        respect to any taxable year, an integrated oil company (as 
        defined in section 291(b)(4)) which--
                    ``(A) had gross receipts in excess of 
                $1,000,000,000 for such taxable year, and
                    ``(B) has an average daily worldwide production of 
                crude oil of at least 500,000 barrels for such taxable 
                year.''.
    (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.
                                 <all>