I 

113TH CONGRESS 

1ST SESSION H. R. 601 

To direct the Secretary of the Interior to establish an annual production 

incentive fee with respect to Federal onshore and offshore lands that 

are subject to a lease for production of oil or natural gas under which 

production is not occurring, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 8, 2013 

Mr. MARKEY (for himself and Mr. BLUMENAUER) introduced the following 

bill; which was referred to the Committee on Natural Resources, and in 

addition to the Committee on Ways and Means, 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 direct the Secretary of the Interior to establish an annual 

production incentive fee with respect to Federal onshore 

and offshore lands that are subject to a lease for production of oil or natural gas under which production is 

not occurring, 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 ‘‘Permanent Repeal of 

5 Oil Subsidies Act’’. 


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1 SEC. 2. TABLE OF CONTENTS. 

2 The table of contents for this Act is as follows: 

Sec. 1. Short title. 

Sec. 2. Table of contents. 

TITLE I—USE IT ACT 

Sec. 101. Short title. 

Sec. 102. Production incentive fee. 

TITLE II—DEFICIT REDUCTION THROUGH FAIR OIL ROYALTIES 

Sec. 201. Short title. 

Sec. 202. Eligibility for new leases and the transfer of leases. 

Sec. 203. Price thresholds for royalty suspension provisions. 

Sec. 204. Repeal of royalty relief provisions. 

TITLE III—OCS FACILITY INSPECTIONS 

Sec. 301. Short title. 

Sec. 302. OCS facility inspection fees. 

TITLE IV—REPEAL OF FOSSIL FUEL SUBSIDIES FOR LARGE OIL 

COMPANIES 

Sec. 401. Short title. 

Sec. 402. Amortization of geological and geophysical expenditures. 

Sec. 403. Producing oil and gas from marginal wells. 

Sec. 404. Enhanced oil recovery credit. 

Sec. 405. Intangible drilling and development costs in the case of oil and gas 

wells. 

Sec. 406. Percentage depletion. 

Sec. 407. Tertiary injectants. 

Sec. 408. Passive activity losses and credits limited. 

Sec. 409. Income attributable to domestic production activities. 

Sec. 410. Prohibition on using last-in, first-out accounting for major integrated 

oil companies. 

Sec. 411. Modifications of foreign tax credit rules applicable to dual capacity 

taxpayers. 

3 TITLE I—USE IT ACT 

4 SEC. 101. SHORT TITLE. 

5 This title may be cited as the ‘‘United States Explo6 ration on Idle Tracts Act’’ or the ‘‘USE IT Act’’. 

7 SEC. 102. PRODUCTION INCENTIVE FEE. 

8 (a) ESTABLISHMENT.—The Secretary of the Interior 

9 shall, within 180 days after the date of enactment of this 


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1 Act, issue regulations to establish an annual production 

2 incentive fee with respect to Federal onshore and offshore 

3 lands that are subject to a lease for production of oil or 

4 natural gas under which production is not occurring. Such 

5 fee shall apply with respect to lands that are subject to 

6 such a lease that is in effect on the date final regulations 

7 are promulgated under this subsection or that is issued 

8 thereafter. 

9 (b) AMOUNT.—The amount of the fee shall be, for 

10 each acre of land from which oil or natural gas is produced 

11 for less than 90 days in a calendar year— 

12 (1) in the case of onshore land— 

13 (A) for each of the first 3 years of the 

14 lease, $4 per acre in 2011 dollars; 

15 (B) for the fourth year of the lease, $6 per 

16 acre in 2011 dollars; and 

17 (C) for the fifth year of the lease and each 

18 year thereafter for which the lease is otherwise 

19 in effect, $8 per acre in 2011 dollars; and 

20 (2) in the case of offshore land— 

21 (A) for each of the third, fourth, and fifth 

22 years of the lease, $4 per acre in 2011 dollars; 

23 (B) for the sixth year of the lease, $6 per 

24 acre in 2011 dollars; and 


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1 (C) for the seventh year of the lease and 

2 each year thereafter for which the lease is oth3 erwise in effect, $8 per acre in 2011 dollars. 

4 (c) ASSESSMENT AND COLLECTION.—The Secretary 

5 shall assess and collect the fee established under this sec6 tion. 

7 (d) DEPOSIT.—Amounts received by the United 

8 States as the fee under this section shall be deposited in 

9 the general fund of the Treasury. 

10 (e) REGULATIONS.—The Secretary of the Interior 

11 may issue regulations to prevent evasion of the fee under 

12 this section. 

13 TITLE II—DEFICIT REDUCTION 

14 THROUGH FAIR OIL ROYALTIES 

15 SEC. 201. SHORT TITLE. 

16 This title may be cited as the ‘‘Deficit Reduction 

17 Through Fair Oil Royalties Act’’. 

18 SEC. 202. ELIGIBILITY FOR NEW LEASES AND THE TRANS19 FER OF LEASES. 

20 (a) ISSUANCE OF NEW LEASES.— 

21 (1) IN GENERAL.—The Secretary shall not 

22 issue any new lease that authorizes the production 

23 of oil or natural gas under the Outer Continental 

24 Shelf Lands Act (43 U.S.C. 1331 et seq.) to a per25 son described in paragraph (2) unless the person has 


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1 renegotiated each covered lease with respect to which 

2 the person is a lessee, to modify the payment re3 sponsibilities of the person to require the payment of 

4 royalties if the price of oil and natural gas is greater 

5 than or equal to the price thresholds described in 

6 clauses (v) through (vii) of section 8(a)(3)(C) of the 

7 Outer Continental Shelf Lands Act (43 U.S.C. 

8 1337(a)(3)(C)). 

9 (2) PERSONS DESCRIBED.—A person referred 

10 to in paragraph (1) is a person that— 

11 (A) is a lessee that— 

12 (i) holds a covered lease on the date 

13 on which the Secretary considers the 

14 issuance of the new lease; or 

15 (ii) was issued a covered lease before 

16 the date of enactment of this Act, but 

17 transferred the covered lease to another 

18 person or entity (including a subsidiary or 

19 affiliate of the lessee) after the date of en20 actment of this Act; or 

21 (B) any other person that has any direct 

22 or indirect interest in, or that derives any ben23 efit from, a covered lease. 

24 (3) MULTIPLE LESSEES.— 


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1 (A) IN GENERAL.—For purposes of para2 graph (1), if there are multiple lessees that own 

3 a share of a covered lease, the Secretary may 

4 implement separate agreements with any lessee 

5 with a share of the covered lease that modifies 

6 the payment responsibilities with respect to the 

7 share of the lessee to include price thresholds 

8 that are equal to or less than the price thresh9 olds described in clauses (v) through (vii) of 

10 section 8(a)(3)(C) of the Outer Continental 

11 Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)). 

12 (B) TREATMENT OF SHARE AS COVERED

13 LEASE.—Beginning on the effective date of an 

14 agreement under subparagraph (A), any share 

15 subject to the agreement shall not constitute a 

16 covered lease with respect to any lessees that 

17 entered into the agreement. 

18 (b) TRANSFERS.—A lessee or any other person who 

19 has any direct or indirect interest in, or who derives a 

20 benefit from, a lease shall not be eligible to obtain by sale 

21 or other transfer (including through a swap, spinoff, serv22 icing, or other agreement) any covered lease, the economic 

23 benefit of any covered lease, or any other lease for the 

24 production of oil or natural gas in the Gulf of Mexico 


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1 under the Outer Continental Shelf Lands Act (43 U.S.C. 

2 1331 et seq.), unless the lessee or other person has— 

3 (1) renegotiated each covered lease with respect 

4 to which the lessee or person is a lessee, to modify 

5 the payment responsibilities of the lessee or person 

6 to include price thresholds that are equal to or less 

7 than the price thresholds described in clauses (v) 

8 through (vii) of section 8(a)(3)(C) of the Outer Con9 tinental Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)); 

10 or 

11 (2) entered into an agreement with the Sec12 retary to modify the terms of all covered leases of 

13 the lessee or other person to include limitations on 

14 royalty relief based on market prices that are equal 

15 to or less than the price thresholds described in 

16 clauses (v) through (vii) of section 8(a)(3)(C) of the 

17 Outer Continental Shelf Lands Act (43 U.S.C. 

18 1337(a)(3)(C)). 

19 (c) USE OF AMOUNTS FOR DEFICIT REDUCTION.— 

20 Notwithstanding any other provision of law, any amounts 

21 received by the United States as rentals or royalties under 

22 covered leases shall be deposited in the Treasury and used 

23 for Federal budget deficit reduction or, if there is no Fed24 eral budget deficit, for reducing the Federal debt in such 


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1 manner as the Secretary of the Treasury considers appro2 priate. 

3 (d) DEFINITIONS.—In this section— 

4 (1) COVERED LEASE.—The term ‘‘covered 

5 lease’’ means a lease for oil or gas production in the 

6 Gulf of Mexico that is— 

7 (A) in existence on the date of enactment 

8 of this Act; 

9 (B) issued by the Department of the Inte10 rior under section 304 of the Outer Continental 

11 Shelf Deep Water Royalty Relief Act (43 

12 U.S.C. 1337 note; Public Law 104–58); and 

13 (C) not subject to limitations on royalty re14 lief based on market price that are equal to or 

15 less than the price thresholds described in 

16 clauses (v) through (vii) of section 8(a)(3)(C) of 

17 the Outer Continental Shelf Lands Act (43 

18 U.S.C. 1337(a)(3)(C)). 

19 (2) LESSEE.—The term ‘‘lessee’’ includes any 

20 person or other entity that controls, is controlled by, 

21 or is in or under common control with, a lessee. 

22 (3) SECRETARY.—The term ‘‘Secretary’’ means 

23 the Secretary of the Interior. 


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1 SEC. 203. PRICE THRESHOLDS FOR ROYALTY SUSPENSION 

2 PROVISIONS. 

3 The Secretary of the Interior shall agree to a request 

4 by any lessee to amend any lease issued for any Central 

5 and Western Gulf of Mexico tract in the period of January 

6 1, 1996, through November 28, 2000, to incorporate price 

7 thresholds applicable to royalty suspension provisions, that 

8 are equal to or less than the price thresholds described 

9 in clauses (v) through (vii) of section 8(a)(3)(C) of the 

10 Outer Continental Shelf Lands Act (43 U.S.C. 

11 1337(a)(3)(C)). Any amended lease shall impose the new 

12 or revised price thresholds effective October 1, 2013. Ex13 isting lease provisions shall prevail through September 30, 

14 2013. 

15 SEC. 204. REPEAL OF ROYALTY RELIEF PROVISIONS. 

16 (a) REPEAL OF PROVISIONS OF ENERGY POLICY ACT

17 OF 2005.—The following provisions of the Energy Policy 

18 Act of 2005 (Public Law 109–58) are repealed: 

19 (1) Section 344 (42 U.S.C. 15904; relating to 

20 incentives for natural gas production from deep wells 

21 in shallow waters of the Gulf of Mexico). 

22 (2) Section 345 (42 U.S.C. 15905; relating to 

23 royalty relief for deep water production in the Gulf 

24 of Mexico). 

25 (b) REPEAL OF PROVISIONS RELATING TO PLAN26 NING AREAS OFFSHORE ALASKA.—Section 8(a)(3)(B) of 


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1 the Outer Continental Shelf Lands Act (43 U.S.C. 

2 1337(a)(3)(B)) is amended by striking ‘‘and in the Plan3 ning Areas offshore Alaska’’. 

4 TITLE III—OCS FACILITY 

5 INSPECTIONS 

6 SEC. 301. SHORT TITLE. 

7 This title may be cited as the ‘‘No Free Inspections 

8 for Oil Companies Act’’. 

9 SEC. 302. OCS FACILITY INSPECTION FEES. 

10 Section 22 of the Outer Continental Shelf Lands Act 

11 (43 U.S.C. 1348) is amended by adding at the end of the 

12 section the following: 

13 ‘‘(g) INSPECTION FEES.— 

14 ‘‘(1) ESTABLISHMENT.—The Secretary of the 

15 Interior shall establish, by rule, and collect from the 

16 operators of facilities subject to inspection under 

17 subsection (c) nonrefundable fees for such inspec18 tions— 

19 ‘‘(A) at an aggregate level equal to the 

20 amount necessary to offset the annual expenses 

21 of inspections of outer Continental Shelf facili22 ties (including mobile offshore drilling units) by 

23 the Department of the Interior; and 


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1 ‘‘(B) using a schedule that reflects the dif2 ferences in complexity among the classes of fa3 cilities to be inspected. 

4 ‘‘(2) OCEAN ENERGY ENFORCEMENT FUND.— 

5 There is established in the Treasury a fund, to be 

6 known as the ‘Ocean Energy Enforcement Fund’ 

7 (referred to in this subsection as the ‘Fund’), into 

8 which shall be deposited amounts collected as fees 

9 under paragraph (1) and which shall be available as 

10 provided under paragraph (3). 

11 ‘‘(3) AVAILABILITY OF FEES.—Notwithstanding 

12 section 3302 of title 31, United States Code, all 

13 amounts collected by the Secretary under this sec14 tion— 

15 ‘‘(A) shall be credited as offsetting collec16 tions; 

17 ‘‘(B) shall be available for expenditure only 

18 for purposes of carrying out inspections of 

19 outer Continental Shelf facilities (including mo20 bile offshore drilling units) and the administra21 tion of the inspection program under this sec22 tion; 

23 ‘‘(C) shall be available only to the extent 

24 provided for in advance in an appropriations 

25 Act; and 


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1 ‘‘(D) shall remain available until expended. 

2 ‘‘(4) ANNUAL REPORTS.— 

3 ‘‘(A) IN GENERAL.—Not later than 60 

4 days after the end of each fiscal year beginning 

5 with fiscal year 2013, the Secretary shall sub6 mit to the Committee on Energy and Natural 

7 Resources of the Senate and the Committee on 

8 Natural Resources of the House of Representa9 tives a report on the operation of the Fund dur10 ing the fiscal year. 

11 ‘‘(B) CONTENTS.—Each report shall in12 clude, for the fiscal year covered by the report, 

13 the following: 

14 ‘‘(i) A statement of the amounts de15 posited into the Fund. 

16 ‘‘(ii) A description of the expenditures 

17 made from the Fund for the fiscal year, in18 cluding the purpose of the expenditures. 

19 ‘‘(iii) Recommendations for additional 

20 authorities to fulfill the purpose of the 

21 Fund. 

22 ‘‘(iv) A statement of the balance re23 maining in the Fund at the end of the fis24 cal year.’’. 


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1 TITLE IV—REPEAL OF FOSSIL 

2 FUEL SUBSIDIES FOR LARGE 

3 OIL COMPANIES 

4 SEC. 401. SHORT TITLE. 

5 This Act may be cited as the ‘‘End Big Oil Tax Sub6 sidies Act of 2013’’. 

7 SEC. 402. AMORTIZATION OF GEOLOGICAL AND GEO8 PHYSICAL EXPENDITURES. 

9 (a) IN GENERAL.—Subparagraph (A) of section 

10 167(h)(5) of the Internal Revenue Code of 1986 is amend11 ed by striking ‘‘major integrated oil company’’ and insert12 ing ‘‘covered large oil company’’. 

13 (b) COVERED LARGE OIL COMPANY.—Paragraph (5) 

14 of section 167(h) of such Act is amended by redesignating 

15 subparagraph (B) as subparagraph (C) and by inserting 

16 after subparagraph (A) the following new subparagraph: 

17 ‘‘(B) COVERED LARGE OIL COMPANY.— 

18 For purposes of this paragraph, the term ‘cov19 ered large oil company’ means a taxpayer 

20 which— 

21 ‘‘(i) is a major integrated oil com22 pany, or 

23 ‘‘(ii) has gross receipts in excess of 

24 $50,000,000 for the taxable year. 


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1 For purposes of clause (ii), all persons treated 

2 as a single employer under subsections (a) and 

3 (b) of section 52 shall be treated as 1 person.’’. 

4 (c) CONFORMING AMENDMENT.—The heading for 

5 paragraph (5) of section 167(h) of such Code is amended 

6 by inserting ‘‘AND OTHER LARGE TAXPAYERS’’. 

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

8 this section shall apply to amounts paid or incurred in tax9 able years beginning after December 31, 2012. 

10 SEC. 403. PRODUCING OIL AND GAS FROM MARGINAL 

11 WELLS. 

12 (a) IN GENERAL.—Section 45I of the Internal Rev13 enue Code of 1986 is amended by adding at the end the 

14 following new subsection: 

15 ‘‘(e) EXCEPTION FOR TAXPAYER WITH GROSS RE16 CEIPTS IN EXCESS OF $50,000,000.— 

17 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

18 apply to any taxpayer whose aggregate gross re19 ceipts for the taxable year are in excess of 

20 $50,000,000. 

21 ‘‘(2) AGGREGATION RULE.—For purposes of 

22 paragraph (1), all persons treated as a single em23 ployer under subsections (a) and (b) of section 52 

24 shall be treated as 1 person.’’. 


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

2 subsection (a) shall apply to credits determined for taxable 

3 years beginning after December 31, 2012. 

4 SEC. 404. ENHANCED OIL RECOVERY CREDIT. 

5 (a) IN GENERAL.—Section 43 of the Internal Rev6 enue Code of 1986 is amended by adding at the end the 

7 following new subsection: 

8 ‘‘(f) EXCEPTION FOR TAXPAYER WITH GROSS RE9 CEIPTS IN EXCESS OF $50,000,000.— 

10 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

11 apply to any taxpayer whose aggregate gross re12 ceipts for the taxable year are in excess of 

13 $50,000,000. 

14 ‘‘(2) AGGREGATION RULE.—For purposes of 

15 paragraph (1), all persons treated as a single em16 ployer under subsections (a) and (b) of section 52 

17 shall be treated as 1 person.’’. 

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

19 this section shall apply to amounts paid or incurred in tax20 able years beginning after December 31, 2012. 

21 SEC. 405. INTANGIBLE DRILLING AND DEVELOPMENT 

22 COSTS IN THE CASE OF OIL AND GAS WELLS. 

23 (a) IN GENERAL.—Subsection (c) of section 263 of 

24 the Internal Revenue Code of 1986 is amended by adding 

25 at the end the following new sentence: ‘‘This subsection 


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1 shall not apply to amounts paid or incurred by a taxpayer 

2 in any taxable year in which such taxpayer has aggregate 

3 gross receipts for the taxable year in excess of 

4 $50,000,000, determined by deeming all persons treated 

5 as a single employer under subsections (a) and (b) of sec6 tion 52 as 1 person.’’. 

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

8 this section shall apply to amounts paid or incurred in tax9 able years beginning after December 31, 2012. 

10 SEC. 406. PERCENTAGE DEPLETION. 

11 (a) IN GENERAL.—Section 613A of the Internal Rev12 enue Code of 1986 is amended by adding at the end the 

13 following new subsection: 

14 ‘‘(f) EXCEPTION FOR TAXPAYER WITH GROSS RE15 CEIPTS IN EXCESS OF $50,000,000.— 

16 ‘‘(1) IN GENERAL.—This section and section 

17 611 shall not apply to any taxpayer which has ag18 gregate gross receipts for the taxable year in excess 

19 of $50,000,000. 

20 ‘‘(2) AGGREGATION RULE.—For purposes of 

21 paragraph (1), all persons treated as a single em22 ployer under subsections (a) and (b) of section 52 

23 shall be treated as 1 person.’’. 


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1 (b) CONFORMING AMENDMENT.—Section 613A(c)(1) 

2 of such Code is amended by striking ‘‘subsection (d)’’ and 

3 inserting ‘‘subsections (d) and (f)’’. 

4 (c) EFFECTIVE DATE.—The amendment made by 

5 this section shall apply to taxable years beginning after 

6 December 31, 2012. 

7 SEC. 407. TERTIARY INJECTANTS. 

8 (a) IN GENERAL.—Section 193 of the Internal Rev9 enue Code of 1986 is amended by adding at the end the 

10 following new subsection: 

11 ‘‘(d) EXCEPTION FOR TAXPAYER WITH GROSS RE12 CEIPTS IN EXCESS OF $50,000,000.— 

13 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

14 apply to any taxpayer which has aggregate gross re15 ceipts for the taxable year in excess of $50,000,000. 

16 ‘‘(2) AGGREGATION RULE.—For purposes of 

17 paragraph (1), all persons treated as a single em18 ployer under subsections (a) and (b) of section 52 

19 shall be treated as 1 person.’’. 

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

21 this section shall apply to expenses incurred after Decem22 ber 31, 2012. 


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1 SEC. 408. PASSIVE ACTIVITY LOSSES AND CREDITS LIM2 ITED. 

3 (a) RULES RELATING TO WORKING INTERESTS IN

4 OIL AND GAS PROPERTY.—Paragraph (3) of section 

5 469(c) of the Internal Revenue Code of 1986 is amended 

6 by adding at the end the following: 

7 ‘‘(C) EXCEPTION FOR TAXPAYER WITH

8 GROSS RECEIPTS IN EXCESS OF $50,000,000.— 

9 ‘‘(i) IN GENERAL.—Subparagraph (A) 

10 shall not apply to any taxpayer which has 

11 aggregate gross receipts for the taxable 

12 year in excess of $50,000,000. 

13 ‘‘(ii) AGGREGATION RULE.—For pur14 poses of clause (i), all persons treated as 

15 a single employer under subsections (a) 

16 and (b) of section 52 shall be treated as 1 

17 person.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2012. 

21 SEC. 409. INCOME ATTRIBUTABLE TO DOMESTIC PRODUC22 TION ACTIVITIES. 

23 (a) DENIAL OF DEDUCTION.—Paragraph (4) of sec24 tion 199(c) of the Internal Revenue Code of 1986 is 

25 amended by adding at the end the following new subpara26 graph: 


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1 ‘‘(E) SPECIAL RULE FOR CERTAIN OIL

2 AND GAS INCOME.—In the case of any taxpayer 

3 who is a major integrated oil company (as de4 fined in section 167(h)) for the taxable year, 

5 the term ‘domestic production gross receipts’ 

6 shall not include gross receipts from the pro7 duction, transportation, or distribution of oil, 

8 natural gas, or any primary product (within the 

9 meaning of subsection (d)(9)) thereof.’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2012. 

13 SEC. 410. PROHIBITION ON USING LAST-IN, FIRST-OUT AC14 COUNTING FOR MAJOR INTEGRATED OIL 

15 COMPANIES. 

16 (a) IN GENERAL.—Section 472 of the Internal Rev17 enue Code of 1986 is amended by adding at the end the 

18 following new subsection: 

19 ‘‘(h) MAJOR INTEGRATED OIL COMPANIES.—Not20 withstanding any other provision of this section, a major 

21 integrated oil company (as defined in section 167(h)) may 

22 not use the method provided in subsection (b) in 

23 inventorying of any goods.’’. 

24 (b) EFFECTIVE DATE AND SPECIAL RULE.— 


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

2 subsection (a) shall apply to taxable years beginning 

3 after December 31, 2012. 

4 (2) CHANGE IN METHOD OF ACCOUNTING.—In 

5 the case of any taxpayer required by the amendment 

6 made by this section to change its method of ac7 counting for its first taxable year beginning after the 

8 date of the enactment of this Act— 

9 (A) such change shall be treated as initi10 ated by the taxpayer, 

11 (B) such change shall be treated as made 

12 with the consent of the Secretary of the Treas13 ury, and 

14 (C) the net amount of the adjustments re15 quired to be taken into account by the taxpayer 

16 under section 481 of the Internal Revenue Code 

17 of 1986 shall be taken into account ratably over 

18 a period (not greater than 8 taxable years) be19 ginning with such first taxable year. 

20 SEC. 411. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 

21 APPLICABLE TO DUAL CAPACITY TAXPAYERS. 

22 (a) IN GENERAL.—Section 901 of the Internal Rev23 enue Code of 1986 is amended by redesignating subsection 

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

25 the following new subsection: 


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1 ‘‘(n) SPECIAL RULES RELATING TO MAJOR INTE2 GRATED OIL COMPANIES WHICH ARE DUAL CAPACITY

3 TAXPAYERS.— 

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

5 other provision of this chapter, any amount paid or 

6 accrued by a dual capacity taxpayer which is a 

7 major integrated oil company (as defined in section 

8 167(h)) to a foreign country or possession of the 

9 United States for any period shall not be considered 

10 a tax— 

11 ‘‘(A) if, for such period, the foreign coun12 try or possession does not impose a generally 

13 applicable income tax, or 

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

15 the amount (determined in accordance with reg16 ulations) which— 

17 ‘‘(i) is paid by such dual capacity tax18 payer pursuant to the generally applicable 

19 income tax imposed by the country or pos20 session, or 

21 ‘‘(ii) would be paid if the generally ap22 plicable income tax imposed by the country 

23 or possession were applicable to such dual 

24 capacity taxpayer. 


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1 Nothing in this paragraph shall be construed to 

2 imply the proper treatment of any such amount not 

3 in excess of the amount determined under subpara4 graph (B). 

5 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur6 poses of this subsection, the term ‘dual capacity tax7 payer’ means, with respect to any foreign country or 

8 possession of the United States, a person who— 

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

10 possession, and 

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

12 indirectly a specific economic benefit (as deter13 mined in accordance with regulations) from 

14 such country or possession. 

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

16 For purposes of this subsection— 

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

18 applicable income tax’ means an income tax (or 

19 a series of income taxes) which is generally im20 posed under the laws of a foreign country or 

21 possession on income derived from the conduct 

22 of a trade or business within such country or 

23 possession. 


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

2 include a tax unless it has substantial applica3 tion, by its terms and in practice, to— 

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

5 taxpayers, and 

6 ‘‘(ii) persons who are citizens or resi7 dents of the foreign country or posses8 sion.’’. 

9 (b) EFFECTIVE DATE.— 

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

11 this section shall apply to taxes paid or accrued in 

12 taxable years beginning after December 31, 2012. 

13 (2) CONTRARY TREATY OBLIGATIONS

14 UPHELD.—The amendments made by this section 

15 shall not apply to the extent contrary to any treaty 

16 obligation of the United States. 

Æ 


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