Title: Close Big Oil Tax Loopholes Act
Policy area: Taxation

Summary:
Close Big Oil Tax Loopholes Act
This bill amends the Internal Revenue Code to limit or repeal certain tax benefits for major integrated oil companies (certain companies with annual gross receipts over $1 billion and an average daily worldwide production of crude oil of at least 500,000 barrels), including: (1) the foreign tax credit for companies that are dual capacity taxpayers; (2) the tax deduction for income attributable to the production, refining, processing, transportation, or distribution of oil, natural gas, or primary products thereof; (3) the tax deduction for intangible drilling and development costs; (4) the percentage depletion allowance for oil and gas wells; and (5) the tax deduction for qualified tertiary injectant expenses.
The bill modifies the definition of "major integrated oil company" to include certain successors in interest that control more than 50% of the crude oil production or natural gas production of the company.
The bill also amends the Energy Policy Act of 2005 to repeal royalty relief (suspension of royalties) for: (1) natural gas production from deep wells in shallow waters of the Gulf of Mexico; and (2) deep water oil and gas production in the Western and Central Planning Area of the Gulf (including the portion of the Eastern Planning Area encompassing whole lease blocks lying west of 87 degrees, 30 minutes west longitude).
Any net savings that occur as a result of this bill must be used for reducing the federal budget deficit or the federal debt.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 1710 Introduced in Senate (IS)]

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115th CONGRESS
  1st Session
                                S. 1710

To reduce the Federal budget deficit by closing big oil tax loopholes, 
                        and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             August 2, 2017

 Mr. Menendez (for himself, Mr. Blumenthal, Mr. Leahy, Mr. Whitehouse, 
  Mr. Schumer, Mr. Nelson, Mr. Franken, Mrs. Shaheen, Mr. Peters, Ms. 
 Hassan, Mr. Cardin, Mr. Reed, Mrs. Murray, Mr. Durbin, Ms. Stabenow, 
Ms. Klobuchar, Mrs. Feinstein, Mr. Merkley, Mr. Markey, Ms. Hirono, Ms. 
 Harris, and Mr. Booker) 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.

    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 ``Close Big Oil Tax 
Loopholes Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                  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; 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.

                  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.

    (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 (within the 
        meaning of section 167(h)(5)) 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. 102. 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 (within the meaning of section 
                167(h)(5)) for the taxable year, the term `domestic 
                production gross receipts' shall not include gross 
                receipts from the production, refining, processing, 
                transportation, or distribution of oil, 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, 2017.

SEC. 103. LIMITATION ON DEDUCTION FOR INTANGIBLE DRILLING AND 
              DEVELOPMENT COSTS; AMORTIZATION OF DISALLOWED AMOUNTS.

    (a) In General.--Section 263(c) of the Internal Revenue Code of 
1986 is amended to read as follows:
    ``(c) Intangible Drilling and Development Costs in the Case of Oil 
and Gas Wells and Geothermal Wells.--
            ``(1) In general.--Notwithstanding subsection (a), and 
        except as provided in subsection (i), regulations shall be 
        prescribed by the Secretary under this subtitle corresponding 
        to the regulations which granted the option to deduct as 
        expenses intangible drilling and development costs in the case 
        of oil and gas wells and which were recognized and approved by 
        the Congress in House Concurrent Resolution 50, Seventy-ninth 
        Congress. Such regulations shall also grant the option to 
        deduct as expenses intangible drilling and development costs in 
        the case of wells drilled for any geothermal deposit (as 
        defined in section 613(e)(2)) to the same extent and in the 
        same manner as such expenses are deductible in the case of oil 
        and gas wells. This subsection shall not apply with respect to 
        any costs to which any deduction is allowed under section 59(e) 
        or 291.
            ``(2) Exclusion.--
                    ``(A) In general.--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 (within the meaning of section 
                167(h)(5)).
                    ``(B) Amortization of amounts not allowable as 
                deductions under subparagraph (a).--The amount not 
                allowable as a deduction for any taxable year by reason 
                of subparagraph (A) shall be allowable as a deduction 
                ratably over the 60-month period beginning with the 
                month in which the costs are paid or incurred. For 
                purposes of section 1254, any deduction under this 
                subparagraph shall be treated as a deduction under this 
                subsection.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred in taxable years beginning after December 
31, 2017.

SEC. 104. 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 (within the meaning of section 167(h)(5)), 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, 2017.

SEC. 105. 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.--
            ``(1) In general.--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 (within the 
        meaning of section 167(h)(5)).
            ``(2) Amortization of amounts not allowable as deductions 
        under paragraph (1).--The amount not allowable as a deduction 
        for any taxable year by reason of paragraph (1) shall be 
        allowable as a deduction ratably over the 60-month period 
        beginning with the month in which the costs are paid or 
        incurred.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred in taxable years beginning after December 
31, 2017.

SEC. 106. MODIFICATION OF DEFINITION OF MAJOR INTEGRATED OIL COMPANY.

    (a) In General.--Paragraph (5) of section 167(h) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(C) Certain successors in interest.--For purposes 
                of this paragraph, the term `major integrated oil 
                company' includes any successor in interest of a 
                company that was described in subparagraph (B) in any 
                taxable year, if such successor controls more than 50 
                percent of the crude oil production or natural gas 
                production of such company.''.
    (b) Conforming Amendments.--
            (1) In general.--Subparagraph (B) of section 167(h)(5) of 
        the Internal Revenue Code of 1986 is amended by inserting 
        ``except as provided in subparagraph (C),'' after ``For 
        purposes of this paragraph,''.
            (2) Taxable years tested.--Clause (iii) of section 
        167(h)(5)(B) of such Code is amended--
                    (A) by striking ``does not apply by reason of 
                paragraph (4) of section 613A(d)'' and inserting ``did 
                not apply by reason of paragraph (4) of section 613A(d) 
                for any taxable year after 2004'', and
                    (B) by striking ``does not apply'' in subclause 
                (II) and inserting ``did not apply for the taxable 
                year''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

         TITLE II--OUTER CONTINENTAL SHELF OIL AND NATURAL GAS

SEC. 201. 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.

                        TITLE III--MISCELLANEOUS

SEC. 301. DEFICIT REDUCTION.

    The net amount of any savings realized as a result of the enactment 
of this Act and the amendments made by this Act (after any expenditures 
authorized by this Act and the amendments made by this Act) shall be 
deposited in the Treasury and used for Federal budget deficit reduction 
or, if there is no Federal budget deficit, for reducing the Federal 
debt in such manner as the Secretary of the Treasury considers 
appropriate.

SEC. 302. BUDGETARY EFFECTS.

    The budgetary effects of this Act, for the purpose of complying 
with the Statutory Pay-As-You-Go Act of 2010, shall be determined by 
reference to the latest statement titled ``Budgetary Effects of PAYGO 
Legislation'' for this Act, submitted for printing in the Congressional 
Record by the Chairman of the Senate Budget Committee, provided that 
such statement has been submitted prior to the vote on passage.
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