To: Jim McMannis who wrote (612548 ) 5/23/2011 11:18:32 AM From: Alighieri Read Replies (1) | Respond to Again, you just don't understand it. These are global multinational companies. OTOH, they do pay Billions in US taxes. Government R&D. The Department of Energy (DOE) has spent taxpayer dollars on oil research and development, including funding for unconventional oil, gas, and coal. Although President Obama’s FY 2012 budget request significantly cuts funding for the Office of Fossil Energy, decreasing its size by $417.8 million below the FY 2010 appropriation, it does not go far enough. The only funding in this area should maintain the Strategic Petroleum Reserve, for which the President’s budget requests an appropriate $121.7 million. Eliminating all other fossil energy funding would save $399 million. Enhanced Oil Recovery (EOR) Tax Credit. Oil producers receive a 15 percent tax credit for costlier methods and technologies, such as injecting liquids and carbon dioxide into the earth. Many EOR processes are no longer in use, and the tax credit applies only when the price of oil falls below a certain level. Marginal Well Production Credit. Marginal wells produce 15 or fewer barrels of oil per day, produce heavy oil, or produce mostly water and fewer than 25 barrels of oil per day. The marginal well production credit is another safety-net tax provision. This is another preferential tax credit that Congress should repeal. Percentage depletion Companies are generally allowed to deduct the costs of an investment over the term of that investment’s useful life. But oil companies get to use a special method for calculating their deductions called “percentage depletion.” Instead of deducting the costs of an oil or gas well as its value declines, oil companies are allowed to deduct a flat percentage of the income they derive from it. Because the deductions are based on revenues, not costs, the subsidy actually increases at times when prices are high, which of course is when oil companies enjoy their greatest profits. Domestic manufacturing deduction for oil production Oil producers successfully lobbied for inclusion in a 2004 bill that gave the beleaguered manufacturing sector a special tax break designed to discourage outsourcing of jobs. For a number of reasons—including the capital-intensive nature of oil production, the relative mobility of investments, and of course the level of profitability—there are vast differences between the oil industry and traditional U.S. manufacturing. As Sen. Bob Corker, a Tennessee Republican, has explained: “Congress was trying to solve a manufacturing issue in this country” by enacting the deduction and included oil producers “almost inadvertently.”[4] Expensing of intangible drilling costs Another special tax rule dating back to 1916 permits independent oil companies (and major integrated oil companies to a lesser but still significant extent) to “expense” certain costs associated with drilling oil wells. This means they can take immediate deductions for these costs rather than spreading the deductions out over the useful life of the wells, which is the normal tax code rule for other types of investments. Taking deductions immediately means the companies lower their tax bill in the first year, in effect getting an interest-free loan from the government. Dual capacity taxpayer” rules for claiming foreign tax credits Our tax system allows companies that do business abroad to reduce from their tax bill any income taxes paid to other governments. The rules are supposed to prevent oil companies from claiming credit for royalty payments to foreign governments. Royalties are not taxes; they are fees for the privilege of extracting natural resources.
