The Independent Petroleum Association of America (IPAA) has called on the House Ways and Means Committee’s Energy Tax Reform Working Group to to support the continuation of the tax breaks for oil and natural gas for fiscal year (FY) 2014.
In his FY 2014 budget released last week (see Daily GPI, April 11), President Obama proposed repealing the tax benefits for oil and gas, which could raise as much as $44 billion over the next decade for funding of renewable fuels projects.
“The Obama administration’s budget request — and recurring advocacy statements — would strip essential capital from new American natural gas and oil investment by radically raising taxes on American production,” wrote the IPAA, which represents independent producers, in a letter to Reps. Kevin (R-TX) and Mike Thompson (D-CA), both members of the energy tax reform working group. The working group, which is charged with reforming the tax code for the energy industry, indicated earlier this month that it had not yet reached a consensus.
The House Ways and Means Committee has created 11 individual working groups, each with the responsibility to reform the tax code in their area. The working groups will forward their recommendations to the Joint Committee on Taxation, which will prepare a final report for the full Ways and Means Committee.
“The federal government can enhance or impede the development of American oil and gas. Changes to oil and natural gas tax provisions would have an immediate impact. If Congress eliminates [tax] provisions, such as the immediate expensing of intangible drilling costs [IDCs], independent producers would drill 25 to 40% fewer wells,” the IPAA said.
“As the committee considers policies related to America’s oil and gas resources, it must recognize that federal actions can dramatically affect the future of the nation’s energy security and the nation’s ability to meet the potential for its economic growth.” It urged Congress to reject “ill-advised calls for adverse restrictions on capital.”
The Obama administration has proposed unwinding a number of tax benefits for oil and gas producers, including expensing of IDCs; percentage depletion; the passive loss exception for working interests in oil and gas properties; geological and geophysical amortization; the marginal well tax credit; the enhanced oil recovery tax credit; and the 199 manufacturing deduction, which allows energy firms and other companies to deduct 6% of their qualifying incomes. .
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