[Congressional Record Volume 153, Number 1 (Thursday, January 4, 2007)]
[Senate]
[Page S111]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mrs. Feinstein, and Mr. Wyden):
  S. 103. A bill to amend the Internal Revenue Code of 1986 to provide 
that major oil and gas companies will not be eligible for the effective 
rate reductions enacted in 2004 for domestic manufacturers; to 
Committee on Finance.
  Mr. KERRY. Mr. President, today, I am introducing the Restore a 
Rational Tax Rate on Petroleum Act of 2007. This legislation repeals 
the manufacturing deduction for big oil and gas companies that was 
enacted by Congress in 2004. I introduced this legislation in the 109th 
Congress and Congressman McDermott introduced companion legislation in 
the House.
  The domestic manufacturing deduction was designed to replace export-
related tax benefits that were successfully challenged by the European 
Union. Producers of oil and gas did not benefit from this tax break. 
Initial legislation proposed to address the repeal of the export-
related tax benefits and to replace them with a new domestic 
manufacturing deduction. That legislation only provided the deduction 
to industries that benefited from the export-related tax benefits. 
However, the final product extended the deduction to include the oil 
and gas industry as well.
  My bill repeals the manufacturing deduction for oil and gas companies 
because these industries suffered no detriment from the repeal of 
export-related tax benefits. At a time when oil companies are reporting 
mind-boggling record profits, there is no reason to reward them with a 
tax deduction.
  Like me, many Members of Congress support a windfall profits tax on 
big oil and gas companies. Providing this deduction to oil and gas 
companies actually functions as a reverse windfall profits tax. This 
deduction lowers the tax rates on the windfall profits that they are 
currently enjoying. And without Congressional action this benefit will 
increase: upon enactment, the domestic manufacturing deduction was 
three percent, but it increased to six percent in 2007 and it is 
scheduled to increase to nine percent in 2010.
  I urge my colleagues to support this legislation. We owe it to the 
American people to eliminate tax benefits to the oil industry at a time 
of record profits, record gas prices, and record deficits.
  I ask unanimous consent that the text of this bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 103

       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 ``Restore a Rational Tax Rate 
     on Petroleum Production Act of 2007''.

     SEC. 2. FINDINGS.

       The Congress finds that--
       (1) like many other countries, the United States has long 
     provided export-related benefits under its tax law,
       (2) producers and refiners of oil and natural gas were 
     specifically denied the benefits of those export-related tax 
     provisions,
       (3) those export-related tax provisions were successfully 
     challenged by the European Union as being inconsistent with 
     our trade agreements,
       (4) the Congress responded by repealing the export-related 
     benefits and enacting a substitute benefit that was an 
     effective rate reduction for United States manufacturers,
       (5) producers and refiners of oil and natural gas were made 
     eligible for the rate reduction even though they suffered no 
     detriment from repeal of the export-related benefits, and
       (6) the decision to provide the effective rate reduction to 
     producers and refiners of oil and natural gas has operated as 
     a reverse windfall profits tax, lowering the tax rate on the 
     windfall profits they are currently enjoying.

     SEC. 3. DENIAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO 
                   DOMESTIC PRODUCTION OF OIL, NATURAL GAS, OR 
                   PRIMARY PRODUCTS THEREOF.

       (a) In General.--Subparagraph (B) of section 199(c)(4) of 
     the Internal Revenue Code of 1986 (relating to exceptions) is 
     amended by striking ``or'' at the end of clause (ii), by 
     striking the period at the end of clause (iii) and inserting 
     ``, or'', and by inserting after clause (iii) the following 
     new clause:
       ``(iv) in the case of any major integrated oil company (as 
     defined in section 167(h)(5)(B)), the production, refining, 
     processing, transportation, or distribution of oil, natural 
     gas, or any primary product thereof during any taxable year 
     described in section 167(h)(A).''.
       (b) Conforming Amendments.--Section 199(c)(4) of such Code 
     is amended--
       (1) in subparagraph (A)(i)(III) by striking ``electricity, 
     natural gas,'' and inserting ``electricity'', and
       (2) in subparagraph (B)(ii) by striking ``electricity, 
     natural gas,'' and inserting ``electricity''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.
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