II 

113TH CONGRESS 

1ST SESSION S. 307 

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

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 13, 2013 

Mr. MENENDEZ (for himself, Mr. LAUTENBERG, Mr. DURBIN, Mr. SCHUMER, 

Ms. STABENOW, Mr. CARDIN, Mrs. MCCASKILL, Mrs. GILLIBRAND, Mr. 

WHITEHOUSE, Mrs. SHAHEEN, Mr. FRANKEN, Mr. REED, Mr. NELSON, 

Ms. KLOBUCHAR, Mr. BROWN, Mr. LEAHY, and Mr. MERKLEY) introduced the following bill; which was read twice and referred to the Committee on Finance 

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, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

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

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

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—CLOSE BIG OIL TAX LOOPHOLES 


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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; 

amortization of disallowed amounts. 

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

Sec. 105. Limitation on deduction for tertiary injectants. 

Sec. 106. Modification of definition of major integrated oil company. 

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. 

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 (within the meaning of 


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1 section 167(h)(5)) to a foreign country or possession 

2 of the United States for any period shall not be con3 sidered a tax— 

4 ‘‘(A) if, for such period, the foreign coun5 try or possession does not impose a generally 

6 applicable income tax, or 

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

8 the amount (determined in accordance with reg9 ulations) which— 

10 ‘‘(i) is paid by such dual capacity tax11 payer pursuant to the generally applicable 

12 income tax imposed by the country or pos13 session, or 

14 ‘‘(ii) would be paid if the generally ap15 plicable income tax imposed by the country 

16 or possession were applicable to such dual 

17 capacity taxpayer. 

18 Nothing in this paragraph shall be construed to 

19 imply the proper treatment of any such amount not 

20 in excess of the amount determined under subpara21 graph (B). 

22 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur23 poses of this subsection, the term ‘dual capacity tax24 payer’ means, with respect to any foreign country or 

25 possession of the United States, a person who— 


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

2 possession, and 

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

4 indirectly a specific economic benefit (as deter5 mined in accordance with regulations) from 

6 such country or possession. 

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

8 For purposes of this subsection— 

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

10 applicable income tax’ means an income tax (or 

11 a series of income taxes) which is generally im12 posed under the laws of a foreign country or 

13 possession on income derived from the conduct 

14 of a trade or business within such country or 

15 possession. 

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

17 include a tax unless it has substantial applica18 tion, by its terms and in practice, to— 

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

20 taxpayers, and 

21 ‘‘(ii) persons who are citizens or resi22 dents of the foreign country or posses23 sion.’’. 

24 (b) EFFECTIVE DATE.— 


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

2 this section shall apply to taxes paid or accrued in 

3 taxable years beginning after the date of the enact4 ment of this Act. 

5 (2) CONTRARY TREATY OBLIGATIONS

6 UPHELD.—The amendments made by this section 

7 shall not apply to the extent contrary to any treaty 

8 obligation of the United States. 

9 SEC. 102. LIMITATION ON SECTION 199 DEDUCTION ATTRIB10 UTABLE TO OIL, NATURAL GAS, OR PRIMARY 

11 PRODUCTS THEREOF. 

12 (a) DENIAL OF DEDUCTION.—Paragraph (4) of sec13 tion 199(c) of the Internal Revenue Code of 1986 is 

14 amended by adding at the end the following new subpara15 graph: 

16 ‘‘(E) SPECIAL RULE FOR CERTAIN OIL

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

18 who is a major integrated oil company (within 

19 the meaning of section 167(h)(5)) for the tax20 able year, the term ‘domestic production gross 

21 receipts’ shall not include gross receipts from 

22 the production, refining, processing, transpor23 tation, or distribution of oil, gas, or any pri24 mary product (within the meaning of subsection 

25 (d)(9)) thereof.’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2013. 

4 SEC. 103. LIMITATION ON DEDUCTION FOR INTANGIBLE 

5 DRILLING AND DEVELOPMENT COSTS; AMOR6 TIZATION OF DISALLOWED AMOUNTS. 

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

8 Revenue Code of 1986 is amended to read as follows: 

9 ‘‘(c) INTANGIBLE DRILLING AND DEVELOPMENT

10 COSTS IN THE CASE OF OIL AND GAS WELLS AND GEO11 THERMAL WELLS.— 

12 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

13 (a), and except as provided in subsection (i), regula14 tions shall be prescribed by the Secretary under this 

15 subtitle corresponding to the regulations which 

16 granted the option to deduct as expenses intangible 

17 drilling and development costs in the case of oil and 

18 gas wells and which were recognized and approved 

19 by the Congress in House Concurrent Resolution 50, 

20 Seventy-ninth Congress. Such regulations shall also 

21 grant the option to deduct as expenses intangible 

22 drilling and development costs in the case of wells 

23 drilled for any geothermal deposit (as defined in sec24 tion 613(e)(2)) to the same extent and in the same 

25 manner as such expenses are deductible in the case 


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1 of oil and gas wells. This subsection shall not apply 

2 with respect to any costs to which any deduction is 

3 allowed under section 59(e) or 291. 

4 ‘‘(2) EXCLUSION.— 

5 ‘‘(A) IN GENERAL.—This subsection shall 

6 not apply to amounts paid or incurred by a tax7 payer in any taxable year in which such tax8 payer is a major integrated oil company (within 

9 the meaning of section 167(h)(5)). 

10 ‘‘(B) AMORTIZATION OF AMOUNTS NOT AL11 LOWABLE AS DEDUCTIONS UNDER SUBPARA12 GRAPH (A).—The amount not allowable as a de13 duction for any taxable year by reason of sub14 paragraph (A) shall be allowable as a deduction 

15 ratably over the 60-month period beginning 

16 with the month in which the costs are paid or 

17 incurred. For purposes of section 1254, any de18 duction under this subparagraph shall be treat19 ed as a deduction under this subsection.’’. 

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

21 this section shall apply to amounts paid or incurred in tax22 able years beginning after December 31, 2013. 


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1 SEC. 104. LIMITATION ON PERCENTAGE DEPLETION AL2 LOWANCE FOR OIL AND GAS WELLS. 

3 (a) IN GENERAL.—Section 613A of the Internal Rev4 enue Code of 1986 is amended by adding at the end the 

5 following new subsection: 

6 ‘‘(f) APPLICATION WITH RESPECT TO MAJOR INTE7 GRATED OIL COMPANIES.—In the case of any taxable year 

8 in which the taxpayer is a major integrated oil company 

9 (within the meaning of section 167(h)(5)), the allowance 

10 for percentage depletion shall be zero.’’. 

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

12 this section shall apply to taxable years beginning after 

13 December 31, 2013. 

14 SEC. 105. LIMITATION ON DEDUCTION FOR TERTIARY 

15 INJECTANTS. 

16 (a) IN GENERAL.—Section 193 of the Internal Rev17 enue Code of 1986 is amended by adding at the end the 

18 following new subsection: 

19 ‘‘(d) APPLICATION WITH RESPECT TO MAJOR INTE20 GRATED OIL COMPANIES.— 

21 ‘‘(1) IN GENERAL.—This section shall not apply 

22 to amounts paid or incurred by a taxpayer in any 

23 taxable year in which such taxpayer is a major inte24 grated oil company (within the meaning of section 

25 167(h)(5)). 


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1 ‘‘(2) AMORTIZATION OF AMOUNTS NOT ALLOW2 ABLE AS DEDUCTIONS UNDER PARAGRAPH (1).—The 

3 amount not allowable as a deduction for any taxable 

4 year by reason of paragraph (1) shall be allowable 

5 as a deduction ratably over the 60-month period be6 ginning with the month in which the costs are paid 

7 or incurred.’’. 

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

9 this section shall apply to amounts paid or incurred in tax10 able years beginning after December 31, 2013. 

11 SEC. 106. MODIFICATION OF DEFINITION OF MAJOR INTE12 GRATED OIL COMPANY. 

13 (a) IN GENERAL.—Paragraph (5) of section 167(h) 

14 of the Internal Revenue Code of 1986 is amended by add15 ing at the end the following new subparagraph: 

16 ‘‘(C) CERTAIN SUCCESSORS IN INTER17 EST.—For purposes of this paragraph, the term 

18 ‘major integrated oil company’ includes any 

19 successor in interest of a company that was de20 scribed in subparagraph (B) in any taxable 

21 year, if such successor controls more than 50 

22 percent of the crude oil production or natural 

23 gas production of such company.’’. 

24 (b) CONFORMING AMENDMENTS.— 


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1 (1) IN GENERAL.—Subparagraph (B) of section 

2 167(h)(5) of the Internal Revenue Code of 1986 is 

3 amended by inserting ‘‘except as provided in sub4 paragraph (C),’’ after ‘‘For purposes of this para5 graph,’’. 

6 (2) TAXABLE YEARS TESTED.—Clause (iii) of 

7 section 167(h)(5)(B) of such Code is amended— 

8 (A) by striking ‘‘does not apply by reason 

9 of paragraph (4) of section 613A(d)’’ and in10 serting ‘‘did not apply by reason of paragraph 

11 (4) of section 613A(d) for any taxable year 

12 after 2004’’, and 

13 (B) by striking ‘‘does not apply’’ in sub14 clause (II) and inserting ‘‘did not apply for the 

15 taxable year’’. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years beginning after 

18 December 31, 2013. 

19 TITLE II—OUTER CONTINENTAL 

20 SHELF OIL AND NATURAL GAS 

21 SEC. 201. REPEAL OF OUTER CONTINENTAL SHELF DEEP 

22 WATER AND DEEP GAS ROYALTY RELIEF. 

23 (a) IN GENERAL.—Sections 344 and 345 of the En24 ergy Policy Act of 2005 (42 U.S.C. 15904, 15905) are 

25 repealed. 


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

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

3 lease sale terms beginning with the first lease sale held 

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

5 a final notice of sale has not been published. 

6 TITLE III—MISCELLANEOUS 

7 SEC. 301. DEFICIT REDUCTION. 

8 The net amount of any savings realized as a result 

9 of the enactment of this Act and the amendments made 

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

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

12 in the Treasury and used for Federal budget deficit reduc13 tion or, if there is no Federal budget deficit, for reducing 

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

15 Treasury considers appropriate. 

16 SEC. 302. BUDGETARY EFFECTS. 

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

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

19 shall be determined by reference to the latest statement 

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

21 Act, submitted for printing in the Congressional Record 

22 by the Chairman of the Senate Budget Committee, pro23 vided that such statement has been submitted prior to the 

24 vote on passage. 

Æ 


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