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Senate Rejects Democratic Bid to Levy a Windfall Profits Tax

The Republican-led Senate fended off a Democratic drive Thursday to levy a controversial windfall profits tax on the earnings of major energy companies as part of a $60 billion tax reconciliation package.

By 64 to 35, Senate opponents blocked an amendment, offered by Sens. Byron Dorgan (D-ND) and Christopher Dodd (D-CT), that would have imposed a 50% excise tax on oil company profits above $40 a barrel, to be rebated directly to energy consumers. Exempted from the tax would have been energy companies who reinvested their earnings to expand supplies of oil and natural gas or build new refinery capacity.

Sen. Charles Grassley (R-IA), chairman of the Senate Finance Committee, motioned that the Dorgan-Dodd amendment was "not germane" to the tax bill, which triggered an automatic vote on whether to waive the Budget Act to allow the proposal to proceed. The Senate voted 64 to 35 not to grant the waiver, which effectively killed the amendment.

Leading the opposition to the amendment on the Senate floor Thursday was Sen. Craig Thomas (R-WY).

Also suffering a defeat was an amendment, offered by Sen. Dianne Feinstein (D-CA), that sought to eliminate an existing tax break for integrated energy companies for oil drilling. Feinstein said she offered the proposal after the chiefs of five major energy companies testified at a joint Senate committee hearing last week that they didn't need the tax incentives offered in the Energy Policy Act of 2005.

But Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee, argued the tax break that Feinstein was seeking to eliminate was not part of the energy bill. Rather, he said it has been policy for "eons."

Grassley again motioned that the amendment was "not germane" to the Senate tax package, which triggered a vote on whether to waive the Budget Act to allow Feinstein's proposal to proceed. By a narrow margin of 51 to 48, the Senate voted not to grant the waiver.

The Senate was expected to act on the tax reconciliation package late Thursday. The bill as reported out by the Senate Finance Committee earlier this week would require major energy companies to shell out an additional $4.9 billion in taxes next year under an inventory accounting change. The proposal would affect integrated oil companies that have gross receipts of more than $1 billion annually.

In addition, the bill includes an amendment, proposed by Sen. Ron Wyden (D-OR), to scale back a tax break for oil and gas drilling projects so that it would not apply to large integrated companies. The tax break, which was part of the Energy Policy Act of 2005, would have provided incentives totaling less than $1 billion over a 10-year period.

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