II 

109TH CONGRESS 

1ST SESSION S. 1631 

To amend the Internal Revenue Code of 1986 to impose a temporary windfall 

profit tax on crude oil and to rebate the tax collected back to the 

American consumer, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 7, 2005 

Mr. DORGAN (for himself, Mr. DODD, and Mrs. BOXER) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to impose 

a temporary windfall profit tax on crude oil and to 

rebate the tax collected back to the American consumer, 

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. 

4 This Act may be cited as the ‘‘Windfall Profits Re5 bate Act of 2005’’. 

6 SEC. 2. WINDFALL PROFITS TAX. 

7 (a) IN GENERAL.—Subtitle E of the Internal Rev8 enue Code of 1986 (relating to alcohol, tobacco, and cer-
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1 tain other excise taxes) is amended by adding at the end 

2 thereof the following new chapter: 

3 ‘‘CHAPTER 56—WINDFALL PROFITS ON 

4 CRUDE OIL 

‘‘Sec. 5896. Imposition of tax. 

‘‘Sec. 5897. Windfall profit; removal price; adjusted base price; qualified investment. 

‘‘Sec. 5898. Special rules and definitions. 

5 ‘‘SEC. 5896. IMPOSITION OF TAX. 

6 ‘‘(a) IN GENERAL.—In addition to any other tax im7 posed under this title, there is hereby imposed on any inte8 grated oil company (as defined in section 291(b)(4)) an 

9 excise tax equal to the excess of— 

10 ‘‘(1) the amount equal to 50 percent of the 

11 windfall profit from all barrels of taxable crude oil 

12 removed from the property during each taxable year, 

13 over 

14 ‘‘(2) the amount of qualified investment by such 

15 company during such taxable year. 

16 ‘‘(b) FRACTIONAL PART OF BARREL.—In the case of 

17 a fraction of a barrel, the tax imposed by subsection (a) 

18 shall be the same fraction of the amount of such tax im19 posed on the whole barrel. 

20 ‘‘(c) TAX PAID BY PRODUCER.—The tax imposed by 

21 this section shall be paid by the producer of the taxable 

22 crude oil. 
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1 ‘‘SEC. 5897. WINDFALL PROFIT; REMOVAL PRICE; AD2 JUSTED BASE PRICE; QUALIFIED INVEST3 MENT. 

4 ‘‘(a) GENERAL RULE.—For purposes of this chapter, 

5 the term ‘windfall profit’ means the excess of the removal 

6 price of the barrel of taxable crude oil over the adjusted 

7 base price of such barrel. 

8 ‘‘(b) REMOVAL PRICE.—For purposes of this chap9 ter— 

10 ‘‘(1) IN GENERAL.—Except as otherwise pro11 vided in this subsection, the term ‘removal price’ 

12 means the amount for which the barrel of taxable 

13 crude oil is sold. 

14 ‘‘(2) SALES BETWEEN RELATED PERSONS.—In 

15 the case of a sale between related persons, the re16 moval price shall not be less than the constructive 

17 sales price for purposes of determining gross income 

18 from the property under section 613. 

19 ‘‘(3) OIL REMOVED FROM PROPERTY BEFORE

20 SALE.—If crude oil is removed from the property be21 fore it is sold, the removal price shall be the con22 structive sales price for purposes of determining 

23 gross income from the property under section 613. 

24 ‘‘(4) REFINING BEGUN ON PROPERTY.—If the 

25 manufacture or conversion of crude oil into refined 
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1 products begins before such oil is removed from the 

2 property— 

3 ‘‘(A) such oil shall be treated as removed 

4 on the day such manufacture or conversion be5 gins, and 

6 ‘‘(B) the removal price shall be the con7 structive sales price for purposes of determining 

8 gross income from the property under section 

9 613. 

10 ‘‘(5) PROPERTY.—The term ‘property’ has the 

11 meaning given such term by section 614. 

12 ‘‘(c) ADJUSTED BASE PRICE DEFINED.— 

13 ‘‘(1) IN GENERAL.—For purposes of this chap14 ter, the term ‘adjusted base price’ means $40 for 

15 each barrel of taxable crude oil plus an amount 

16 equal to— 

17 ‘‘(A) such base price, multiplied by 

18 ‘‘(B) the inflation adjustment for the cal19 endar year in which the taxable crude oil is re20 moved from the property. 

21 The amount determined under the preceding sen22 tence shall be rounded to the nearest cent. 

23 ‘‘(2) INFLATION ADJUSTMENT.— 

24 ‘‘(A) IN GENERAL.—For purposes of para25 graph (1), the inflation adjustment for any cal-
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1 endar year after 2006 is the percentage by 

2 which— 

3 ‘‘(i) the implicit price deflator for the 

4 gross national product for the preceding 

5 calendar year, exceeds 

6 ‘‘(ii) such deflator for the calendar 

7 year ending December 31, 2005. 

8 ‘‘(B) FIRST REVISION OF PRICE DEFLATOR

9 USED.—For purposes of subparagraph (A), the 

10 first revision of the price deflator shall be used. 

11 ‘‘(d) QUALIFIED INVESTMENT.—For purposes of this 

12 chapter— 

13 ‘‘(1) IN GENERAL.—The term ‘qualified invest14 ment’ means any amount paid or incurred with re15 spect to— 

16 ‘‘(A) section 263(c) costs, 

17 ‘‘(B) qualified refinery property (as defined 

18 in section 179C(c) and determined without re19 gard to any termination date), 

20 ‘‘(C) any qualified facility described in 

21 paragraph (1), (2), (3), or (4) of section 45(d) 

22 (determined without regard to any placed in 

23 service date), 

24 ‘‘(D) any facility for the production of al25 cohol used as a fuel (within the meaning of sec-
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1 tion 40) or biodiesel or agri-biodiesel used as a 

2 fuel (within the meaning of section 40A). 

3 ‘‘(2) SECTION 263(c) COSTS.—For purposes of 

4 this subsection, the term ‘section 263(c) costs’ 

5 means intangible drilling and development costs in6 curred by the taxpayer which (by reason of an elec7 tion under section 263(c)) may be deducted as ex8 penses for purposes of this title (other than this 

9 paragraph). Such term shall not include costs in10 curred in drilling a nonproductive well. 

11 ‘‘SEC. 5898. SPECIAL RULES AND DEFINITIONS . 

12 ‘‘(a) WITHHOLDING AND DEPOSIT OF TAX.—The 

13 Secretary shall provide such rules as are necessary for the 

14 withholding and deposit of the tax imposed under section 

15 5896 on any taxable crude oil. 

16 ‘‘(b) RECORDS AND INFORMATION.—Each taxpayer 

17 liable for tax under section 5896 shall keep such records, 

18 make such returns, and furnish such information (to the 

19 Secretary and to other persons having an interest in the 

20 taxable crude oil) with respect to such oil as the Secretary 

21 may by regulations prescribe. 

22 ‘‘(c) RETURN OF WINDFALL PROFIT TAX.—The Sec23 retary shall provide for the filing and the time of such 

24 filing of the return of the tax imposed under section 5896. 

25 ‘‘(d) DEFINITIONS.—For purposes of this chapter— 
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1 ‘‘(1) PRODUCER.—The term ‘producer’ means 

2 the holder of the economic interest with respect to 

3 the crude oil. 

4 ‘‘(2) CRUDE OIL.— 

5 ‘‘(A) IN GENERAL.—The term ‘crude oil’ 

6 includes crude oil condensates and natural gas7 oline. 

8 ‘‘(B) EXCLUSION OF NEWLY DISCOVERED

9 OIL.—Such term shall not include any oil pro10 duced from a well drilled after the date of the 

11 enactment of the Windfall Profits Rebate Act of 

12 2005, except with respect to any oil produced 

13 from a well drilled after such date on any prov14 en oil or gas property (within the meaning of 

15 section 613A(c)(9)(A)). 

16 ‘‘(3) BARREL.—The term ‘barrel’ means 42 

17 United States gallons. 

18 ‘‘(e) ADJUSTMENT OF REMOVAL PRICE.—In deter19 mining the removal price of oil from a property in the case 

20 of any transaction, the Secretary may adjust the removal 

21 price to reflect clearly the fair market value of oil removed. 

22 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

23 such regulations as may be necessary or appropriate to 

24 carry out the purposes of this chapter. 
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1 ‘‘(g) TERMINATION.—This section shall not apply to 

2 taxable crude oil removed after the date which is 3 years 

3 after the date of the enactment of this section.’’. 

4 (b) CLERICAL AMENDMENT.—The table of chapters 

5 for subtitle E of the Internal Revenue Code of 1986 is 

6 amended by adding at the end the following new item: 

‘‘CHAPTER 56. Windfall Profit on Crude Oil.’’. 

7 (c) DEDUCTIBILITY OF WINDFALL PROFIT TAX.— 

8 The first sentence of section 164(a) of the Internal Rev9 enue Code of 1986 (relating to deduction for taxes) is 

10 amended by inserting after paragraph (5) the following 

11 new paragraph: 

12 ‘‘(6) The windfall profit tax imposed by section 

13 5896.’’. 

14 (d) EFFECTIVE DATE.— 

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

16 this section shall apply to crude oil removed after 

17 the date of the enactment of this Act, in taxable 

18 years ending after such date. 

19 (2) TRANSITIONAL RULES.—For the period 

20 ending December 31, 2005, the Secretary of the 

21 Treasury or the Secretary’s delegate shall prescribe 

22 rules relating to the administration of chapter 56 of 

23 the Internal Revenue Code of 1986. To the extent 

24 provided in such rules, such rules shall supplement 

25 or supplant for such period the administrative provi-
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1 sions contained in chapter 56 of such Code (or in so 

2 much of subtitle F of such Code as relates to such 

3 chapter 56). 

4 SEC. 3. ENERGY CONSUMER REBATE. 

5 (a) IN GENERAL.—Subchapter B of chapter 65 of the 

6 Internal Revenue Code of 1986 (relating to rules of special 

7 application in the case of abatements, credits, and re8 funds) is amended by adding at the end the following new 

9 section: 

10 ‘‘SEC. 6430. ENERGY CONSUMER REBATE. 

11 ‘‘(a) GENERAL RULE.—Except as otherwise provided 

12 in this section, each individual shall be treated as having 

13 made a payment against the tax imposed by chapter 1 for 

14 each taxable year beginning after December 31, 2005, in 

15 an amount equal to the lesser of— 

16 ‘‘(1) the amount of the taxpayer’s liability for 

17 tax for such taxpayer’s preceding taxable year, or 

18 ‘‘(2) the applicable amount. 

19 ‘‘(b) LIABILITY FOR TAX.—For purposes of this sec20 tion, the liability for tax for any taxable year shall be the 

21 excess (if any) of— 

22 ‘‘(1) the sum of— 

23 ‘‘(A) the taxpayer’s regular tax liability 

24 (within the meaning of section 26(b)) for the 

25 taxable year, 
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1 ‘‘(B) the tax imposed by section 55(a) with 

2 respect to such taxpayer for the taxable year, 

3 and 

4 ‘‘(C) the taxpayer’s social security taxes 

5 (within the meaning of section 24(d)(2)) for the 

6 taxable year, over 

7 ‘‘(2) the sum of the credits allowable under part 

8 IV of subchapter A of chapter 1 (other than the 

9 credits allowable under subpart C thereof, relating to 

10 refundable credits) for the taxable year. 

11 ‘‘(c) APPLICABLE AMOUNT.—For purposes of this 

12 section, the applicable amount for any taxpayer shall be 

13 determined by the Secretary not later than the date speci14 fied in subsection (d)(1) taking into account the number 

15 of such taxpayers and the amount of revenues in the 

16 Treasury resulting from the tax imposed by section 5896 

17 for the calendar year preceding the taxable year. 

18 ‘‘(d) DATE PAYMENT DEEMED MADE.— 

19 ‘‘(1) IN GENERAL.—The payment provided by 

20 this section shall be deemed made on February 1 of 

21 the calendar year ending with or within the taxable 

22 year. 

23 ‘‘(2) REMITTANCE OF PAYMENT.—The Sec24 retary shall remit to each taxpayer the payment de25 scribed in paragraph (1) not later that the date 
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1 which is 30 days after the date specified in para2 graph (1). 

3 ‘‘(e) CERTAIN PERSONS NOT ELIGIBLE.—This sec4 tion shall not apply to— 

5 ‘‘(1) any individual with respect to whom a de6 duction under section 151 is allowable to another 

7 taxpayer for a taxable year beginning in the cal8 endar year in which such individual’s taxable year 

9 begins, 

10 ‘‘(2) any estate or trust, or 

11 ‘‘(3) any nonresident alien individual.’’. 

12 (b) CONFORMING AMENDMENT.—Section 1324(b)(2) 

13 of title 31, United States Code, is amended by inserting 

14 before the period ‘‘, or enacted by the Windfall Profits 

15 Rebate Act of 2005’’. 

16 (c) CLERICAL AMENDMENT.—The table of sections 

17 for subchapter B of chapter 65 of the Internal Revenue 

18 Code of 1986 is amended by adding at the end the fol19 lowing new item: 

‘‘Sec. 6430. Energy consumer rebate.’’. 

20 (d) EFFECTIVE DATE.—The amendments made by 

21 this section shall take effect on the date of the enactment 

22 of this Act. 

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