I 

112TH CONGRESS 

1ST SESSION H. R. 2003 

To amend the Internal Revenue Code of 1986 to impose a tax on transactions 

in oil futures, options, and swaps, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 26, 2011 

Mr. DEFAZIO (for himself, Mr. BRALEY of Iowa, and Mr. HOLT) introduced 

the following bill; which was referred to the Committee on Ways and 

Means, and in addition to the Committee on Agriculture, for a period to 

be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee 

concerned 

A BILL 

To amend the Internal Revenue Code of 1986 to impose 

a tax on transactions in oil futures, options, and swaps, 

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; FINDINGS. 

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

5 ‘‘Taxing Speculators out of the Oil Market Act’’. 

6 (b) FINDINGS.—Congress finds the following: 


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1 (1) The price of oil has risen and fallen dra2 matically over the last decade without a clear con3 nection to the laws of supply and demand. 

4 (2) The price of a barrel of oil predictably 

5 stayed beneath $20 a barrel of oil for decades. In 

6 the beginning of 1999, the price was under $10 a 

7 barrel of oil, but since then the oil market has been 

8 plagued by speculation and fluctuated wildly. 

9 (3) In late 2004, the price of oil exceeded $40 

10 a barrel of oil, up 400 percent in 5 years. 

11 (4) In late 2007, the price exceeded $80 a bar12 rel of oil, up 800 percent in 8 years. 

13 (5) In mid 2008, the price of oil peaked at 

14 $145 a barrel, up 1,450 percent in under ten years. 

15 (6) The price of oil collapsed in 2008 to just 

16 over $30 a barrel of oil. 

17 (7) By early 2011, the price of oil rebounded to 

18 almost $115 per barrel of oil. 

19 (8) These large price swings coincide with drop 

20 in demand since 2005. In 2010, the United States 

21 consumed 2.1 million barrels of oil per day less than 

22 it did 6 years ago. 

23 (9) Many economists have attributed this irra24 tional behavior of the oil market to the large in25 crease in speculative trading in oil derivatives. 


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1 (10) A transaction tax on speculative trading 

2 can deter short-term speculation which will reduce 

3 the volatility and price of oil. 

4 SEC. 2. TAX ON TRANSACTIONS IN OIL FUTURES, OPTIONS, 

5 AND SWAPS. 

6 (a) IN GENERAL.—Chapter 36 of the Internal Rev7 enue Code of 1986 is amended by inserting after sub8 chapter B the following new subchapter: 

9 ‘‘Subchapter C—Tax on Transactions in Oil 

10 Futures, Options, and Swaps 

‘‘Sec. 4475. Tax on transactions in oil futures, options, and swaps. 

11 ‘‘SEC. 4475. TAX ON TRANSACTIONS IN OIL FUTURES, OP12 TIONS, AND SWAPS. 

13 ‘‘(a) IMPOSITION OF TAX.— 

14 ‘‘(1) FUTURES.—There is hereby imposed a tax 

15 on each covered transaction in an oil futures con16 tract of 0.01 percent of the value of the futures in17 struments involved in such transaction. 

18 ‘‘(2) OPTIONS.—There is hereby imposed a tax 

19 on each covered transaction in an oil option of 0.01 

20 percent of the premium paid on the option for a fu21 tures instruments involved in such transaction. 

22 ‘‘(3) SWAPS.—There is hereby imposed a tax on 

23 each covered transaction in an oil swap of 0.01 per24 cent of the value of the underlying assets involved in 


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1 such transaction for each year until the swap con2 tact maturity. 

3 ‘‘(b) BY WHOM PAID.— 

4 ‘‘(1) IN GENERAL.—The tax imposed by this 

5 section shall be paid by— 

6 ‘‘(A) the trading facility on which the 

7 transaction occurs, or 

8 ‘‘(B) if such transaction does not occur on 

9 a trading facility, by the buyer of the trans10 action. 

11 ‘‘(2) WITHHOLDING IF BUYER NOT UNITED

12 STATES PERSON.—See section 1447 for withholding 

13 by seller if buyer is a foreign person. 

14 ‘‘(c) EXCEPTION FOR COMMERCIAL TRADERS.—The 

15 tax imposed by this section shall not apply to any trans16 action if— 

17 ‘‘(1) either party to the transaction is— 

18 ‘‘(A) classified by the Commodity Futures 

19 Trading Commission as a commercial trader 

20 with respect to oil, or 

21 ‘‘(B) a financial institution acting on be22 half of such a party (but only if the financial 

23 institution does not at any time acquire owner24 ship of the security), and 


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1 ‘‘(2) the transaction is a bona fide hedging 

2 transaction (within the meaning of section 4a(c) of 

3 the Commodity Exchange Act). 

4 ‘‘(d) DEFINITIONS.—For purposes of this section— 

5 ‘‘(1) COVERED TRANSACTION.—The term ‘cov6 ered transaction’ means any purchase or sale of an 

7 oil futures contract, an oil option or oil swap con8 tract if— 

9 ‘‘(A) such purchase or sale on a trading fa10 cility is located in the United States, or 

11 ‘‘(B) the purchaser or seller is a United 

12 States person. 

13 ‘‘(2) OIL FUTURES CONTRACT.—The term ‘oil 

14 futures contract’ means any contract of sale of oil 

15 for future delivery (within the meaning of the Com16 modity Exchange Act). 

17 ‘‘(3) OIL OPTION.—The term ‘oil option’ means 

18 any option on an oil futures transaction. 

19 ‘‘(4) OIL SWAP CONTRACT.—The term ‘oil swap 

20 contract’ means any contract of sale of oil involving 

21 a swap. 

22 ‘‘(5) TRADING FACILITY.—The term ‘trading 

23 facility’ has the meaning given to such term by the 

24 Commodity Exchange Act. 


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1 ‘‘(e) ADMINISTRATION.—The Secretary shall carry 

2 out this section in consultation with the Commodity Fu3 tures Trading Commission.’’. 

4 (b) WITHHOLDING.—Subchapter A of chapter 3 of 

5 such Code is amended by adding at the end the following 

6 new section: 

7 ‘‘SEC. 1447. WITHHOLDING OF TAX ON TRANSACTIONS IN 

8 OIL FUTURES, OPTIONS, AND SWAPS. 

9 ‘‘In the case of any acquisition of an oil futures con10 tract, an oil option, or an oil swap contract (as such terms 

11 are defined in section 4475) by a foreign person, the 

12 transferor shall be required to deduct and withhold a tax 

13 equal to the tax which would be imposed on such acquisi14 tion under section 4475 if the transferee were a United 

15 States person.’’. 

16 (c) CLERICAL AMENDMENTS.— 

17 (1) The table of subchapters for chapter 36 of 

18 such Code is amended by inserting after the item re19 lating to subchapter B the following new item: 

‘‘SUBCHAPTER C. TAX ON TRANSACTIONS IN OIL FUTURES, OPTIONS, AND

SWAPS.’’. 

20 (2) The table of sections for subchapter A of 

21 chapter 3 of such Code is amended by adding at the 

22 end the following new section: 

‘‘Sec. 1447. Withholding of tax on transactions in oil futures, options, and 

swaps.’’. 


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

2 this section shall apply to transactions occurring on or 

3 after 90 days after the date of the enactment of this Act. 

4 SEC. 3. AVAILABILITY TO THE COMMODITY FUTURES TRAD5 ING COMMISSION OF REVENUE FROM TAXES 

6 ON TRANSACTIONS IN OIL FUTURES, OP7 TIONS, AND SWAPS. 

8 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

9 is amended by inserting after section 10 the following: 

10 ‘‘SEC. 11. AVAILABILITY TO THE COMMISSION OF REVENUE 

11 FROM TAXES ON TRANSACTIONS IN OIL FU12 TURES, OPTIONS, AND SWAPS. 

13 ‘‘(a) TAX REVENUE DEPOSITED AS OFFSETTING

14 COLLECTIONS TO CFTC APPROPRIATIONS ACCOUNT.— 

15 All taxes collected pursuant to sections 4475 and 1447 

16 of the Internal Revenue Code of 1986 for any fiscal year 

17 shall be deposited and credited as offsetting collections to 

18 the account providing appropriations to the Commission. 

19 ‘‘(b) USE OF UNEXPENDED FUNDS FOR PUBLIC

20 DEBT REDUCTION.—Any amount credited under para21 graph (1) that remains unexpended as of the end of any 

22 fiscal year shall be transferred to the Treasury and used 

23 to reduce the public debt of the United States.’’. 


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1 SEC. 4. DUTIES OF COMMODITY FUTURES TRADING COM2 MISSION. 

3 The Commodity Futures Trading Commission (re4 ferred to in this section as the ‘‘Commission’’) shall use 

5 the authority of the Commission, including the emergency 

6 authority of the Commission— 

7 (1) to subject each bank holding company (as 

8 defined in section 2(a) of the Bank Holding Com9 pany Act of 1956) that engages in trading subject 

10 to section 4475 of the Internal Revenue Code of 

11 1986, and each hedge fund (as defined in section 

12 13(h)(2) of the Bank Holding Company Act of 

13 1956) that buys or sells a contract of sale of oil for 

14 future delivery (within the meaning of the Com15 modity Exchange Act) for its own account or on be16 half of a third party, to the rules applicable to non17 commercial participants in the markets for the con18 tracts; and 

19 (2) to revoke immediately each staff no-action 

20 letter that covers a foreign board of trade that— 

21 (A) has established a trading terminal in 

22 the United States for the purpose of selling the 

23 contracts to, or buying the contracts from, 

24 United States investors; and 


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1 (B) engages in trading subject to such sec2 tion 4475. 

Æ 


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