II 

Calendar No. 42 

112TH CONGRESS 

1ST SESSION S. 940 

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

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 10, 2011 

Mr. MENENDEZ (for himself, Mrs. MCCASKILL, Mr. TESTER, Mr. BROWN of 

Ohio, Mr. REID, Mr. DURBIN, Mr. SCHUMER, Mrs. MURRAY, Mr. LEAHY, 

Mr. REED, Mr. NELSON of Florida, Mr. LAUTENBERG, Mr. 

WHITEHOUSE, Mrs. BOXER, Ms. MIKULSKI, Mrs. GILLIBRAND, Mr. 

COONS, Mr. ROCKEFELLER, Mr. BLUMENTHAL, Mr. FRANKEN, Mr. 

CARDIN, Ms. STABENOW, Mr. MERKLEY, Mr. JOHNSON of South Dakota, 

Mr. SANDERS, Mrs. SHAHEEN, Mrs. FEINSTEIN, and Ms. KLOBUCHAR) 

introduced the following bill; which was read the first time 

MAY 11, 2011 

Read the second time and placed on the calendar 

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, 


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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

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

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

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

Sec. 3. Sense of Senate on high gas prices. 

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. 

Sec. 102. Limitation on section 199 deduction attributable to oil, natural gas, 

or primary products thereof. 

Sec. 103. Limitation on deduction for intangible drilling and development costs. 

Sec. 104. Limitation on percentage depletion allowance for oil and gas wells. 

Sec. 105. Limitation on deduction for tertiary injectants. 

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. 

6 SEC. 2. FINDINGS. 

7 Congress finds that— 

8 (1) gas prices have risen significantly largely in 

9 response to unrest in north Africa and the Middle 

10 East, unrest that speculators are capitalizing on to 

11 increase oil futures prices and make huge profits; 

12 (2) high gas prices are hurting the quality of 

13 life of people of the United States, cutting into sav14 ings, and jeopardizing jobs and the economic recov15 ery of the United States; 


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1 (3) implementation of the regulatory reforms 

2 enacted by Congress in the Dodd-Frank Wall Street 

3 Reform and Consumer Protection Act (Public Law 

4 111–203; 124 Stat. 1376) to prevent energy market 

5 manipulation and control excessive speculation has 

6 been delayed and has been threatened with funding 

7 reductions in the House of Representatives; 

8 (4) the United States is producing more oil 

9 than any time in the last 13 years and companies 

10 hold abundant inventories of oil, but the United 

11 States is still importing more than 11,000,000 bar12 rels of oil per day and the Energy Information Ad13 ministration projects that full production in all on14 shore and offshore areas would reduce gas prices by 

15 only 3 cents per gallon by 2030; 

16 (5) domestic refining capacity now exceeds 

17 United States demand for refined petroleum prod18 ucts, resulting in increased idle refinery capacity; 

19 (6) oil companies are sitting idly on approxi20 mately 60,000,000 acres of leased Federal lands and 

21 waters containing more than 11,000,000,000 barrels 

22 of oil and 59,000,000,000,000 cubic feet of natural 

23 gas; 

24 (7) the United States possesses less than 2 per25 cent of the proven oil reserves of the world, yet conVerDate Mar 15 2010 20:46 May 11, 2011 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S940.PCS S940

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1 sumes an unsustainable 25 percent of the oil produc2 tion of the world; 

3 (8) the economy of the United States suffers 

4 huge net losses in jobs and productivity from the 

5 growing annual trade deficit in energy, due mainly 

6 to the outflow of $250,000,000,000 or more to pay 

7 for foreign oil; 

8 (9) world oil prices have risen steadily since the 

9 slow beginning of the global economic recovery and, 

10 absent major efficiency or conservation improve11 ments or deployment of alternative fuels, those oil 

12 prices are projected to remain well above $100 per 

13 barrel or higher as world demand grows as China, 

14 India and other countries industrialize; 

15 (10) the oil production policies of cartel of the 

16 Organization of the Petroleum Exporting Countries 

17 (OPEC) are a large determinant of the world price 

18 of oil, so the economy of the United States will be 

19 affected by decisions of OPEC as long as the United 

20 States depends on oil for a significant portion of the 

21 energy consumption of the United States; 

22 (11) the major oil companies have accumulated 

23 more than $1,000,000,000,000 in net profits over 

24 the last 10 years and collected more than 

25 $40,000,000,000 in tax breaks during the same peVerDate Mar 15 2010 20:46 May 11, 2011 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S940.PCS S940

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1 riod, but have invested negligible amounts of those 

2 funds into research and development of the produc3 tion of clean and renewable fuels made in the United 

4 States, leaving consumers with few if any choices at 

5 the pump; and 

6 (12) in the Energy Independence and Security 

7 Act of 2007 (42 U.S.C. 17001 et seq.), Congress in8 creased fuel economy standards for the first time in 

9 30 years and established ambitious requirements for 

10 domestic biofuels, actions that have reduced oil con11 sumption and reduced upward pressure on gas 

12 prices. 

13 SEC. 3. SENSE OF SENATE ON HIGH GAS PRICES. 

14 It is the sense of the Senate that— 

15 (1) the President and Administration should be 

16 commended for recognizing the severity of high gas 

17 prices and for taking appropriate actions to help re18 duce gas prices, including actions— 

19 (A) to move forward with expeditious and 

20 responsible domestic production in the Gulf of 

21 Mexico and elsewhere; 

22 (B) to form a Task Force led by the De23 partment of Justice to investigate and eliminate 

24 oil and gas price gouging and market manipula25 tion; 


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1 (C) to establish a national oil savings goal 

2 to cut imports by 33 percent by 2025; 

3 (D) to call for 1,000,000 electric vehicles 

4 to be on the road by 2015; 

5 (E) to harmonize corporate average fuel 

6 standards under section 32902 of title 49, 

7 United States Code, (CAFE) and carbon pollu8 tion standards to achieve 1,800,000,000 barrels 

9 in oil savings from new vehicles built before 

10 2017, and working with stakeholders to in11 crease those savings from future year vehicles; 

12 (F) to establish the National Clean Fleets 

13 Partnership and Green Fleet Initiative to re14 duce diesel and gasoline use in fleets by incor15 porating electric vehicles, alternative fuels like 

16 natural gas, and efficiency measures; and 

17 (G) to clarify and expand the use of E-15 

18 fuel for new motor vehicles; 

19 (2) Congress should take additional actions to 

20 complement the efforts of the President, including 

21 enacting provisions— 

22 (A) to encourage diligent and responsible 

23 development of domestic oil and gas resources 

24 onshore and off-shore; 


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1 (B) to eliminate subsidies for major oil and 

2 gas companies and use the savings to promote 

3 research, development, and deployment of af4 fordable alternative fuels and vehicles; 

5 (C) to give consumers more choices at the 

6 pump and incentives for buying vehicles that 

7 displace petroleum consumption; and 

8 (D) to direct and fund the Commodity Fu9 tures Trading Commission and the Federal 

10 Trade Commission to rapidly implement the en11 ergy consumer protection requirements of the 

12 Dodd-Frank Wall Street Reform and Consumer 

13 Protection Act (Public Law 111–203; 124 Stat. 

14 1376); 

15 (3) the Organization of the Petroleum Export16 ing Countries (OPEC) should contribute to the sta17 bilization of world oil markets and prices and reduce 

18 the burden of high gasoline prices borne by the con19 sumers in the United States by using existing idle 

20 oil production capacity to compensate for any supply 

21 shortages experienced in member countries; and 

22 (4) the economic, environmental, and national 

23 security of the United States depend on a sustained 

24 effort to drastically reduce and eventually eliminate 

25 the dependency of the United States on oil. 


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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 (as defined in section 

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

19 the United States for any period shall not be consid20 ered a tax— 

21 ‘‘(A) if, for such period, the foreign coun22 try or possession does not impose a generally 

23 applicable income tax, or 


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

2 the amount (determined in accordance with reg3 ulations) which— 

4 ‘‘(i) is paid by such dual capacity tax5 payer pursuant to the generally applicable 

6 income tax imposed by the country or pos7 session, or 

8 ‘‘(ii) would be paid if the generally ap9 plicable income tax imposed by the country 

10 or possession were applicable to such dual 

11 capacity taxpayer. 

12 Nothing in this paragraph shall be construed to 

13 imply the proper treatment of any such amount not 

14 in excess of the amount determined under subpara15 graph (B). 

16 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur17 poses of this subsection, the term ‘dual capacity tax18 payer’ means, with respect to any foreign country or 

19 possession of the United States, a person who— 

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

21 possession, and 

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

23 indirectly a specific economic benefit (as deter24 mined in accordance with regulations) from 

25 such country or possession. 


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

2 For purposes of this subsection— 

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

4 applicable income tax’ means an income tax (or 

5 a series of income taxes) which is generally im6 posed under the laws of a foreign country or 

7 possession on income derived from the conduct 

8 of a trade or business within such country or 

9 possession. 

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

11 include a tax unless it has substantial applica12 tion, by its terms and in practice, to— 

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

14 taxpayers, and 

15 ‘‘(ii) persons who are citizens or resi16 dents of the foreign country or posses17 sion.’’. 

18 (b) EFFECTIVE DATE.— 

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

20 this section shall apply to taxes paid or accrued in 

21 taxable years beginning after the date of the enact22 ment of this Act. 

23 (2) CONTRARY TREATY OBLIGATIONS

24 UPHELD.—The amendments made by this section 


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1 shall not apply to the extent contrary to any treaty 

2 obligation of the United States. 

3 SEC. 102. LIMITATION ON SECTION 199 DEDUCTION ATTRIB4 UTABLE TO OIL, NATURAL GAS, OR PRIMARY 

5 PRODUCTS THEREOF. 

6 (a) DENIAL OF DEDUCTION.—Paragraph (4) of sec7 tion 199(c) of the Internal Revenue Code of 1986 is 

8 amended by adding at the end the following new subpara9 graph: 

10 ‘‘(E) SPECIAL RULE FOR CERTAIN OIL

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

12 who is a major integrated oil company (as de13 fined in section 167(h)(5)(B)) for the taxable 

14 year, the term ‘domestic production gross re15 ceipts’ shall not include gross receipts from the 

16 production, transportation, or distribution of 

17 oil, natural gas, or any primary product (within 

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

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2011. 

22 SEC. 103. LIMITATION ON DEDUCTION FOR INTANGIBLE 

23 DRILLING AND DEVELOPMENT COSTS. 

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

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


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1 the following new sentence: ‘‘This subsection shall not 

2 apply to amounts paid or incurred by a taxpayer in any 

3 taxable year in which such taxpayer is a major integrated 

4 oil company (as defined in section 167(h)(5)(B)).’’. 

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

6 this section shall apply to amounts paid or incurred in tax7 able years beginning after December 31, 2011. 

8 SEC. 104. LIMITATION ON PERCENTAGE DEPLETION AL9 LOWANCE FOR OIL AND GAS WELLS. 

10 (a) IN GENERAL.—Section 613A of the Internal Rev11 enue Code of 1986 is amended by adding at the end the 

12 following new subsection: 

13 ‘‘(f) APPLICATION WITH RESPECT TO MAJOR INTE14 GRATED OIL COMPANIES.—In the case of any taxable year 

15 in which the taxpayer is a major integrated oil company 

16 (as defined in section 167(h)(5)(B)), the allowance for 

17 percentage depletion shall be zero.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2011. 

21 SEC. 105. LIMITATION ON DEDUCTION FOR TERTIARY 

22 INJECTANTS. 

23 (a) IN GENERAL.—Section 193 of the Internal Rev24 enue Code of 1986 is amended by adding at the end the 

25 following new subsection: 


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1 ‘‘(d) APPLICATION WITH RESPECT TO MAJOR INTE2 GRATED OIL COMPANIES.—This section shall not apply to 

3 amounts paid or incurred by a taxpayer in any taxable 

4 year in which such taxpayer is a major integrated oil com5 pany (as defined in section 167(h)(5)(B)).’’. 

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

7 this section shall apply to amounts paid or incurred in tax8 able years beginning after December 31, 2011. 

9 TITLE II—OUTER CONTINENTAL 

10 SHELF OIL AND NATURAL GAS 

11 SEC. 201. REPEAL OF OUTER CONTINENTAL SHELF DEEP 

12 WATER AND DEEP GAS ROYALTY RELIEF. 

13 (a) IN GENERAL.—Sections 344 and 345 of the En14 ergy Policy Act of 2005 (42 U.S.C. 15904, 15905) are 

15 repealed. 

16 (b) ADMINISTRATION.—The Secretary of the Interior 

17 shall not be required to provide for royalty relief in the 

18 lease sale terms beginning with the first lease sale held 

19 on or after the date of enactment of this Act for which 

20 a final notice of sale has not been published. 

21 TITLE III—MISCELLANEOUS 

22 SEC. 301. DEFICIT REDUCTION. 

23 The net amount of any savings realized as a result 

24 of the enactment of this Act and the amendments made 

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


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

2 in the Treasury and used for Federal budget deficit reduc3 tion or, if there is no Federal budget deficit, for reducing 

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

5 Treasury considers appropriate. 

6 SEC. 302. BUDGETARY EFFECTS. 

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

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

9 shall be determined by reference to the latest statement 

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

11 Act, submitted for printing in the Congressional Record 

12 by the Chairman of the Senate Budget Committee, pro13 vided that such statement has been submitted prior to the 

14 vote on passage. 


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Calendar No. 42 

112TH CONGRESS 

1ST SESSION S. 940 

A BILL 

To reduce the Federal budget deficit by closing big 

oil tax loopholes, and for other purposes. 

MAY 11, 2011 

Read the second time and placed on the calendar 


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