|
House-Senate Joint Committee on Taxation: Tax Preferences for Fossil Fuels |
5 Years |
10 Years |
|
VI. Eliminate Fossil
Fuel Preferences |
Billions of dollars
per year |
|
|
Total of Eliminate
Fossil Fuel Preferences |
$17.6 |
$30.3 |
|
A. Eliminate Oil And
Natural Gas Preferences |
$26.1 |
$38.1 |
|
1. Repeal enhanced oil
recovery ("EOR") credit |
$0.4 |
$0.4 |
|
2. Repeal credit for
oil and gas produced from marginal wells |
|
|
|
3. Repeal expensing
of intangible drilling costs |
$10.0 |
$13.1 |
|
2019 version:
Expensing of exploration and development costs: Oil and gas |
$2.4 |
|
|
4. Repeal deduction
for tertiary injectants |
$0.0 |
$0.1 |
|
5. Repeal exception to
passive loss limitations for working interests in oil and natural gas
properties |
$0.1 |
$0.3 |
|
6. Repeal percentage
depletion for oil and natural gas wells |
$5.1 |
$12.1 |
|
2019 version: Excess
of percentage over cost depletion: Oil and gas |
$2.4 |
|
|
7. (repealed in 2018) |
|
|
|
8. Increase geological
and geophysical amortization period for independent producers to seven years |
$0.9 |
$1.3 |
|
B. Eliminate Coal
Preferences |
$1.1 |
$3.1 |
|
1. Repeal expensing of
exploration and development costs |
$0.4 |
$0.8 |
|
2. Repeal percentage
depletion for hard mineral fossil fuels |
$0.4 |
$0.8 |
|
3. Repeal capital
gains treatment for royalties on disposition of coal or lignite |
$0.2 |
$0.4 |
|
4. Repeal use of the
domestic manufacturing deduction for the production of coal and other hard
mineral fossil fuels |
$0.1 |
$0.3 |
|
5. Repeal exemption
from the corporate income tax for publicly traded partnerships with
qualifying income and gains from activities relating to fossil fuels |
$0.0 |
$0.8 |
|
Sources: |
||
|
Most lines are
potential revenue from report JCX-15-16, 3/24/2016 |
||
|
2019 "Tax
Expenditures" are more recent data, which may correspond to the earlier
lines, from report JCX-55-19, 12/19/2020 |
||
|
Explanations are available from the bipartisan
EESI; the biggest are listed below: |
eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs |
|
Intangible Drilling Costs Deduction (26 U.S. Code §
263. Active). This provision allows companies to deduct a majority of the costs
incurred from drilling new wells domestically.
Percentage Depletion (26 U.S. Code § 613. Active). Depletion is an accounting method
that works much like depreciation, allowing businesses to deduct a certain
amount from their taxable income as a reflection of declining production from a
reserve over time. However, with standard cost depletion, if a firm were to
extract 10 percent of recoverable oil from a property, the depletion expense
would be ten percent of capital costs. In contrast, percentage depletion allows
firms to deduct a set percentage from their taxable income. Because percentage depletion
is not based on capital costs, total deductions can exceed capital costs. This
provision is limited to independent producers and royalty owners.