House Republicans mustered enough support from the ranks to pass a $1.4 trillion bill for comprehensive tax reform Thursday, while the Senate Finance Committee held a marathon hearing to debate its plan.
HR1, also known as The Tax Cuts and Jobs Act, passed on a 227-205 vote, with 13 Republicans joining all 192 Democrats in opposition. All but one of the GOP defectors represent California, New Jersey and New York, which have high tax rates; the bill eliminates some state tax deductions.
The House bill calls for lowering the corporate tax rate from 35% to 20%. For the oil and gas industry, it preserves deductions for intangible drilling costs, aka IDCs, and the passive loss exception, but it repeals credits for enhanced oil recovery (EOR) and production from marginal oil and gas wells.
Reports indicate the Senate Finance Committee would vote on its version of the tax reform bill as soon as Friday, with expectations that the full Senate may vote on the measure after the Thanksgiving holiday. As of Thursday afternoon, the committee's official calendar did not show a hearing scheduled for Friday.
The American Petroleum Institute (API) and the Independent Petroleum Association of America (IPAA) each praised passage of the House bill.
"By including pro-growth proposals like lowering the corporate tax rate and strong cost-recovery provisions, this legislation will help unleash economic growth and allow our industry to continue providing safe, reliable energy for Americans," said API CEO Jack Gerard. "We look forward to working with the Senate on updating the U.S. tax code and getting a bill to the president's desk to ensure our nation continues its global energy leadership."
IPAA CEO Barry Russell said the House vote "is a significant step toward modernizing the U.S. tax code, which will help grow our economy, spur investment and create good-paying jobs. Meaningful reforms, like lowering the corporate tax rate and strong cost-recovery provisions, will be an important shot in the arm for the U.S. economy and will help independent oil and natural gas producers of all sizes succeed."
American Energy Alliance President Thomas Pyle applauded House Republicans for trimming the Production Tax Credit (PTC) for wind power, and for terminating a $7,500 tax credit for electric vehicles. He derided the latter as an "unnecessary handout."
"The wind PTC has cost us tens of billions of dollars and yet wind still produces just 5% of our electricity," Pyle said. "After 25 years, we can safely say that this industry is no longer in its infancy. Taxpayers and electricity ratepayers would benefit most from an immediate termination of the PTC, but we applaud the House's proposal to trim it as an important first step and will fight for its inclusion in any final tax package."