II 

117TH CONGRESS 

2D SESSION S. 5216 

To reduce the Federal budget deficit by closing big oil tax loopholes, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 8, 2022 

Mr. MENENDEZ (for himself, Mr. PADILLA, Mr. BOOKER, Mrs. SHAHEEN, Ms. 

HIRONO, Mr. CARDIN, and Mrs. MURRAY) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To reduce the Federal budget deficit by closing big oil tax 

loopholes, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Close Big Oil Tax Loopholes Act’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—CLOSE BIG OIL TAX LOOPHOLES 

Sec. 101. Modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers. 


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Sec. 102. Limitation on deduction for intangible drilling and development costs; 

amortization of disallowed amounts. 

Sec. 103. Limitation on percentage depletion allowance for oil and gas wells. 

Sec. 104. Limitation on deduction for tertiary injectants. 

Sec. 105. Limitation on enhanced oil recovery credit. 

Sec. 106. Limitation on credit for carbon oxide sequestration. 

TITLE II—OUTER CONTINENTAL SHELF OIL AND NATURAL GAS 

Sec. 201. Repeal of outer Continental Shelf deep water and deep gas royalty 

relief. 

TITLE III—MISCELLANEOUS 

Sec. 301. Deficit reduction. 

Sec. 302. Budgetary effects. 

1 TITLE I—CLOSE BIG OIL TAX 

2 LOOPHOLES 

3 SEC. 101. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 

4 APPLICABLE TO MAJOR INTEGRATED OIL 

5 COMPANIES WHICH ARE DUAL CAPACITY 

6 TAXPAYERS. 

7 (a) IN GENERAL.—Section 901 of the Internal Rev8 enue Code of 1986 is amended by redesignating subsection 

9 (n) as subsection (o) and by inserting after subsection (m) 

10 the following new subsection: 

11 ‘‘(n) SPECIAL RULES RELATING TO MAJOR INTE12 GRATED OIL COMPANIES WHICH ARE DUAL CAPACITY

13 TAXPAYERS.— 

14 ‘‘(1) GENERAL RULE.—Notwithstanding any 

15 other provision of this chapter, any amount paid or 

16 accrued by a dual capacity taxpayer which is a 

17 major integrated oil company (within the meaning of 

18 section 167(h)(5)) to a foreign country or possession 


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1 of the United States for any period shall not be con2 sidered a tax— 

3 ‘‘(A) if, for such period, the foreign coun4 try or possession does not impose a generally 

5 applicable income tax, or 

6 ‘‘(B) to the extent such amount exceeds 

7 the amount (determined in accordance with reg8 ulations) which— 

9 ‘‘(i) is paid by such dual capacity tax10 payer pursuant to the generally applicable 

11 income tax imposed by the country or pos12 session, or 

13 ‘‘(ii) would be paid if the generally ap14 plicable income tax imposed by the country 

15 or possession were applicable to such dual 

16 capacity taxpayer. 

17 Nothing in this paragraph shall be construed to 

18 imply the proper treatment of any such amount not 

19 in excess of the amount determined under subpara20 graph (B). 

21 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur22 poses of this subsection, the term ‘dual capacity tax23 payer’ means, with respect to any foreign country or 

24 possession of the United States, a person who— 


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1 ‘‘(A) is subject to a levy of such country or 

2 possession, and 

3 ‘‘(B) receives (or will receive) directly or 

4 indirectly a specific economic benefit (as deter5 mined in accordance with regulations) from 

6 such country or possession. 

7 ‘‘(3) GENERALLY APPLICABLE INCOME TAX.— 

8 For purposes of this subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘generally 

10 applicable income tax’ means an income tax (or 

11 a series of income taxes) which is generally im12 posed under the laws of a foreign country or 

13 possession on income derived from the conduct 

14 of a trade or business within such country or 

15 possession. 

16 ‘‘(B) EXCEPTIONS.—Such term shall not 

17 include a tax unless it has substantial applica18 tion, by its terms and in practice, to— 

19 ‘‘(i) persons who are not dual capacity 

20 taxpayers, and 

21 ‘‘(ii) persons who are citizens or resi22 dents of the foreign country or posses23 sion.’’. 

24 (b) EFFECTIVE DATE.— 


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1 (1) IN GENERAL.—The amendments made by 

2 this section shall apply to taxes paid or accrued in 

3 taxable years beginning after the date of the enact4 ment of this Act. 

5 (2) CONTRARY TREATY OBLIGATIONS

6 UPHELD.—The amendments made by this section 

7 shall not apply to the extent contrary to any treaty 

8 obligation of the United States. 

9 SEC. 102. LIMITATION ON DEDUCTION FOR INTANGIBLE 

10 DRILLING AND DEVELOPMENT COSTS; AMOR11 TIZATION OF DISALLOWED AMOUNTS. 

12 (a) IN GENERAL.—Section 263(c) of the Internal 

13 Revenue Code of 1986 is amended to read as follows: 

14 ‘‘(c) INTANGIBLE DRILLING AND DEVELOPMENT

15 COSTS IN THE CASE OF OIL AND GAS WELLS AND GEO16 THERMAL WELLS.— 

17 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

18 (a), and except as provided in subsection (i), regula19 tions shall be prescribed by the Secretary under this 

20 subtitle corresponding to the regulations which 

21 granted the option to deduct as expenses intangible 

22 drilling and development costs in the case of oil and 

23 gas wells and which were recognized and approved 

24 by the Congress in House Concurrent Resolution 50, 

25 Seventy-ninth Congress. Such regulations shall also 


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1 grant the option to deduct as expenses intangible 

2 drilling and development costs in the case of wells 

3 drilled for any geothermal deposit (as defined in sec4 tion 613(e)(2)) to the same extent and in the same 

5 manner as such expenses are deductible in the case 

6 of oil and gas wells. This subsection shall not apply 

7 with respect to any costs to which any deduction is 

8 allowed under section 59(e) or 291. 

9 ‘‘(2) EXCLUSION.— 

10 ‘‘(A) IN GENERAL.—This subsection shall 

11 not apply to amounts paid or incurred by a tax12 payer in any taxable year in which such tax13 payer is an applicable large taxpayer. 

14 ‘‘(B) APPLICABLE LARGE TAXPAYER.—For 

15 purposes of this paragraph— 

16 ‘‘(i) IN GENERAL.—The term ‘applica17 ble large taxpayer’ means, with respect to 

18 any taxable year, any taxpayer with gross 

19 receipts (within the meaning of section 

20 448(c)) for such taxable year in excess of 

21 $50,000,000. 

22 ‘‘(ii) AGGREGATION RULE.—All per23 sons treated as a single employer under 

24 subsection (a) or (b) of section 52 or sub25 section (m) or (o) of section 414 shall be 


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1 treated as one person for purposes of 

2 clause (i). 

3 ‘‘(C) AMORTIZATION OF AMOUNTS NOT AL4 LOWABLE AS DEDUCTIONS UNDER SUBPARA5 GRAPH (A).—The amount not allowable as a de6 duction for any taxable year by reason of sub7 paragraph (A) shall be allowable as a deduction 

8 ratably over the 60-month period beginning 

9 with the month in which the costs are paid or 

10 incurred. For purposes of section 1254, any de11 duction under this subparagraph shall be treat12 ed as a deduction under this subsection.’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 this section shall apply to amounts paid or incurred in tax15 able years beginning after December 31, 2022. 

16 SEC. 103. LIMITATION ON PERCENTAGE DEPLETION AL17 LOWANCE FOR OIL AND GAS WELLS. 

18 (a) IN GENERAL.—Section 613A of the Internal Rev19 enue Code of 1986 is amended by adding at the end the 

20 following new subsection: 

21 ‘‘(f) APPLICATION WITH RESPECT TO CERTAIN

22 LARGE TAXPAYERS.—In the case of any taxable year in 

23 which the taxpayer is an applicable large taxpayer (as de24 fined in section 263(c)(2)), the allowance for percentage 

25 depletion shall be zero.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2022. 

4 SEC. 104. LIMITATION ON DEDUCTION FOR TERTIARY 

5 INJECTANTS. 

6 (a) IN GENERAL.—Section 193 of the Internal Rev7 enue Code of 1986 is amended by adding at the end the 

8 following new subsection: 

9 ‘‘(d) APPLICATION WITH RESPECT TO CERTAIN

10 LARGE TAXPAYERS.— 

11 ‘‘(1) IN GENERAL.—This section shall not apply 

12 to amounts paid or incurred by a taxpayer in any 

13 taxable year in which such taxpayer is an applicable 

14 large taxpayer (as defined in section 263(c)(2)). 

15 ‘‘(2) AMORTIZATION OF AMOUNTS NOT ALLOW16 ABLE AS DEDUCTIONS UNDER PARAGRAPH (1).—The 

17 amount not allowable as a deduction for any taxable 

18 year by reason of paragraph (1) shall be allowable 

19 as a deduction ratably over the 60-month period be20 ginning with the month in which the costs are paid 

21 or incurred.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to amounts paid or incurred in tax24 able years beginning after December 31, 2022. 


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1 SEC. 105. LIMITATION ON ENHANCED OIL RECOVERY CRED2 IT. 

3 (a) IN GENERAL.—Section 43 of the Internal Rev4 enue Code of 1986 is amended by redesignating sub5 sections (d) and (e) as subsections (e) and (f), respectively, 

6 and by inserting after subsection (c) the following new 

7 subsection: 

8 ‘‘(d) APPLICATION WITH RESPECT TO CERTAIN

9 LARGE TAXPAYERS.—In the case of any taxable year in 

10 which the taxpayer is an applicable large taxpayer (as de11 fined in section 263(c)(2)), subsection (a) shall be applied 

12 by substituting ‘0 percent’ for ‘15 percent’.’’. 

13 (b) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to amounts paid or incurred in tax15 able years beginning after December 31, 2022. 

16 SEC. 106. LIMITATION ON CREDIT FOR CARBON OXIDE SE17 QUESTRATION. 

18 (a) IN GENERAL.—Section 45Q(f) of the Internal 

19 Revenue Code of 1986 is amended by adding at the end 

20 the following new paragraph: 

21 ‘‘(10) ELIMINATION OF USE OF CARBON OXIDE

22 AS TERTIARY INJECTANT.—In the case of any quali23 fied facility the construction of which begins after 

24 the date of the enactment of the Close Big Oil Tax 

25 Loopholes Act, subsection (a)(4)(B)(i) shall not 

26 apply.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to amounts paid or incurred in tax3 able years beginning after December 31, 2022. 

4 TITLE II—OUTER CONTINENTAL 

5 SHELF OIL AND NATURAL GAS 

6 SEC. 201. REPEAL OF OUTER CONTINENTAL SHELF DEEP 

7 WATER AND DEEP GAS ROYALTY RELIEF. 

8 (a) IN GENERAL.—Sections 344 and 345 of the En9 ergy Policy Act of 2005 (42 U.S.C. 15904, 15905) are 

10 repealed. 

11 (b) ADMINISTRATION.—With respect to any lease de12 scribed in section 344 or 345 of the Energy Policy Act 

13 of 2005 (42 U.S.C. 15904, 15905) (as in effect on the 

14 day before the date of enactment of this Act), beginning 

15 with the first lease sale held on or after that date of enact16 ment for which a final notice of sale has not been pub17 lished, the Secretary of the Interior shall not be required 

18 to provide for royalty relief in the lease sale terms. 

19 TITLE III—MISCELLANEOUS 

20 SEC. 301. DEFICIT REDUCTION. 

21 The net amount of any savings realized as a result 

22 of the enactment of this Act and the amendments made 

23 by this Act (after any expenditures authorized by this Act 

24 and the amendments made by this Act) shall be deposited 

25 in the Treasury and used for Federal budget deficit reducVerDate Sep 11 2014 04:50 Dec 13, 2022 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S5216.IS S5216

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1 tion or, if there is no Federal budget deficit, for reducing 

2 the Federal debt in such manner as the Secretary of the 

3 Treasury considers appropriate. 

4 SEC. 302. BUDGETARY EFFECTS. 

5 The budgetary effects of this Act, for the purpose of 

6 complying with the Statutory Pay-As-You-Go Act of 2010, 

7 shall be determined by reference to the latest statement 

8 titled ‘‘Budgetary Effects of PAYGO Legislation’’ for this 

9 Act, submitted for printing in the Congressional Record 

10 by the Chairman of the Senate Budget Committee, pro11 vided that such statement has been submitted prior to the 

12 vote on passage. 

Æ 


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