U.S. Senator Robert Menendez (D-NJ) today reintroduced legislation that would repeal tax subsidies for the "Big 5" oil companies. The nation's five largest oil companies (BP, Exxon, Shell, Chevron, and ConocoPhillips) took home nearly $1 trillion in profits over the past decade, including $118 billion in 2012, with only a small percentage of those earnings going towards exploration and research. The Close Big Oil Tax Loopholes Act of 2013 would finally put an end to unfair taxpayer handouts to these highly profitable companies, raising $24 billion in savings towards deficit reduction over 10 years.
"It's time for the federal government to finally put American taxpayers ahead of Big Oil companies," said Menendez. "We simply cannot afford to continue giving away billions of taxpayer dollars to companies that are doing nothing to help lower prices. And while middle-class families are paying their fair share to help reduce the deficit, it's only right that Big Oil does the same. Enough is enough. I hope my colleagues will join me in standing up for American families and standing up to Big Oil."
Senator Menendez has long been fighting against taxpayer giveaways to Big Oil. In the 112th Congress, Menendez introduced the Repeal Big Oil Tax Subsidies Act and the Close Big Oil Tax Loopholes Act, both of which received bipartisan majority support on the Senate floor but were procedurally blocked by Republicans.
Currently, the following Senators are co-sponsors of the Close Big Oil Tax Loopholes Act of 2013: Sherrod Brown (D-OH), Ben Cardin (D-MD), Dick Durbin (D-IL), Al Franken (D-MN), Kirsten Gillibrand (D-NY), Amy Klobuchar (D-MN), Frank R. Lautenberg (D-NJ), Patrick Leahy (D-VT), Claire McCaskill (D-MO), Jeff Merkley (D--OR), Bill Nelson (D-FL), Jack Reed (D-RI) Charles Schumer (D-NY), Jeanne Shaheen (D-NH), Debbie Stabenow (D-MI ), Sheldon Whitehouse (D-RI).
"We have to reduce the deficit, and everyone's going to have to tighten their belt. And I guarantee you that means Big Oil, too. Taxpayers shouldn't have to keep subsidizing them by about $2.4 billion a year," said Senator Bill Nelson (D-FL), who passed legislation in 2006 keeping the oil companies from drilling too close to Florida's coastal tourism industry.
"The big oil companies are doing just fine on their own, making billions in profits, and shouldn't be double dipping into Rhode Islanders' wallets by charging near-record prices and taking our tax dollars," said Senator Whitehouse. "We should put an end to these ridiculous tax breaks to Big Oil."
"We need to stand with the American people and stand up to Big Oil for an energy future that working families need and deserve. Continuing these tax subsidies is indefensible on several counts. They are counterproductive and costly. Instead we should be putting our resources into our future with new cleaner energy sources that will bring down fuel costs, especially for families and businesses in rural states like Vermont, where we have to depend on our cars to travel far distances, and where in the winter we must rely on heating fuel," said Senator Leahy.
"Making oil companies pay their fair share in taxes isn't going to hurt the industry, but it can help our country thrive. This common sense-bill would end $24 billion in unnecessary tax giveaways to big oil companies that are already raking in huge profits. This is money that should be used to invest in a stronger America, including new investments in clean energy, education, infrastructure, and manufacturing that President Obama laid out in his State of the Union Address," said Senator Lautenberg.
"We've got real fiscal problems in this country and we're giving the most profitable corporations in the history of the world billions of dollars each year in tax giveaways--it's hard to understand how we're going to seriously tackle the former until we end the latter. There's still some low-hanging fruit in our fight to tackle the debt, and ending these tax loopholes should be a no-brainer," said Senator Claire McCaskill.
Click Here for a report on Big Oil profits and activities by the Center for American Progress and Click Here for a report on how oil companies profit from American drivers by the Union of Concerned Scientists.
A summary of the Close Big Oil Tax Loopholes Act of 2013 is below:
Modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers:
U.S. taxpayers are taxed on their income worldwide, but are entitled to a dollar-for-dollar tax credit for any income taxes paid to a foreign government. U.S. oil and gas companies have been accused of disguising royalty payments to foreign governments as foreign taxes. This allows them to lower their taxes in the U.S. The bill would close this loophole that amounts to a U.S. subsidy for foreign oil production for the Big 5.
Limitation on deduction for income attributable to the production of oil, natural gas, or primary products thereof:
In 2004 Congress enacted Section 199, the domestic manufacturing tax deduction. In 2008 Congress froze the Section 199 deduction at 6% for all oil and gas activity. The bill eliminates the Section 199 deduction for the Big 5.
Limitation on deduction for intangible drilling and development costs:
Would deny the Big 5 oil companies the option of expensing Intangible Drilling Costs (IDCs) and require such costs be capitalized. IDCs are expenditures such as wages, fuel, repairs, hauling, and supplies necessary for the drilling of oil wells. Currently, integrated oil companies can expense 70% of the cost of IDCs. The bill requires the Big 5 to capitalize all of its IDC costs.
Limitation on percentage depletion allowance for oil and gas wells:
Firms that extract oil and gas are permitted a deduction to recover their capital investment under one of two methods. Cost depletion allows for the recovery of the actual capital investment--the costs of discovering, purchasing, and developing the well--over the period the well produces income. Under this method, the taxpayer's total deductions cannot exceed its original investment.
Percentage depletion allows the cost recovery to be computed using a percentage of the revenue from the sale of the oil or gas. Under this method, total deductions could (and often do) exceed the taxpayer's capital investment. The bill repeals percentage depletion for the Big 5.
Limitation on deduction for tertiary injectants:
Tertiary injectants are used in enhanced oil recovery to drive more oil from an existing well. Currently, oil companies are allowed to deduct the cost of tertiary injectants rather than capitalizing their costs and recovering them over time. The bill requires the Big 5 to capitalize the cost of tertiary injectants it uses during the year and recover those costs over time.
Repeal of Outer Continental Shelf deep water and deep gas royalty relief:
Repeals Sections 344 and 345 of the Energy Policy Act of 2005. Section 344 extended existing deep gas incentives and Section 345 provided additional mandatory royalty relief for certain deepwater oil and gas production. These changes will help ensure that Americans receive fair value for Federally-owned fossil fuel resources.
All savings realized as the result of the bill's elimination of the tax breaks and other subsidies currently going to the major integrated oil companies are devoted to deficit reduction.