Taxing Big Oil Profiteers Act

To amend the Internal Revenue Code of 1986 to tax excess profits of large oil and gas companies, to impose a tax on the repurchase of stock by large oil and gas companies, to end the use of the LIFO method of accounting by large oil and gas trades or businesses, and for other purposes. 1. Short title This Act may be cited as the Taxing Big Oil Profiteers Act 2. Tax on excess profits of certain taxpayers from oil and gas (a) In general Subchapter A of chapter 1 VIII Windfall profits from oil and gas Sec. 59B. Tax on oil and gas excess profits. 59B. Tax on oil and gas excess profits (a) Imposition of tax (1) In general In addition to any other tax imposed under this chapter, there is hereby imposed on each applicable taxpayer for any taxable year a tax equal to 21 percent of the excess profits of such taxpayer for such taxable year. (2) Excess profits For purposes of this subsection, the term excess profits (A) the current profits of the taxpayer for the taxable year, over (B) the normal return of the taxpayer for the taxable year. (b) Applicable taxpayer For purposes of this section— (1) In general The term applicable taxpayer (A) the average annual gross receipts of such person for the 3-taxable-year period ending with the taxable year which precedes such taxable year equals or exceeds $1,000,000,000, and (B) such person is primarily engaged in 1 or more oil or natural gas trades or businesses during the taxable year. (2) Special rules for applicable entities (A) In general If an entity is an applicable entity (as defined in subsection (e)) for any taxable year— (i) except as provided in paragraphs (1)(A) and (2)(B) of subsection (e), such entity shall not be treated as an applicable taxpayer for purposes of this section, but (ii) any allocable share of a covered taxpayer of any excess profits of such entity for such taxable year (as determined under subsection (e)) shall be taken into account by such taxpayer under subsection (a)(1)— (I) as excess profits of such taxpayer for the taxable year of such taxpayer with or within which such taxable year of such entity ends, and (II) in the same manner as if such taxpayer were an applicable taxpayer. (B) Covered taxpayer For purposes of this section, the term covered taxpayer (i) a taxpayer who is an individual (other than an estate or trust) and whose adjusted gross income for such taxable year exceeds $400,000 ($200,000 in the case of a married individual filing separately), (ii) an estate or trust, or (iii) a C corporation which is not an applicable taxpayer. (3) Oil or natural gas trade or business The term oil or natural gas trade or business (A) The production of oil or natural gas. (B) The refining of oil or natural gas. (C) The processing of oil or natural gas. (D) The transportation of oil or natural gas. (E) The distribution of oil or natural gas. (4) Applicable rules relating to gross receipts For purposes of paragraph (1)(A)— (A) except as provided in subsection (f), there shall be taken into account only gross receipts which are effectively connected with the conduct of a trade or business within the United States, the Commonwealth of Puerto Rico, or any possession of the United States, and (B) rules similar to the rules of paragraphs (2) and (3) of section 448(c) shall apply. (c) Current profits For purposes of this section, the term current profits (1) No net operating loss deduction No net operating loss deduction shall be allowed. (2) Deduction for employee remuneration (A) In general Section 162(m) shall be applied— (i) by substituting In the case of any applicable taxpayer (as defined in section 59B) In the case of any publicly held corporation (ii) by substituting covered individual (as defined in section 59B(c)(2)(B)) covered employee (iii) by treating any reference to an employee individual (B) Covered individual For purposes of applying this paragraph to section 162(m), the term covered individual (i) is an officer, director, or employee of the applicable taxpayer for the taxable year, or (ii) performed services for the applicable taxpayer during the taxable year. For purposes of clause (i), any employee who is treated as an employee of the applicable taxpayer under subsection (b) or (c) of section 414 shall be treated as an employee for purposes of this subparagraph. (3) Certain foreign income Except as provided in subsection (f)— (A) Certain income excluded In determining gross income— (i) subpart F income and global intangible low-taxed income included in gross income under sections 951 and 951A shall not be taken into account, and (ii) foreign-derived intangible income (as defined in section 250) shall not be taken into account unless such income is domestic oil-related income which is derived from oil or gas which is exported from the United States. For purposes of clause (ii), the term domestic oil-related income (B) Denial of section 250 deduction No deduction shall be allowed under section 250. (d) Normal return For purposes of this section, the term normal return (1) the gross receipts of the taxpayer taken into account in computing the taxpayer's current profits for the taxable year, including the taxpayer's allocable share of any gross receipts of a partnership, S corporation, or other pass-thru entity specified by the Secretary under subsection (e)(2)(A), over (2) the current profits of the taxpayer for the taxable year. (e) Definitions and rules relating to applicable entities For purposes of this section— (1) In general An applicable entity for any taxable year shall— (A) compute the current profits, normal return, and excess profits of such entity for such taxable year in the same manner as if such entity were an applicable taxpayer, except that subsection (c) shall be applied by substituting the entity's non-separately stated taxable income taxable income (B) report to each partner, shareholder, or other holder of an ownership interest in such entity its allocable share of the entity's excess profits. (2) Applicable entity The term applicable entity (A) which is a partnership, S corporation, or other pass-thru entity specified by the Secretary, and (B) with respect to which the requirements of subparagraphs (A) and (B) of subsection (b)(1) are met for such taxable year, determined in the same manner as if such entity were an applicable taxpayer. (3) Allocable share A person's allocable share of the excess profits shall be determined in the same manner as— (A) in the case of a partnership, such person's distributive share of the non-separately stated taxable income of the partnership, (B) in the case of an S corporation, such person's pro rata share of the non-separately stated taxable income of the S corporation, and (C) in the case of any other pass-thru entity, such person's share (as determined under rules prescribed by the Secretary) of the non-separately stated taxable income of the entity. (4) Non-separately stated taxable income The term non-separately stated taxable income (A) section 703(a) in the case of a partnership, (B) section 1366(a)(1)(B) in the case of an S corporation, and (C) rules prescribed by the Secretary in the case of any other pass-thru entity. (f) Rules for certain foreign income attributable to imports into the United States For purposes of this section— (1) In general In the case of any oil and gas import income of an applicable taxpayer for any taxable year— (A) in computing such taxpayer's current profits for such taxable year— (i) such oil and gas import income (and any deductions allocable to such income) shall be taken into account, and (ii) subsection (c)(3) shall not apply to any subpart F income, global intangible low-taxed income, or foreign-derived intangible income of such taxpayer to the extent such income is attributable to such oil and gas import income, and (B) gross receipts taken into account in computing such oil and gas import income shall be taken into account in computing the gross receipts of such taxpayer for purposes of subsection (b)(1)(A) . (2) Oil and gas import income (A) Controlled foreign corporations In the case of a United States shareholder of a controlled foreign corporation, the term oil and gas import income (B) Authority to include other income The Secretary may prescribe such regulations or other guidance to include in oil and gas import income of an applicable taxpayer its pro rata share of any combined foreign oil and gas income of any person related to the taxpayer (other than a controlled foreign corporation) which is derived from oil and gas imported into the United States if the Secretary determines such inclusion is necessary to prevent the avoidance of the tax imposed by this section. (3) Definitions and special rules (A) In general The term combined foreign oil and gas income income taxable income (B) Pro rata share An applicable taxpayer's pro rata share of any oil and gas import income shall be determined under rules similar to the rules under section 951(a)(2). (C) Prevention of double counting Oil and gas import income (and any deductions allocable to such income) shall not be taken into account under paragraph (1) to the extent already taken into account. (g) Regulations or other guidance The Secretary shall prescribe such regulations or other guidance as is necessary to carry out this section, including regulations or other guidance for the application of subsections (b)(2) and (e), including regulations or other guidance— (1) for the application of such subsections in the case of tiered entities, (2) for determining a person's allocable share where the non-separately stated taxable income of an entity is a loss, and (3) providing rules for the reporting, including through tiered entities, of excess profits. (h) Termination This section shall not apply to any taxable year beginning after December 31, 2025. . (b) Tax not taken into account in computing estimated tax Paragraph (1) of section 6654(f) 59B or 143(m) (c) Conforming amendment The table of subchapters for subchapter A of chapter 1 PART VIII—Windfall profits from oil and gas . (d) Effective date The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act. (e) Tax treated as rate change For purposes of section 15(a) 3. Excise tax on repurchase of corporate stock (a) In general Subtitle D of the Internal Revenue Code of 1986 is amended by inserting after chapter 36 the following new chapter: 37 Repurchase of corporate stock Sec. 4502. Repurchase of corporate stock by oil and gas companies. 4502. Repurchase of corporate stock by oil and gas companies (a) General rule There is hereby imposed on each covered corporation a tax equal to 25 percent of the fair market value of any stock of the corporation which is repurchased by such corporation during the taxable year. (b) Covered corporation For purposes of this section, the term covered corporation (1) the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)), and (2) which is an applicable taxpayer (as defined in section 59B) for the taxable year in which such repurchase occurs. (c) Repurchase For purposes of this section— (1) In general The term repurchase (A) a redemption within the meaning of section 317(b) with regard to the stock of a covered corporation, and (B) any transaction determined by the Secretary to be economically similar to a transaction described in subparagraph (A). (2) Treatment of purchases by specified affiliates (A) In general The acquisition of stock of a covered corporation by a specified affiliate of such covered corporation, from a person who is not the covered corporation or a specified affiliate of such covered corporation, shall be treated as a repurchase of the stock of the covered corporation by such covered corporation. (B) Specified affiliate For purposes of this section, the term specified affiliate (i) any corporation more than 50 percent of the stock of which is owned (by vote or by value), directly or indirectly, by such corporation, and (ii) any partnership more than 50 percent of the capital interests or profits interests of which is held, directly or indirectly, by such corporation. (3) Adjustment The amount taken into account under subsection (a) with respect to any stock repurchased by a covered corporation shall be reduced by the fair market value of any stock issued by the covered corporation during the taxable year, including the fair market value of any stock issued or provided to employees of such covered corporation or a specified affiliate of such covered corporation during the taxable year, whether or not such stock is issued or provided in response to the exercise of an option to purchase such stock. (d) Special rules for acquisition of stock of certain foreign corporations (1) In general In the case of an acquisition of stock of an applicable foreign corporation by a specified affiliate of such corporation (other than a foreign corporation or a foreign partnership (unless such partnership has a domestic entity as a direct or indirect partner)) from a person who is not the applicable foreign corporation or a specified affiliate of such applicable foreign corporation, for purposes of this section— (A) such specified affiliate shall be treated as a covered corporation with respect to such acquisition, (B) such acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and (C) the adjustment under subsection (c)(3) shall be determined only with respect to stock issued or provided by such specified affiliate to employees of the specified affiliate. (2) Surrogate foreign corporations In the case of a repurchase of stock of a covered surrogate foreign corporation by such covered surrogate foreign corporation, or an acquisition of stock of a covered surrogate foreign corporation by a specified affiliate of such corporation, for purposes of this section— (A) the expatriated entity with respect to such covered surrogate foreign corporation shall be treated as a covered corporation with respect to such repurchase or acquisition, (B) such repurchase or acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and (C) the adjustment under subsection (c)(3) shall be determined only with respect to stock issued or provided by such expatriated entity to employees of the expatriated entity. (3) Definitions For purposes of this subsection— (A) Applicable foreign corporation The term applicable foreign corporation (i) the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)), and (ii) with respect to which requirements of subparagraphs (B) and (C) of subsection (b)(1) are met with respect such corporation, except that in applying such subparagraphs, the taxable year of the acquisition of stock shall be substituted for the taxable year of purchase of stock. (B) Covered surrogate foreign corporation The term covered surrogate foreign corporation (i) which is a surrogate foreign corporation (as determined under section 7874(a)(2)(B) by substituting September 20, 2021 March 4, 2003 (ii) with respect to which requirements of subparagraphs (B) and (C) of subsection (b)(1) are met with respect to the taxable year of the repurchase of stock of such corporation. (C) Expatriated entity The term expatriated entity (e) Exceptions Subsection (a) shall not apply— (1) to the extent that the repurchase is part of a reorganization (within the meaning of section 368(a)) and no gain or loss is recognized on such repurchase by the shareholder under chapter 1 by reason of such reorganization, (2) in any case in which the stock repurchased is, or an amount of stock equal to the value of the stock repurchased is, contributed to an employer-sponsored retirement plan, employee stock ownership plan, or similar plan, (3) in any case in which the total value of the stock repurchased during the taxable year does not exceed $1,000,000, (4) to repurchases by a regulated investment company (as defined in section 851) or a real estate investment trust, or (5) to the extent that the repurchase is treated as a dividend for purposes of this title. (f) Regulations and guidance The Secretary shall prescribe such regulations and other guidance as are necessary or appropriate to administer and to prevent the avoidance of the purposes of this section, including regulations and other guidance— (1) to prevent the abuse of the exceptions provided by subsection (e), (2) to address special classes of stock and preferred stock, and (3) for the application of the rules under subsection (d). (g) Termination This section shall not apply to repurchases after December 31, 2025. . (b) Tax not deductible Paragraph (6) of section 275(a) 37, 41 (c) Clerical amendment The table of chapters for subtitle D of the Internal Revenue Code of 1986 is amended by inserting after the item relating to chapter 36 the following new item: Chapter 37—Repurchase of corporate stock . (d) Effective date The amendments made by this section shall apply to repurchases (within the meaning of section 4502(c) 4. Termination of LIFO inventories for certain oil and gas companies (a) In general Section 472 (h) Termination for oil and natural gas companies (1) Termination Except as provided in paragraph (2), subsection (a) shall not apply to any trade or business primarily consisting of one or more of the following: (A) The production of oil or natural gas. (B) The refining of oil or natural gas. (C) The processing of oil or natural gas. (D) The transportation of oil or natural gas. (E) The distribution of oil or natural gas. (2) Exception (A) In general Paragraph (1) shall not apply to any trade or business of a person for any taxable year if the average annual gross receipts of all trades or businesses of such person for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $1,000,000,000. (B) Applicable rules For purposes of subparagraph (A) rules similar to the rules of paragraphs (2) and (3) of section 448(c) shall apply. . (b) Change in method of accounting If any taxpayer is required by the amendments made by this section to change its method of accounting in taxable years beginning after December 31, 2022, then, for purposes of section 481 (1) such change shall be treated as initiated by the taxpayer; and (2) such change shall be treated as made with the consent of the Secretary of the Treasury. (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

Summary: Taxing Big Oil Profiteers Act This bill imposes an additional 21% tax through 2025 on the excess profits (i.e., current profits over normal return) of oil and natural gas companies that have average annual gross receipts during a three-year period of over $1 billion. The bill imposes on publicly-traded domestic corporations a tax equal to 25% of the fair market value of the stock of the corporation repurchased during the taxable year. The tax does not apply to a repurchase made after 2025 or that is treated as dividend. It also does not apply if the total value of the stock repurchased during a taxable year does not exceed $1 million. The bill disqualifies certain large oil and natural gas companies from the use of the LIFO (last-in first-out) inventory accounting method.