We have received text from H.R. 383: End Oil and Gas Tax Subsidies Act of 2025. This bill was received on 2025-01-14, and currently has 13 cosponsors.
Here is a short summary of the bill:
The End Oil and Gas Tax Subsidies Act of 2025 aims to eliminate various tax benefits currently provided to oil and gas companies under the Internal Revenue Code. The bill includes several key provisions designed to gradually repeal these subsidies, which are viewed as financial supports benefiting fossil fuel industries. Here are the main aspects of the proposed legislation:
1. Amortization of Geological and Geophysical Expenditures
The bill proposes to change the time frame for amortizing geological and geophysical expenditures from a 24-month period to a 7-year period. This adjustment means that oil and gas companies would spread these costs over a longer time, potentially resulting in less immediate tax relief. The change would take effect for costs incurred after December 31, 2024.
2. Producing Oil and Gas from Marginal Wells
The bill seeks to remove section 45I of the Internal Revenue Code, which provides tax credits for producing oil and gas from marginal wells. This amendment would mean that such production would no longer be eligible for these tax credits starting in taxable years beginning after December 31, 2024.
3. Enhanced Oil Recovery Credit
Similar to the previous section, the enhanced oil recovery credit would also be repealed. This credit currently allows companies a tax incentive for enhanced oil recovery methods. This repeal would apply to expenses incurred after December 31, 2024.
4. Intangible Drilling and Development Costs
The legislation will end the current provisions that allow oil and gas companies to deduct intangible drilling and development costs. This repeal would also take effect for costs incurred after December 31, 2024.
5. Repeal of Percentage Depletion for Oil and Gas Wells
The proposed legislation would strike section 613A, which currently permits percentage depletion deductions for oil and gas wells. The repeal would mean that companies could no longer use this specific deduction for tax years beginning after December 31, 2024.
6. Repeal of Deduction for Tertiary Injectants
This provision would eliminate the ability to deduct costs associated with tertiary injectants used in oil and gas production, with the changes effective for taxable years beginning after December 31, 2024.
7. Passive Loss Limitations
The bill proposes to repeal an exception that allows certain losses from working interests in oil and gas properties to bypass passive loss limitations. This change would be effective for taxable years after the enactment of the bill.
8. Prohibition on Using Last-In, First-Out Accounting Method
The legislation forbids major integrated oil companies from using the last-in, first-out (LIFO) method for accounting purposes. This provision is intended to standardize how these companies report their inventories for tax purposes and would apply to taxable years beginning after December 31, 2024.
9. Modifications of Foreign Tax Credit Rules
Changes to the foreign tax credit rules would limit the credit available to dual capacity taxpayers regarding oil and gas income, specifying that amounts paid to foreign entities should not exceed what would have been required without dual capacity considerations. This amendment would be effective for taxes accrued after December 31, 2024.
10. Clarification of Tar Sands as Crude Oil for Tax Purposes
The bill clarifies that substances like tar sands and other similar materials are to be classified as crude oil for excise tax purposes, thereby potentially increasing tax liabilities for producers using these materials.
Effective Dates
Most of the amendments and repeals specified in the bill would apply to taxable years beginning after December 31, 2024, indicating a phased approach to the removal of these subsidies. The precise operational impact would depend on each company's accounting practices and financial planning.
Relevant Companies
- XOM - Exxon Mobil Corporation: Expected to be significantly impacted due to its large-scale operations in oil and gas production, losing various tax deductions and credits.
- COP - ConocoPhillips: May see reduced tax benefits, affecting profit margins on their oil and gas projects.
- CVX - Chevron Corporation: Similar to Exxon, Chevron would likely face changes in tax liability due to the proposed elimination of specific tax subsidies.
- OXY - Occidental Petroleum Corporation: The repeal of deductions may affect the overall financial strategy of the company.
This article is not financial advice. See Quiver Quantitative's disclaimers for more information.
