A bill to amend the Internal Revenue Code of 1986 to terminate certain incentives for oil and gas.

Summary: Oil Industry Tax Break Repeal Act of 2007 - Amends the Internal Revenue Code to: (1) increase the amortization period for the geological and geophysical expenditures of certain large integrated oil companies (defined as having an average daily worldwide crude oil production level of at least 500,000 barrels and more than $1 billion in gross receipts) from five to seven years; (2) limit the oil depletion allowance; (3) terminate accelerated depreciation of natural gas distribution lines and Alaska natural gas pipelines, expensing of equipment used in refining of liquid fuels, the tax deduction for intangible drilling and development costs, and the tax credits for enhanced oil recovery and for producing oil and gas from marginal wells; (4) classify natural gas gathering lines as 15-year property for depreciation purposes; and (5) deny large integrated oil companies the tax deduction for income attributable to the domestic production of oil, natural gas, or related products.

Requires large integrated oil companies to revalue their LIFO inventories of crude oil, natural gas, or other petroleum products according to a specified formula. Denies such oil companies a foreign tax credit for payments to certain foreign countries from which they receive a specified economic benefit as a dual capacity taxpayer.

Establishes in the Treasury the Energy Trust Fund and directs the transfer to such Fund of revenues resulting from the repeal of oil industry tax benefits by this Act.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Oil Industry Tax Break Repeal Act of 
2007''.

               TITLE I--REPEAL OF OIL INDUSTRY TAX BREAKS

SEC. 101. 7-YEAR AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL 
              EXPENDITURES FOR CERTAIN MAJOR INTEGRATED OIL COMPANIES.

    (a) In General.--Subparagraph (A) of section 167(h)(5) of the 
Internal Revenue Code of 1986 (relating to special rule for major 
integrated oil companies) is amended by striking ``5-year'' and 
inserting ``7-year''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred after the date of the enactment of this 
Act.

SEC. 102. LIMITATION ON PERCENTAGE DEPLETION.

    (a) In General.--Section 613A of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(f) Limitation on Aggregate Amount of Depletion.--In the case of 
any oil or gas well, the allowance for depletion allowed under section 
613 shall not exceed the basis of the taxpayer in such property.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 103. TERMINATION OF TREATMENT OF NATURAL GAS DISTRIBUTION LINES AS 
              15-YEAR PROPERTY.

    (a) In General.--Section 168(e)(3)(E)(viii) of the Internal Revenue 
Code of 1986 is amended by striking ``January 1, 2011'' and inserting 
``the date of the enactment of the Oil Industry Tax Break Repeal Act of 
2007''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to property placed in service after the date of the 
        enactment of this Act.
            (2) Exception.--The amendments made by this section shall 
        not apply to any property with respect to which the taxpayer or 
        a related party has entered into a binding contract for the 
        construction thereof on or before February 16, 2007, or, in the 
        case of self-constructed property, has started construction on 
        or before such date.

SEC. 104. TERMINATION OF TEMPORARY EXPENSING FOR EQUIPMENT USED IN 
              REFINING OF LIQUID FUELS.

    (a) In General.--Section 179C(c)(1) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``January 1, 2012'' and inserting ``the 
        date of the enactment of the Oil Industry Tax Break Repeal Act 
        of 2007'', and
            (2) by striking ``January 1, 2008'' and inserting ``the 
        date of the enactment of the Oil Industry Tax Break Repeal Act 
        of 2007''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 105. NATURAL GAS GATHERING LINES TREATED AS 15-YEAR PROPERTY.

    (a) In General.--Subparagraph (E) of section 168(e)(3) of the 
Internal Revenue Code of 1986, as amended by section 2, is amended by 
inserting ``, and'' at the end of clause (vi), by striking the period 
at the end of clause (vii) and inserting ``, and'', and by adding at 
the end the following new clause:
                            ``(viii) any natural gas gathering line the 
                        original use of which commences with the 
                        taxpayer after the date of the enactment of 
                        this clause.''.
    (b) Alternative System.--The table contained in section 
168(g)(3)(B) of such Code (relating to special rule for property 
assigned to classes), as amended by section 3, is amended by inserting 
after the item relating to subparagraph (E)(vii) the following new 
item:

``(E)(viii)..........................................             22''.
    (c) Conforming Amendment.--Clause (iv) of section 168(e)(3) of such 
Code is amended by inserting ``and before the date of the enactment of 
the Oil Industry Tax Break Repeal Act of 2007'' after ``April 11, 
2005''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to property placed in service after the date of the 
        enactment of this Act.
            (2) Exception.--The amendments made by this section shall 
        not apply to any property with respect to which the taxpayer or 
        a related party has entered into a binding contract for the 
        construction thereof on or before February 16, 2007, or, in the 
        case of self-constructed property, has started construction on 
        or before such date.

SEC. 106. TERMINATION OF DEDUCTION FOR INTANGIBLE DRILLING AND 
              DEVELOPMENT COSTS.

    (a) In General.--Section 263(c) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new sentence: ``This 
subsection shall not apply to any taxable year beginning after the date 
of the enactment of this sentence.''.
    (b) Conforming Amendments.--Paragraphs (2) and (3) of section 
291(b) of such Code are each amended by striking ``section 263(c), 
616(a),'' and inserting ``section 616(a)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 107. TERMINATION OF ENHANCED OIL RECOVERY CREDIT.

    (a) In General.--Section 43 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subsection:
    ``(f) Termination.--This section shall not apply to any taxable 
year beginning after the date of the enactment of this subsection.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 108. TERMINATION OF CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL 
              WELLS.

    (a) In General.--Section 45I of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(e) Termination.--This section shall not apply to any taxable 
year beginning after the date of the enactment of this subsection.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 109. TERMINATION OF TREATMENT OF ALASKA NATURAL GAS PIPELINES AS 
              7-YEAR PROPERTY.

    (a) In General.--Section 168(e)(3)(C)(iii) of the Internal Revenue 
Code of 1986 is amended by inserting ``placed in service before the 
date of the enactment of the Oil Industry Tax Break Repeal Act of 
2007'' after ``Alaska natural gas pipeline''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 110. DENIAL OF DEDUCTION FOR LARGE INTEGRATED OIL COMPANIES 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 a taxpayer which is a 
                        large integrated oil company, the sale, 
                        exchange, or other disposition of oil, natural 
                        gas, or any primary product thereof.''.
    (b) Primary Product.--Section 199(c)(4)(B) of such Code is amended 
by adding at the end the following flush sentence:
                ``For purposes of clause (iv), the term `primary 
                product' has the same meaning as when used in section 
                927(a)(2)(C), as in effect before its repeal.''.
    (c) Large Integrated Oil Company.--Subsection (c) of section 199 of 
such Code is amended by adding at the end the following new paragraph:
            ``(8) Large integrated oil company.--For purposes of this 
        subsection, the term `large integrated oil company' means, with 
        respect to any taxable year, an integrated oil company (as 
        defined in section 291(b)(4)) which--
                    ``(A) had gross receipts in excess of 
                $1,000,000,000 for such taxable year, and
                    ``(B) has an average daily worldwide production of 
                crude oil of at least 500,000 barrels for such taxable 
                year.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 111. REVALUATION OF LIFO INVENTORIES OF LARGE INTEGRATED OIL 
              COMPANIES.

    (a) General Rule.--Notwithstanding any other provision of law, if a 
taxpayer is an applicable integrated oil company for its last taxable 
year ending in calendar year 2006, the taxpayer shall--
            (1) increase, effective as of the close of such taxable 
        year, the value of each historic LIFO layer of inventories of 
        crude oil, natural gas, or any other petroleum product (within 
        the meaning of section 4611) by the layer adjustment amount, 
        and
            (2) decrease its cost of goods sold for such taxable year 
        by the aggregate amount of the increases under paragraph (1).
If the aggregate amount of the increases under paragraph (1) exceed the 
taxpayer's cost of goods sold for such taxable year, the taxpayer's 
gross income for such taxable year shall be increased by the amount of 
such excess.
    (b) Layer Adjustment Amount.--For purposes of this section--
            (1) In general.--The term ``layer adjustment amount'' 
        means, with respect to any historic LIFO layer, the product 
        of--
                    (A) $18.75, and
                    (B) the number of barrels of crude oil (or in the 
                case of natural gas or other petroleum products, the 
                number of barrel-of-oil equivalents) represented by the 
                layer.
            (2) Barrel-of-oil equivalent.--The term ``barrel-of-oil 
        equivalent'' has the meaning given such term by section 
        29(d)(5) (as in effect before its redesignation by the Energy 
        Tax Incentives Act of 2005).
    (c) Application of Requirement.--
            (1) No change in method of accounting.--Any adjustment 
        required by this section shall not be treated as a change in 
        method of accounting.
            (2) Underpayments of estimated tax.--No addition to the tax 
        shall be made under section 6655 of the Internal Revenue Code 
        of 1986 (relating to failure by corporation to pay estimated 
        tax) with respect to any underpayment of an installment 
        required to be paid with respect to the taxable year described 
        in subsection (a) to the extent such underpayment was created 
        or increased by this section.
    (d) Applicable Integrated Oil Company.--For purposes of this 
section, the term ``applicable integrated oil company'' means an 
integrated oil company (as defined in section 291(b)(4) of the Internal 
Revenue Code of 1986) which has an average daily worldwide production 
of crude oil of at least 500,000 barrels for the taxable year and which 
had gross receipts in excess of $1,000,000,000 for its last taxable 
year ending during calendar year 2006. For purposes of this subsection 
all persons treated as a single employer under subsections (a) and (b) 
of section 52 of the Internal Revenue Code of 1986 shall be treated as 
1 person and, in the case of a short taxable year, the rule under 
section 448(c)(3)(B) shall apply.

SEC. 112. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO LARGE 
              INTEGRATED OIL COMPANIES WHICH ARE DUAL CAPACITY 
              TAXPAYERS.

    (a) In General.--Section 901 of the Internal Revenue Code of 1986 
(relating to credit for taxes of foreign countries and of possessions 
of the United States) is amended by redesignating subsection (m) as 
subsection (n) and by inserting after subsection (l) the following new 
subsection:
    ``(m) Special Rules Relating to Large Integrated Oil Companies 
Which Are Dual Capacity Taxpayers.--
            ``(1) General rule.--Notwithstanding any other provision of 
        this chapter, any amount paid or accrued by a dual capacity 
        taxpayer which is a large integrated oil company to a foreign 
        country or possession of the United States for any period shall 
        not be considered a tax--
                    ``(A) if, for such period, the foreign country or 
                possession does not impose a generally applicable 
                income tax, or
                    ``(B) to the extent such amount exceeds the amount 
                (determined in accordance with regulations) which--
                            ``(i) is paid by such dual capacity 
                        taxpayer pursuant to the generally applicable 
                        income tax imposed by the country or 
                        possession, or
                            ``(ii) would be paid if the generally 
                        applicable income tax imposed by the country or 
                        possession were applicable to such dual 
                        capacity taxpayer.
        Nothing in this paragraph shall be construed to imply the 
        proper treatment of any such amount not in excess of the amount 
        determined under subparagraph (B).
            ``(2) Dual capacity taxpayer.--For purposes of this 
        subsection, the term `dual capacity taxpayer' means, with 
        respect to any foreign country or possession of the United 
        States, a person who--
                    ``(A) is subject to a levy of such country or 
                possession, and
                    ``(B) receives (or will receive) directly or 
                indirectly a specific economic benefit (as determined 
                in accordance with regulations) from such country or 
                possession.
            ``(3) Generally applicable income tax.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `generally applicable 
                income tax' means an income tax (or a series of income 
                taxes) which is generally imposed under the laws of a 
                foreign country or possession on income derived from 
                the conduct of a trade or business within such country 
                or possession.
                    ``(B) Exceptions.--Such term shall not include a 
                tax unless it has substantial application, by its terms 
                and in practice, to--
                            ``(i) persons who are not dual capacity 
                        taxpayers, and
                            ``(ii) persons who are citizens or 
                        residents of the foreign country or possession.
            ``(4) Large integrated oil company.--For purposes of this 
        subsection, the term `large integrated oil company' means, with 
        respect to any taxable year, an integrated oil company (as 
        defined in section 291(b)(4)) which--
                    ``(A) had gross receipts in excess of 
                $1,000,000,000 for such taxable year, and
                    ``(B) has an average daily worldwide production of 
                crude oil of at least 500,000 barrels for such taxable 
                year.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxes paid or accrued in taxable years beginning after 
        the date of the enactment of this Act.
            (2) Contrary treaty obligations upheld.--The amendments 
        made by this section shall not apply to the extent contrary to 
        any treaty obligation of the United States.

                      TITLE II--ENERGY TRUST FUND

SEC. 201. DEDICATION OF RESULTING REVENUES TO THE ENERGY TRUST FUND.

    (a) In General.--Subchapter A of chapter 98 of the Internal Revenue 
Code of 1986 (relating to trust fund code) is amended by adding at the 
end the following new section:

``SEC. 9511. ENERGY TRUST FUND.

    ``(a) Establishment.--There is established in the Treasury of the 
United States a trust fund to be known as the `Energy Trust Fund', 
consisting of such amounts as may be appropriated or credited to such 
Fund as provided in this section or section 9602(b).
    ``(b) Transfers to Trust.--There are hereby appropriated to the 
Energy Trust Fund amounts equivalent to the revenues resulting from the 
amendment made by the title I of the Oil Industry Tax Break Repeal Act 
of 2007.
    ``(c) Expenditures.--Amounts in the Energy Trust Fund shall be 
available, as provided in appropriation Acts, only for the purpose of 
making expenditures--
            ``(1) to accelerate the use of clean domestic renewable 
        energy resources and alternative fuels;
            ``(2) to promote the utilization of energy-efficient 
        products and practices and conservation; and
            ``(3) to increase research, development, and deployment of 
        clean renewable energy and efficiency technologies.''.
    (b) Clerical Amendment.--The table of sections for such subchapter 
is amended by adding at the end the following new item:

``Sec. 9511. Energy Trust Fund.''.