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

Summary:
Close Big Oil Tax Loopholes Act
This bill limits or repeals tax and royalty relief provisions that benefit certain large oil companies. It modifies foreign tax credit rules applicable to such companies and limits deductions for intangible drilling and development costs, percentage depletion, enhanced oil recovery, and other tax preferences.
The bill repeals the outer Continental Shelf deep water and deep gas royalty relief provisions.
Any savings resulting from this bill must be used for federal budget deficit reduction or, if there is no current budget deficit, for reducing the federal debt.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 5216 Introduced in Senate (IS)]

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117th CONGRESS
  2d Session
                                S. 5216

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            December 8, 2022

 Mr. Menendez (for himself, Mr. Padilla, Mr. Booker, Mrs. Shaheen, Ms. 
  Hirono, Mr. Cardin, and Mrs. Murray) 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 deduction for intangible drilling and 
                            development costs; amortization of 
                            disallowed amounts.
Sec. 103. Limitation on percentage depletion allowance for oil and gas 
                            wells.
Sec. 104. Limitation on deduction for tertiary injectants.
Sec. 105. Limitation on enhanced oil recovery credit.
Sec. 106. Limitation on credit for carbon oxide sequestration.
         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 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 an applicable 
                large taxpayer.
                    ``(B) Applicable large taxpayer.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `applicable 
                        large taxpayer' means, with respect to any 
                        taxable year, any taxpayer with gross receipts 
                        (within the meaning of section 448(c)) for such 
                        taxable year in excess of $50,000,000.
                            ``(ii) Aggregation rule.--All persons 
                        treated as a single employer under subsection 
                        (a) or (b) of section 52 or subsection (m) or 
                        (o) of section 414 shall be treated as one 
                        person for purposes of clause (i).
                    ``(C) 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, 2022.

SEC. 103. 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 Certain Large Taxpayers.--In the 
case of any taxable year in which the taxpayer is an applicable large 
taxpayer (as defined in section 263(c)(2)), 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, 2022.

SEC. 104. 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 Certain Large Taxpayers.--
            ``(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 an applicable large taxpayer (as defined in 
        section 263(c)(2)).
            ``(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, 2022.

SEC. 105. LIMITATION ON ENHANCED OIL RECOVERY CREDIT.

    (a) In General.--Section 43 of the Internal Revenue Code of 1986 is 
amended by redesignating subsections (d) and (e) as subsections (e) and 
(f), respectively, and by inserting after subsection (c) the following 
new subsection:
    ``(d) Application With Respect to Certain Large Taxpayers.--In the 
case of any taxable year in which the taxpayer is an applicable large 
taxpayer (as defined in section 263(c)(2)), subsection (a) shall be 
applied by substituting `0 percent' for `15 percent'.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2022.

SEC. 106. LIMITATION ON CREDIT FOR CARBON OXIDE SEQUESTRATION.

    (a) In General.--Section 45Q(f) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(10) Elimination of use of carbon oxide as tertiary 
        injectant.--In the case of any qualified facility the 
        construction of which begins after the date of the enactment of 
        the Close Big Oil Tax Loopholes Act, subsection (a)(4)(B)(i) 
        shall not apply.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred in taxable years beginning after December 
31, 2022.

         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.--With respect to any lease described in section 
344 or 345 of the Energy Policy Act of 2005 (42 U.S.C. 15904, 15905) 
(as in effect on the day before the date of enactment of this Act), 
beginning with the first lease sale held on or after that date of 
enactment for which a final notice of sale has not been published, the 
Secretary of the Interior shall not be required to provide for royalty 
relief in the lease sale terms.

                        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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