FAIR Energy Policy Act

Bill: 114-s-2996
Sponsor: full_name: Sen. Schatz, Brian [D-HI]
Introduced: 2016-05-26
Policy area: Taxation
Subjects: Business investment and capital

Capital gains tax

Coal

Earth sciences

Income tax credits

Income tax deductions

Manufacturing

Oil and gas
Latest action: action_date: 2016-05-26
text: Read twice and referred to the Committee on Finance.

Summaries:
action_date: 2016-05-26
action_desc: Introduced in Senate
text: <p><b>Fossil Aid is Inefficient and Regressive Energy Policy Act or the FAIR Energy Policy Act </b></p> <p>This bill amends the Internal Revenue Code to phase out certain tax provisions that apply to fossil fuels. The bill establishes a schedule for decreasing the benefits of the provisions for major integrated oil companies by specified percentages that reach 100% after December 31, 2019. The affected provisions include: </p> <ul> <li> the deduction for intangible drilling costs, </li> <li>the deduction for the percentage of depletion of oil and natural gas wells, </li> <li> the deduction for oil related qualified production activities income, </li> <li> the deduction for the amortization of geological and geophysical expenditures, </li> <li> the deduction for the percentage of depletion of oil shale, </li> <li> the deduction for exploration and development costs for oil shale, </li> <li> the capital gains treatment for royalties of coal, </li> <li> the deduction for tertiary injectants, </li> <li> the exception to the passive loss limitation for working interests in oil and natural gas properties, and </li> <li> the marginal wells tax credit. </li> </ul>

tv_txt: II 114th CONGRESS 2d Session S. 2996 IN THE SENATE OF THE UNITED STATES May 26, 2016 Mr. Schatz (for himself, Mr. Whitehouse , Mrs. Feinstein , Mr. Merkley , Ms. Warren , and Mr. Markey ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to phase out tax preferences for fossil fuels on the same schedule as the phase out of the tax credits for wind facilities.

1. Short title This Act may be cited as the Fossil Aid is Inefficient and Regressive Energy Policy Act or the FAIR Energy Policy Act . 2. Phase out of tax preferences for fossil fuels (a) Findings Congress finds the following: (1) United States tax policy has provided tax preferences, such as special deductions, special tax rates, tax credits, and grants in lieu of tax credits, for oil and gas production for 100 years. (2) United States tax policy has provided tax preferences for coal production for over 80 years. (3) In order to ensure that all sources of energy compete on an equal footing, as tax credits for renewable energy are phased out over the next 4 years, fossil fuel tax preferences should be phased out on the same schedule. (b) Expensing of intangible drilling costs Section 263 of the Internal Revenue Code of 1986 is amended— (1) in subsection (c), by striking subsection (i) and inserting subsections (i) and (j) , and (2) by adding at the end the following new subsection: (j) Phase out of deduction for intangible drilling costs In the case of a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)), for any intangible drilling and development costs paid or incurred with respect to an oil or gas well, the amount of such costs allowed as a deduction under subsection (c) shall be reduced by— (1) in the case of any costs paid or incurred after December 31, 2016, and before January 1, 2018, 20 percent, (2) in the case of any costs paid or incurred after December 31, 2017, and before January 1, 2019, 40 percent, (3) in the case of any costs paid or incurred after December 31, 2018, and before January 1, 2020, 60 percent, and (4) in the case of any costs paid or incurred after December 31, 2019, 100 percent. . (c) Percentage depletion for oil and natural gas wells Section 613A(d) of such Code is amended by adding at the end the following new paragraph: (6) Phase out of percentage depletion for oil and natural gas wells In the case of a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)), the amount allowed as a deduction for the taxable year which is attributable to the application of subsection (c) (determined after the application of paragraphs (1) through (5) of this subsection and without regard to this paragraph) shall be reduced by— (A) in the case of any crude oil or natural gas produced after December 31, 2016, and before January 1, 2018, 20 percent, (B) in the case of any crude oil or natural gas produced after December 31, 2017, and before January 1, 2019, 40 percent, (C) in the case of any crude oil or natural gas produced after December 31, 2018, and before January 1, 2020, 60 percent, and (D) in the case of any crude oil or natural gas produced after December 31, 2019, 100 percent. . (d) Domestic manufacturing deduction for fossil fuels Section 199(d)(9) of such Code is amended by adding at the end the following new subparagraph: (D) Phase out of deduction for oil related qualified production activities income In the case of a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)), the amount allowable as a deduction under subsection (a) (determined after the application of subparagraph (A) and without regard to this subparagraph) shall be reduced by— (i) in the case of any oil related qualified production activities income received or accrued after December 31, 2016, and before January 1, 2018, 20 percent, (ii) in the case of any oil related qualified production activities income received or accrued after December 31, 2017, and before January 1, 2019, 40 percent, (iii) in the case of any oil related qualified production activities income received or accrued after December 31, 2018, and before January 1, 2020, 60 percent, and (iv) in the case of any oil related qualified production activities income received or accrued after December 31, 2019, 100 percent. . (e) Amortization of geological and geophysical expenditures Section 167(h) of such Code is amended by adding at the end the following new paragraph: (6) Phase out of amortization of geological and geophysical expenditures In the case of a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)), the amount of geological and geophysical expenses paid or incurred by a taxpayer which are allowed as a deduction under this subsection (without regard to this paragraph) shall be reduced by— (A) in the case of any such expenses paid or incurred after December 31, 2016, and before January 1, 2018, 20 percent, (B) in the case of any such expenses paid or incurred after December 31, 2017, and before January 1, 2019, 40 percent, (C) in the case of any such expenses paid or incurred after December 31, 2018, and before January 1, 2020, 60 percent, and (D) in the case of any such expenses paid or incurred after December 31, 2019, 100 percent. . (f) Percentage depletion for oil shale Section 613 of such Code is amended by adding at the end the following new subsection: (f) Phase out of percentage depletion for oil shale In the case of a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)), the allowance for depletion for oil shale determined under this section (without regard to this subsection) shall be reduced by— (1) in the case of any income received or accrued from the property after December 31, 2016, and before January 1, 2018, 20 percent, (2) in the case of any income received or accrued from the property after December 31, 2017, and before January 1, 2019, 40 percent, (3) in the case of any income received or accrued from the property after December 31, 2018, and before January 1, 2020, 60 percent, and (4) in the case of any income received or accrued from the property after December 31, 2019, 100 percent. . (g) Expensing of exploration and development costs for oil shale Section 617 of such Code is amended— (1) by redesignating subsection (i) as subsection (j), and (2) by inserting after subsection (h) the following new subsection: (i) Phase out of expensing of exploration and development costs for oil shale In the case of a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)), the amount of expenditures related to oil shale which are allowed as a deduction under subsection (a) shall be reduced by— (1) in the case of any such expenditures paid or incurred after December 31, 2016, and before January 1, 2018, 20 percent, (2) in the case of any such expenditures paid or incurred after December 31, 2017, and before January 1, 2019, 40 percent, (3) in the case of any such expenditures paid or incurred after December 31, 2018, and before January 1, 2020, 60 percent, and (4) in the case of any such expenditures paid or incurred after December 31, 2019, 100 percent. . (h) Capital gains treatment for royalties of coal Section 631 of such Code is amended by adding at the end the following new subsection: (d) Phase out of capital gains treatment for royalties of coal In the case of coal (including lignite), the amount of gain or loss on the sale of such coal to which subsection (c) applies shall be reduced by— (1) in the case of any such gain or loss after December 31, 2016, and before January 1, 2018, 20 percent, (2) in the case of any such gain or loss after December 31, 2017, and before January 1, 2019, 40 percent, (3) in the case of any such gain or loss after December 31, 2018, and before January 1, 2020, 60 percent, and (4) in the case of any such gain or loss after December 31, 2019, 100 percent. . (i) Deduction for tertiary injectants Section 193 of such Code is amended by adding at the end the following new subsection: (d) Phase out of deduction for tertiary injectants In the case of a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)), the amount of qualified tertiary injectant expenses allowable as a deduction under subsection (a) shall be reduced by— (1) in the case of any such expenditures paid or incurred after December 31, 2016, and before January 1, 2018, 20 percent, (2) in the case of any such expenditures paid or incurred after December 31, 2017, and before January 1, 2019, 40 percent, (3) in the case of any such expenditures paid or incurred after December 31, 2018, and before January 1, 2020, 60 percent, and (4) in the case of any such expenditures paid or incurred after December 31, 2019, 100 percent. . (j) Exception to passive loss limitation for working interests in oil and natural gas properties Section 469(c) of such Code is amended by adding at the end the following new paragraph: (8) Phase out of exception to passive loss limitation for working interests in oil and natural gas properties In the case of a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)), for any loss from a working interest in any oil or gas property, the amount of such loss to which paragraph (3) applies shall be reduced by— (A) in the case of any such loss after December 31, 2016, and before January 1, 2018, 20 percent, (B) in the case of any such loss after December 31, 2017, and before January 1, 2019, 40 percent, (C) in the case of any such loss after December 31, 2018, and before January 1, 2020, 60 percent, and (D) in the case of any such loss after December 31, 2019, 100 percent. . (k) Marginal wells credit Section 45I(d) of such Code is amended by adding at the end the following new paragraph: (4) Phase out of marginal wells credit In the case of a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)), the amount of the credit determined under subsection (a) shall be reduced by— (A) in the case of any qualified crude oil production or qualified natural gas production after December 31, 2016, and before January 1, 2018, 20 percent, (B) in the case of any qualified crude oil production or qualified natural gas production after December 31, 2017, and before January 1, 2019, 40 percent, (C) in the case of any qualified crude oil production or qualified natural gas production after December 31, 2018, and before January 1, 2020, 60 percent, and (D) in the case of any qualified crude oil production or qualified natural gas production after December 31, 2019, 100 percent. .