I 
112TH CONGRESS 
1ST SESSION H. R. 2495 
To amend the Internal Revenue Code of 1986 to eliminate certain tax 
expenditures. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 11, 2011 
Mr. TIERNEY (for himself, Mr. ELLISON, Mr. GRIJALVA, Mr. JACKSON of Illi-
nois, and Ms. MCCOLLUM) introduced the following bill; which was re-
ferred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to eliminate 
certain tax expenditures. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS; ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Tax Equity and Middle Class Fairness Act of 2011’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference 
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shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; table of contents; etc. 
TITLE I—TERMINATION OF OIL AND GAS TAX PREFERENCES 
Sec. 101. Termination of enhanced oil recovery credit. 
Sec. 102. Termination of credit for producing oil and gas from marginal wells. 
Sec. 103. Termination of deduction for intangible drilling and development 
costs. 
Sec. 104. Termination of deduction for tertiary injectants. 
Sec. 105. Repeal exception to passive loss limitation for working interests in oil 
and natural gas properties. 
Sec. 106. Repeal percentage depletion for oil and natural gas wells. 
Sec. 107. Repeal domestic manufacturing tax deduction for oil and natural gas 
companies. 
Sec. 108. Increase geological and geophysical amortization period for inde-
pendent producers to seven years. 
TITLE II—TERMINATION OF CERTAIN COAL TAX PREFERENCES 
Sec. 201. Repeal of deduction for development and exploration expenditures 
with respect to coal, lignite, or oil shale. 
Sec. 202. Repeal of domestic production activities deduction with respect to 
production of coal, lignite, or oil shale. 
Sec. 203. Repeal of percentage depletion with respect to coal, lignite, and oil 
shale. 
Sec. 204. Repeal of capital gain treatment of coal and lignite royalties. 
TITLE III—MODIFICATION OF ACCOUNTING RULES 
Sec. 301. Repeal of last-in, first-out method of inventory. 
Sec. 302. Repeal of lower of cost or market method of inventory. 
TITLE IV—INDIVIDUAL TAX EXPENDITURES 
Sec. 401. Limitation on itemized deductions to 28-percent rate bracket. 
Sec. 402. Repeal of foreign earned income exclusion. 
Sec. 403. Phase-out of health savings accounts. 
Sec. 404. Phase-out of Archer MSAs. 
TITLE V—BUSINESS RELATED TAX EXPENDITURES 
Subtitle A—Partnership Interests Held by Partners Providing Services 
Sec. 501. Partnership interests transferred in connection with performance of 
services. 
Sec. 502. Income of partners for performing investment management services 
treated as ordinary income received for performance of serv-
ices. 
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Subtitle B—Tax Expenditures Relating to Agribusiness 
Sec. 511. Elimination of expensing for fertilizer, etc., otherwise chargeable to 
a capital account. 
Sec. 512. Elimination of expensing for multi-period livestock and crop produc-
tion costs. 
Sec. 513. Repeal of capital gain treatment with respect to the sale of timber. 
Sec. 514. Elimination of expensing for timber and ornamental trees. 
Sec. 515. Elimination of amortization of reforestation expenditures. 
Sec. 516. Repeal of tax expenditure for horse breeders. 
Subtitle C—Other Business Tax Expenditures 
Sec. 521. Termination of $25,000 exemption from passive loss rules for rental 
real estate activities. 
Sec. 522. Elimination of deduction for certain meal and entertainment ex-
penses. 
Sec. 523. State and local bonds converted to direct subsidy bonds. 
Sec. 524. 28-percent rate for expanded direct subsidy build America bonds. 
TITLE VI—INTERNATIONAL TAX EXPENDITURES 
Sec. 601. Allocation of expenses and taxes on basis of repatriation of foreign 
income. 
Sec. 602. Excess income from transfers of intangibles to low-taxed affiliates 
treated as subpart F income. 
Sec. 603. Limitations on income shifting through intangible property transfers. 
Sec. 604. Modifications of foreign tax credit rules applicable to dual capacity 
taxpayers. 
TITLE VII—TAX EXPENDITURE STUDY 
Sec. 701. Study of extended tax expenditures. 
TITLE I—TERMINATION OF OIL 
AND GAS TAX PREFERENCES 
SEC. 101. TERMINATION OF ENHANCED OIL RECOVERY 
CREDIT. 
(a) IN GENERAL.—Section 43 is amended by adding 
at the end the following new subsection: 
‘‘(f) TERMINATION.—This section shall not apply to 
any taxable year beginning after the date of the enactment 
of this subsection.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 102. TERMINATION OF CREDIT FOR PRODUCING OIL 
AND GAS FROM MARGINAL WELLS. 
(a) IN GENERAL.—Section 45I is amended by adding 
at the end the following new subsection: 
‘‘(e) TERMINATION.—This section shall not apply to 
any taxable year beginning after the date of the enactment 
of this subsection.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 103. TERMINATION OF DEDUCTION FOR INTANGIBLE 
DRILLING AND DEVELOPMENT COSTS. 
(a) IN GENERAL.—Section 263(c) is amended by 
adding at the end the following new sentence: ‘‘This sub-
section shall not apply to any taxable year beginning after 
the date of the enactment of this sentence.’’. 
(b) CONFORMING AMENDMENTS.—Paragraphs (2) 
and (3) of section 291(b) are each amended by striking 
‘‘section 263(c), 616(a),’’ and inserting ‘‘section 616(a)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to costs paid or incurred in taxable 
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years beginning after the date of the enactment of this 
Act. 
SEC. 104. TERMINATION OF DEDUCTION FOR TERTIARY 
INJECTANTS. 
(a) IN GENERAL.—Section 193 is amended by adding 
at the end the following new subsection: 
‘‘(d) TERMINATION.—This section shall not apply to 
any taxable year beginning after the date of the enactment 
of this subsection.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 105. REPEAL EXCEPTION TO PASSIVE LOSS LIMITA-
TION FOR WORKING INTERESTS IN OIL AND 
NATURAL GAS PROPERTIES. 
(a) IN GENERAL.—Subsection (c) of section 469 is 
amended by striking paragraph (3). 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 106. REPEAL PERCENTAGE DEPLETION FOR OIL AND 
NATURAL GAS WELLS. 
(a) IN GENERAL.—Section 613A is amended by add-
ing at the end the following new subsection: 
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‘‘(f) TERMINATION.—After December 31, 2010, this 
section and section 611 shall not apply to any oil or gas 
well.’’. 
(b) CONFORMING AMENDMENT.—Section 613A(c)(1) 
is amended by striking ‘‘subsection (d)’’ and inserting 
‘‘subsections (d) and (f)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 107. REPEAL DOMESTIC MANUFACTURING TAX DE-
DUCTION FOR OIL AND NATURAL GAS COM-
PANIES. 
(a) IN GENERAL.—Subparagraph (B) of section 
199(c)(4) is amended by striking ‘‘and’’ at the end of 
clause (ii), by striking the period at the end of clause (iii) 
and inserting ‘‘, and’’, and by inserting after clause (iii) 
the following new clause: 
‘‘(iv) production or extraction relating 
to any oil or gas.’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
199(c)(4)(A)(i)(III) is amended by striking ‘‘, natural 
gas,’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 108. INCREASE GEOLOGICAL AND GEOPHYSICAL AM-
ORTIZATION 
PERIOD 
FOR 
INDEPENDENT 
PRODUCERS TO SEVEN YEARS. 
(a) IN GENERAL.—Paragraphs (1) and (4) of section 
167(h) is amended by striking ‘‘24-month’’ both places it 
appears and inserting ‘‘7-year’’. 
(b) CONFORMING AMENDMENT.—Section 167(h) is 
amended by striking paragraph (5). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred in tax-
able years beginning after the date of the enactment of 
this Act. 
TITLE II—TERMINATION OF CER-
TAIN 
COAL 
TAX 
PREF-
ERENCES 
SEC. 201. REPEAL OF DEDUCTION FOR DEVELOPMENT AND 
EXPLORATION 
EXPENDITURES 
WITH 
RE-
SPECT TO COAL, LIGNITE, OR OIL SHALE. 
(a) DEVELOPMENT EXPENDITURES.—Section 616 is 
amended by redesignating subsection (e) as subsection (f) 
and by inserting after subsection (d) the following new 
subsection: 
‘‘(e) SPECIAL RULE FOR EXPENDITURES FOR DE-
VELOPMENT OF COAL MINE OR DEPOSIT.—No deduction 
shall be allowed under this section for expenditures paid 
or incurred with respect to the development of a mine or 
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