President Biden’s “Made in America Tax Plan” released in early April included a proposal to make changes to the tax code that favor specific forms of clean energy. Then, in late May, President’s budget proposal, clarified the strategy and now seeks to eliminate what the Administration contends are “tax preferences” for fossil fuels. However, many of these tax preferences identified by the administration are similar to other provisions of the tax code which are used by other industries.
Among these are benefits for enhanced oil recovery, intangible costs and a provision allowing companies to deduct up to 15% of a well’s revenue. Most significantly, the reform would include changes to the taxation of foreign fossil fuel income.
Politico estimates that President Biden’s proposals would save $121 billion by 2031 with the majority coming from the reformation of foreign fossil fuel income at $86.2 million.
As the global and national energy industries look to resume in force after the pandemic, new taxes on the industry will face stiff opposition. Additionally, many of the Council’s members are directly involved in the development and deployment of carbon reduction technologies and innovations which would be impacted by these proposals.
The tax proposals would still have to pass Congress, which has the ultimate power to amend the tax code. When former President Obama proposed similar changes to the tax code during his administration, he faced bipartisan opposition. However, it is possible that the slim Democratic majority could make changes through the budget reconciliation process.
The Council has been working hard opposing these changes and has been urging Democrats who represent energy producing districts to show opposition to these proposed changes. Congressman Henry Cuellar, along with four other Democrats in the House, sent a letter to leadership indicating their opposition to the proposed changes. The Council will be addressing these proposals and potential impacts on the industry during an upcoming webinar on June 29, in collaboration with EY and sponsored by Halliburton.
For more information about the Council’s advocacy efforts, contact SVP Government Affairs & Counsel Tim Tarpley.
Maria Suarez, Director Government Affairs, writes about industry-specific policies for the Energy Workforce & Technology Council. Click here to subscribe to the Council’s newsletter, which highlights sector-specific issues, best practices, Council activities and more.