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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 278 Introduced in Senate (IS)]

113th CONGRESS
  1st Session
                                 S. 278

  To replace the Budget Control Act sequester for fiscal year 2013 by 
                       eliminating tax loopholes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           February 11, 2013

 Mr. Whitehouse (for himself, Mr. Harkin, Mr. Sanders, Mr. Levin, and 
 Mr. Merkley) introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
  To replace the Budget Control Act sequester for fiscal year 2013 by 
                       eliminating tax loopholes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Job Preservation 
and Sequester Replacement Act of 2013''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
       TITLE I--ELIMINATION OF SEQUESTRATION FOR FISCAL YEAR 2013

Sec. 101. No sequestration for 2013.
    TITLE II--ELIMINATION OF TAX LOOPHOLES FOR HIGH-INCOME TAXPAYERS

Sec. 201. Minimum tax for high-income earners.
Sec. 202. Requiring high-income professionals to pay their payroll 
                            taxes.
Sec. 203. Elimination of private jet giveaway.
  TITLE III--ELIMINATION OF TAX LOOPHOLES FOR OFFSHORING MANUFACTURERS

Sec. 301. Ending tax breaks for offshoring manufacturers.
    TITLE IV--ELIMINATION OF TAX LOOPHOLES FOR OIL AND GAS COMPANIES

Sec. 401. Modifications of foreign tax credit rules applicable to major 
                            integrated oil companies which are dual 
                            capacity taxpayers.
Sec. 402. Limitation on section 199 deduction attributable to oil, 
                            natural gas, or primary products thereof.
Sec. 403. Limitation on deduction for intangible drilling and 
                            development costs.
Sec. 404. Limitation on percentage depletion allowance for oil and gas 
                            wells.
Sec. 405. Limitation on deduction for tertiary injectants.
Sec. 406. Repeal of outer Continental Shelf deep water and deep gas 
                            royalty relief.

       TITLE I--ELIMINATION OF SEQUESTRATION FOR FISCAL YEAR 2013

SEC. 101. NO SEQUESTRATION FOR 2013.

    (a) In General.--Section 251A(3)(E) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 (2 U.S.C. 901a(3)(E)) is amended 
by striking ``$24,000,000,000'' and inserting ``$109,300,000,000''.
    (b) Repeal of Budget Control Act Sequester for Fiscal Year 2013.--
            (1) Repeal.--Section 901(e) of the American Taxpayer Relief 
        Act of 2012 (Public Law 112-240) is repealed.
            (2) BBEDCA.--Section 251A of the Balanced Budget and 
        Emergency Deficit Control Act (2 U.S.C. 901a) is amended--
                    (A) in paragraph (4), by striking ``On March 1, 
                2013, for fiscal year 2013, and in'' and inserting 
                ``In'';
                    (B) in paragraph (5), by striking ``2013'' and 
                inserting ``2014'';
                    (C) in paragraph (6), by striking ``2013'' and 
                inserting ``2014''; and
                    (D) in paragraph (7)--
                            (i) by striking ``reductions.--'' and all 
                        that follows through ``On the date of the 
                        submission'' and inserting ``reductions.--On 
                        the date of the submission''; and
                            (ii) by redesignating clauses (i) and (ii) 
                        as subparagraphs (A) and (B), respectively.

    TITLE II--ELIMINATION OF TAX LOOPHOLES FOR HIGH-INCOME TAXPAYERS

SEC. 201. MINIMUM TAX FOR HIGH-INCOME EARNERS.

    (a) In General.--Subchapter A of chapter 1 is amended by adding at 
the end the following new part:

          ``PART VIII--FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS

``Sec. 59B. Fair share tax.

``SEC. 59B. FAIR SHARE TAX.

    ``(a) General Rule.--
            ``(1) Phase-in of tax.--In the case of any high-income 
        taxpayer, there is hereby imposed for a taxable year (in 
        addition to any other tax imposed by this subtitle) a tax equal 
        to the product of--
                    ``(A) the amount determined under paragraph (2), 
                and
                    ``(B) a fraction (not to exceed 1)--
                            ``(i) the numerator of which is the excess 
                        of--
                                    ``(I) the taxpayer's adjusted gross 
                                income, over
                                    ``(II) the dollar amount in effect 
                                under subsection (c)(1), and
                            ``(ii) the denominator of which is the 
                        dollar amount in effect under subsection 
                        (c)(1).
            ``(2) Amount of tax.--The amount of tax determined under 
        this paragraph is an amount equal to the excess (if any) of--
                    ``(A) the tentative fair share tax for the taxable 
                year, over
                    ``(B) the excess of--
                            ``(i) the sum of--
                                    ``(I) the regular tax liability (as 
                                defined in section 26(b)) for the 
                                taxable year, determined without regard 
                                to any tax liability determined under 
                                this section,
                                    ``(II) the tax imposed by section 
                                55 for the taxable year, plus
                                    ``(III) the payroll tax for the 
                                taxable year, over
                            ``(ii) the credits allowable under part IV 
                        of subchapter A (other than sections 27(a), 31, 
                        and 34).
    ``(b) Tentative Fair Share Tax.--For purposes of this section--
            ``(1) In general.--The tentative fair share tax for the 
        taxable year is 30 percent of the excess of--
                    ``(A) the adjusted gross income of the taxpayer, 
                over
                    ``(B) the modified charitable contribution 
                deduction for the taxable year.
            ``(2) Modified charitable contribution deduction.--For 
        purposes of paragraph (1)--
                    ``(A) In general.--The modified charitable 
                contribution deduction for any taxable year is an 
                amount equal to the amount which bears the same ratio 
                to the deduction allowable under section 170 (section 
                642(c) in the case of a trust or estate) for such 
                taxable year as--
                            ``(i) the amount of itemized deductions 
                        allowable under the regular tax (as defined in 
                        section 55) for such taxable year, determined 
                        after the application of section 68, bears to
                            ``(ii) such amount, determined before the 
                        application of section 68.
                    ``(B) Taxpayer must itemize.--In the case of any 
                individual who does not elect to itemize deductions for 
                the taxable year, the modified charitable contribution 
                deduction shall be zero.
    ``(c) High-Income Taxpayer.--For purposes of this section--
            ``(1) In general.--The term `high-income taxpayer' means, 
        with respect to any taxable year, any taxpayer (other than a 
        corporation) with an adjusted gross income for such taxable 
        year in excess of $1,000,000 (50 percent of such amount in the 
        case of a married individual who files a separate return).
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2013, the $1,000,000 amount under 
                paragraph (1) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2012' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $10,000, such 
                amount shall be rounded to the next lowest multiple of 
                $10,000.
    ``(d) Payroll Tax.--For purposes of this section, the payroll tax 
for any taxable year is an amount equal to the excess of--
            ``(1) the taxes imposed on the taxpayer under sections 
        1401, 1411, 3101, 3201, and 3211(a) (to the extent such tax is 
        attributable to the rate of tax in effect under section 3101) 
        with respect to such taxable year or wages or compensation 
        received during such taxable year, over
            ``(2) the deduction allowable under section 164(f) for such 
        taxable year.
    ``(e) Special Rule for Estates and Trusts.--For purposes of this 
section, in the case of an estate or trust, adjusted gross income shall 
be computed in the manner described in section 67(e).
    ``(f) Not Treated as Tax Imposed by This Chapter for Certain 
Purposes.--The tax imposed under this section shall not be treated as 
tax imposed by this chapter for purposes of determining the amount of 
any credit under this chapter (other than the credit allowed under 
section 27(a)) or for purposes of section 55.''.
    (b) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 is amended by adding at the end the following new item:

        ``Part VIII--Fair Share Tax on High-Income Taxpayers''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2012.

SEC. 202. REQUIRING HIGH-INCOME PROFESSIONALS TO PAY THEIR PAYROLL 
              TAXES.

    (a) In General.--Section 1402 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(m) Special Rules for Professional Service Businesses.--
            ``(1) Shareholders providing services to specified s 
        corporations.--
                    ``(A) In general.--In the case of an applicable 
                shareholder who provides substantial services with 
                respect to a professional service business referred to 
                in subparagraph (C) of a specified S corporation--
                            ``(i) such shareholder shall be treated as 
                        engaged in the trade or business of such 
                        professional service business with respect to 
                        items of income or loss described in section 
                        1366 which are attributable to such business, 
                        and
                            ``(ii) such shareholder's net earnings from 
                        self-employment shall include such 
                        shareholder's pro rata share of such items of 
                        income or loss, except that in computing such 
                        pro rata share of such items the exceptions 
                        provided in subsection (a) shall apply.
                    ``(B) Treatment of family members.--Except as 
                otherwise provided by the Secretary, the applicable 
                shareholder's pro rata share of items referred to in 
                subparagraph (A) shall be increased by the pro rata 
                share of such items of each member of such applicable 
                shareholder's family (within the meaning of section 
                318(a)(1)) who does not provide substantial services 
                with respect to such professional service business.
                    ``(C) Specified s corporation.--For purposes of 
                this subsection, the term `specified S corporation' 
                means--
                            ``(i) any S corporation which is a partner 
                        in a partnership which is engaged in a 
                        professional service business if substantially 
                        all of the activities of such S corporation are 
                        performed in connection with such partnership, 
                        and
                            ``(ii) any other S corporation which is 
                        engaged in a professional service business if 
                        75 percent or more of the gross income of such 
                        business is attributable to service of 3 or 
                        fewer shareholders of such corporation.
                    ``(D) Applicable shareholder.--For purposes of this 
                paragraph, the term `applicable shareholder' means any 
                shareholder whose modified adjusted gross income for 
                the taxable year exceeds--
                            ``(i) in the case of a shareholder making a 
                        joint return under section 6013 or a surviving 
                        spouse (as defined in section 2(a)), $250,000,
                            ``(ii) in the case of a married shareholder 
                        (as defined in section 7703) filing a separate 
                        return, half of the dollar amount determined 
                        under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(2) Partners.--
                    ``(A) In general.--In the case of any partnership 
                which is engaged in a professional service business, 
                subsection (a)(13) shall not apply to any applicable 
                partner who provides substantial services with respect 
                to such professional service business.
                    ``(B) Applicable partner.--For purposes of this 
                paragraph, the term `applicable partner' means any 
                partner whose modified adjusted gross income for the 
                taxable year exceeds--
                            ``(i) in the case of a partner making a 
                        joint return under section 6013 or a surviving 
                        spouse (as defined in section 2(a)), $250,000,
                            ``(ii) in the case of a married partner (as 
                        defined in section 7703) filing a separate 
                        return, half of the dollar amount determined 
                        under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(3) Professional service business.--For purposes of this 
        subsection, the term `professional service business' means any 
        trade or business (or portion thereof) providing services in 
        the fields of health, law, lobbying, engineering, architecture, 
        accounting, actuarial science, performing arts, consulting, 
        athletics, investment advice or management, or brokerage 
        services.
            ``(4) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income--
                    ``(A) determined without regard to any deduction 
                allowed under section 164(f), and
                    ``(B) increased by the amount excluded from gross 
                income under section 911(a)(1).
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection, including regulations which 
        prevent the avoidance of the purposes of this subsection 
        through tiered entities or otherwise.
            ``(6) Cross reference.--For employment tax treatment of 
        wages paid to shareholders of S corporations, see subtitle 
        C.''.
    (b) Conforming Amendment.--Section 211 of the Social Security Act 
is amended by adding at the end the following new subsection:
    ``(l) Special Rules for Professional Service Businesses.--
            ``(1) Shareholders providing services to specified s 
        corporations.--
                    ``(A) In general.--In the case of an applicable 
                shareholder who provides substantial services with 
                respect to a professional service business referred to 
                in subparagraph (C) of a specified S corporation--
                            ``(i) such shareholder shall be treated as 
                        engaged in the trade or business of such 
                        professional service business with respect to 
                        items of income or loss described in section 
                        1366 of the Internal Revenue Code of 1986 which 
                        are attributable to such business, and
                            ``(ii) such shareholder's net earnings from 
                        self-employment shall include such 
                        shareholder's pro rata share of such items of 
                        income or loss, except that in computing such 
                        pro rata share of such items the exceptions 
                        provided in subsection (a) shall apply.
                    ``(B) Treatment of family members.--Except as 
                otherwise provided by the Secretary of the Treasury, 
                the applicable shareholder's pro rata share of items 
                referred to in subparagraph (A) shall be increased by 
                the pro rata share of such items of each member of such 
                applicable shareholder's family (within the meaning of 
                section 318(a)(1) of the Internal Revenue Code of 1986) 
                who does not provide substantial services with respect 
                to such professional service business.
                    ``(C) Specified s corporation.--For purposes of 
                this subsection, the term `specified S corporation' 
                means--
                            ``(i) any S corporation (as defined in 
                        section 1361(a) of the Internal Revenue Code of 
                        1986) which is a partner in a partnership which 
                        is engaged in a professional service business 
                        if substantially all of the activities of such 
                        S corporation are performed in connection with 
                        such partnership, and
                            ``(ii) any other S corporation (as so 
                        defined) which is engaged in a professional 
                        service business if 75 percent or more of the 
                        gross income of such business is attributable 
                        to service of 3 or fewer shareholders of such 
                        corporation.
                    ``(D) Applicable shareholder.--For purposes of this 
                paragraph, the term `applicable shareholder' means any 
                shareholder whose modified adjusted gross income for 
                the taxable year exceeds--
                            ``(i) in the case of a shareholder making a 
                        joint return under section 6013 of the Internal 
                        Revenue Code of 1986 or a surviving spouse (as 
                        defined in section 2(a) of such Code), 
                        $250,000,
                            ``(ii) in the case of a married shareholder 
                        (as defined in section 7703 of such Code) 
                        filing a separate return, half of the dollar 
                        amount determined under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(2) Partners.--
                    ``(A) In general.--In the case of any partnership 
                which is engaged in a professional service business, 
                subsection (a)(12) shall not apply to any applicable 
                partner who provides substantial services with respect 
                to such professional service business.
                    ``(B) Applicable partner.--For purposes of this 
                paragraph, the term `applicable partner' means any 
                partner whose modified adjusted gross income for the 
                taxable year exceeds--
                            ``(i) in the case of a partner making a 
                        joint return under section 6013 of the Internal 
                        Revenue Code of 1986 or a surviving spouse (as 
                        defined in section 2(a) of such Code), 
                        $250,000,
                            ``(ii) in the case of a married partner (as 
                        defined in section 7703 of such Code) filing a 
                        separate return, half of the dollar amount 
                        determined under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(3) Professional service business.--For purposes of this 
        subsection, the term `professional service business' means any 
        trade or business (or portion thereof) providing services in 
        the fields of health, law, lobbying, engineering, architecture, 
        accounting, actuarial science, performing arts, consulting, 
        athletics, investment advice or management, or brokerage 
        services.
            ``(4) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income as determined under section 62 of the 
        Internal Revenue Code of 1986--
                    ``(A) determined without regard to any deduction 
                allowed under section 164(f) of such Code, and
                    ``(B) increased by the amount excluded from gross 
                income under section 911(a)(1) of such Code.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2012.

SEC. 203. ELIMINATION OF PRIVATE JET GIVEAWAY.

    (a) In General.--Subparagraph (C) of section 168(e)(3) of the 
Internal Revenue Code of 1986 is amended by striking ``and'' at the end 
of clause (iv), by redesignating clause (v) as clause (vi), and by 
inserting after clause (iv) the following new clause:
                            ``(v) any general aviation aircraft, and''.
    (b) Class Life.--Paragraph (3) of section 168(g) of the Internal 
Revenue Code of 1986 is amended by inserting after subparagraph (E) the 
following new subparagraph:
                    ``(F) General aviation aircraft.--In the case of 
                any general aviation aircraft, the recovery period used 
                for purposes of paragraph (2) shall be 12 years.''.
    (c) General Aviation Aircraft.--Subsection (i) of section 168 of 
the Internal Revenue Code of 1986 is amended by inserting after 
paragraph (19) the following new paragraph:
            ``(20) General aviation aircraft.--The term `general 
        aviation aircraft' means any airplane or helicopter (including 
        airframes and engines) not used in commercial or contract 
        carrying of passengers or freight, but which primarily engages 
        in the carrying of passengers.''.
    (d) Effective Date.--This section shall be effective for property 
placed in service after December 31, 2012.

  TITLE III--ELIMINATION OF TAX LOOPHOLES FOR OFFSHORING MANUFACTURERS

SEC. 301. ENDING TAX BREAKS FOR OFFSHORING MANUFACTURERS.

    (a) General Rule.--Subsection (a) of section 954 of the Internal 
Revenue Code of 1986 is amended by striking the period at the end of 
paragraph (5) and inserting ``, and'', by redesignating paragraph (5) 
as paragraph (4), and by adding at the end the following new paragraph:
            ``(5) imported property income for the taxable year 
        (determined under subsection (j) and reduced as provided in 
        subsection (b)(5)).''.
    (b) Definition of Imported Property Income.--Section 954 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subsection:
    ``(j) Imported Property Income.--
            ``(1) In general.--For purposes of subsection (a)(5), the 
        term `imported property income' means income (whether in the 
        form of profits, commissions, fees, or otherwise) derived in 
        connection with--
                    ``(A) manufacturing, producing, growing, or 
                extracting imported property;
                    ``(B) the sale, exchange, or other disposition of 
                imported property; or
                    ``(C) the lease, rental, or licensing of imported 
                property.
        Such term shall not include any foreign oil and gas extraction 
        income (within the meaning of section 907(c)) or any foreign 
        oil related income (within the meaning of section 907(c)).
            ``(2) Imported property.--For purposes of this subsection--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `imported property' means 
                property which is imported into the United States by 
                the controlled foreign corporation or a related person.
                    ``(B) Imported property includes certain property 
                imported by unrelated persons.--The term `imported 
                property' includes any property imported into the 
                United States by an unrelated person if, when such 
                property was sold to the unrelated person by the 
                controlled foreign corporation (or a related person), 
                it was reasonable to expect that--
                            ``(i) such property would be imported into 
                        the United States; or
                            ``(ii) such property would be used as a 
                        component in other property which would be 
                        imported into the United States.
                    ``(C) Exception for property subsequently 
                exported.--The term `imported property' does not 
                include any property which is imported into the United 
                States and which--
                            ``(i) before substantial use in the United 
                        States, is sold, leased, or rented by the 
                        controlled foreign corporation or a related 
                        person for direct use, consumption, or 
                        disposition outside the United States; or
                            ``(ii) is used by the controlled foreign 
                        corporation or a related person as a component 
                        in other property which is so sold, leased, or 
                        rented.
                    ``(D) Exception for certain agricultural 
                commodities.--The term `imported property' does not 
                include any agricultural commodity which is not grown 
                in the United States in commercially marketable 
                quantities.
            ``(3) Definitions and special rules.--
                    ``(A) Import.--For purposes of this subsection, the 
                term `import' means entering, or withdrawal from 
                warehouse, for consumption or use. Such term includes 
                any grant of the right to use intangible property (as 
                defined in section 936(h)(3)(B)) in the United States.
                    ``(B) United states.--For purposes of this 
                subsection, the term `United States' includes the 
                Commonwealth of Puerto Rico, the Virgin Islands of the 
                United States, Guam, American Samoa, and the 
                Commonwealth of the Northern Mariana Islands.
                    ``(C) Unrelated person.--For purposes of this 
                subsection, the term `unrelated person' means any 
                person who is not a related person with respect to the 
                controlled foreign corporation.
                    ``(D) Coordination with foreign base company sales 
                income.--For purposes of this section, the term 
                `foreign base company sales income' shall not include 
                any imported property income.''.
    (c) Separate Application of Limitations on Foreign Tax Credit for 
Imported Property Income.--
            (1) In general.--Paragraph (1) of section 904(d) of the 
        Internal Revenue Code of 1986 is amended by striking ``and'' at 
        the end of subparagraph (A), by redesignating subparagraph (B) 
        as subparagraph (C), and by inserting after subparagraph (A) 
        the following new subparagraph:
                    ``(B) imported property income, and''.
            (2) Imported property income defined.--Paragraph (2) of 
        section 904(d) of such Code is amended by redesignating 
        subparagraphs (I), (J), and (K) as subparagraphs (J), (K), and 
        (L), respectively, and by inserting after subparagraph (H) the 
        following new subparagraph:
                    ``(I) Imported property income.--The term `imported 
                property income' means any income received or accrued 
                by any person which is of a kind which would be 
                imported property income (as defined in section 
                954(j)).''.
            (3) Conforming amendment.--Clause (ii) of section 
        904(d)(2)(A) of such Code is amended by inserting ``or imported 
        property income'' after ``passive category income''.
    (d) Technical Amendments.--
            (1) Clause (iii) of section 952(c)(1)(B) of the Internal 
        Revenue Code of 1986 is amended--
                    (A) by redesignating subclauses (II), (III), (IV), 
                and (V) as subclauses (III), (IV), (V), and (VI), and
                    (B) by inserting after subclause (I) the following 
                new subclause:
                                    ``(II) imported property income,''.
            (2) The last sentence of paragraph (4) of section 954(b) of 
        such Code is amended by striking ``subsection (a)(5)'' and 
        inserting ``subsection (a)(4)''.
            (3) Paragraph (5) of section 954(b) of such Code is amended 
        by striking ``and the foreign base company oil related income'' 
        and inserting ``the foreign base company oil related income, 
        and the imported property income''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after the date 
of the enactment of this Act, and to taxable years of United States 
shareholders within which or with which such taxable years of such 
foreign corporations end.

    TITLE IV--ELIMINATION OF TAX LOOPHOLES FOR OIL AND GAS COMPANIES

SEC. 401. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO MAJOR 
              INTEGRATED OIL COMPANIES WHICH ARE DUAL CAPACITY 
              TAXPAYERS.

    (a) In General.--Section 901 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Special Rules Relating to Major Integrated Oil Companies 
Which Are Dual Capacity Taxpayers.--
            ``(1) General rule.--Notwithstanding any other provision of 
        this chapter, any amount paid or accrued by a dual capacity 
        taxpayer which is a major integrated oil company (as defined in 
        section 167(h)(5)(B)) to a foreign country or possession of the 
        United States for any period shall not be considered a tax--
                    ``(A) if, for such period, the foreign country or 
                possession does not impose a generally applicable 
                income tax, or
                    ``(B) to the extent such amount exceeds the amount 
                (determined in accordance with regulations) which--
                            ``(i) is paid by such dual capacity 
                        taxpayer pursuant to the generally applicable 
                        income tax imposed by the country or 
                        possession, or
                            ``(ii) would be paid if the generally 
                        applicable income tax imposed by the country or 
                        possession were applicable to such dual 
                        capacity taxpayer.
        Nothing in this paragraph shall be construed to imply the 
        proper treatment of any such amount not in excess of the amount 
        determined under subparagraph (B).
            ``(2) Dual capacity taxpayer.--For purposes of this 
        subsection, the term `dual capacity taxpayer' means, with 
        respect to any foreign country or possession of the United 
        States, a person who--
                    ``(A) is subject to a levy of such country or 
                possession, and
                    ``(B) receives (or will receive) directly or 
                indirectly a specific economic benefit (as determined 
                in accordance with regulations) from such country or 
                possession.
            ``(3) Generally applicable income tax.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `generally applicable 
                income tax' means an income tax (or a series of income 
                taxes) which is generally imposed under the laws of a 
                foreign country or possession on income derived from 
                the conduct of a trade or business within such country 
                or possession.
                    ``(B) Exceptions.--Such term shall not include a 
                tax unless it has substantial application, by its terms 
                and in practice, to--
                            ``(i) persons who are not dual capacity 
                        taxpayers, and
                            ``(ii) persons who are citizens or 
                        residents of the foreign country or 
                        possession.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxes paid or accrued in taxable years beginning after 
        the date of the enactment of this Act.
            (2) Contrary treaty obligations upheld.--The amendments 
        made by this section shall not apply to the extent contrary to 
        any treaty obligation of the United States.

SEC. 402. LIMITATION ON SECTION 199 DEDUCTION ATTRIBUTABLE TO OIL, 
              NATURAL GAS, OR PRIMARY PRODUCTS THEREOF.

    (a) Denial of Deduction.--Paragraph (4) of section 199(c) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subparagraph:
                    ``(E) Special rule for certain oil and gas 
                income.--In the case of any taxpayer who is a major 
                integrated oil company (as defined in section 
                167(h)(5)(B)) for the taxable year, the term `domestic 
                production gross receipts' shall not include gross 
                receipts from the production, transportation, or 
                distribution of oil, natural gas, or any primary 
                product (within the meaning of subsection (d)(9)) 
                thereof.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2012.

SEC. 403. LIMITATION ON DEDUCTION FOR INTANGIBLE DRILLING AND 
              DEVELOPMENT COSTS.

    (a) In General.--Section 263(c) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new sentence: ``This 
subsection shall not apply to amounts paid or incurred by a taxpayer in 
any taxable year in which such taxpayer is a major integrated oil 
company (as defined in section 167(h)(5)(B)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred in taxable years beginning after December 
31, 2012.

SEC. 404. LIMITATION ON PERCENTAGE DEPLETION ALLOWANCE FOR OIL AND GAS 
              WELLS.

    (a) In General.--Section 613A of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(f) Application With Respect to Major Integrated Oil Companies.--
In the case of any taxable year in which the taxpayer is a major 
integrated oil company (as defined in section 167(h)(5)(B)), the 
allowance for percentage depletion shall be zero.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2012.

SEC. 405. LIMITATION ON DEDUCTION FOR TERTIARY INJECTANTS.

    (a) In General.--Section 193 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(d) Application With Respect to Major Integrated Oil Companies.--
This section shall not apply to amounts paid or incurred by a taxpayer 
in any taxable year in which such taxpayer is a major integrated oil 
company (as defined in section 167(h)(5)(B)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred in taxable years beginning after December 
31, 2012.

SEC. 406. REPEAL OF OUTER CONTINENTAL SHELF DEEP WATER AND DEEP GAS 
              ROYALTY RELIEF.

    (a) In General.--Sections 344 and 345 of the Energy Policy Act of 
2005 (42 U.S.C. 15904, 15905) are repealed.
    (b) Administration.--The Secretary of the Interior shall not be 
required to provide for royalty relief in the lease sale terms 
beginning with the first lease sale held on or after the date of 
enactment of this Act for which a final notice of sale has not been 
published.
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