US Chamber of Commerce bemoans 'double taxation' on oil industry

Washington (Platts)--4Jan2006

US Chamber of Commerce officials Wednesday decried a provision in the
Senate tax reconciliation bill that would tax 2005 oil inventories at a higher
level than that used for other commodities. 

     The bill also fails to renew tax breaks for US companies, such as oil and
natural gas companies, operating in foreign countries, which the chamber said
would put American businesses at a competitive disadvantage. 

     Passing the Senate 64-43 on Nov 18, the bill, which would add $60-bil to
federal coffers, is set for Senate-House of Representatives negotiation next
month.

     Speaking at a press briefing here, Chamber President and CEO Tom Donahue
said the business group would "press for removal" of the provisions, which he
said "constitute a double taxation on energy companies through forced
bookkeeping gimmicks and denial of longstanding tax credits."

     Under current tax laws, energy companies and others pay taxes on the cost
of inventories at the time they are first established, the so-called "last in,
first out" approach. The Senate bill would repeal the LIFO valuation and make 
energy companies pay taxes on the current value of inventories. 

     The upshot, said Bruce Josten, the chamber's top lobbyist, is that energy
companies will see a tax increase and other industries will not. "This is a 
punitive measure to get $5-bil out of one industry," he said, citing the
expected tax gain under the oil industry-related provisions.

     Proponents of the Senate measure have pointed to record oil industry
profits as justification for effectively raising taxes on inventories.

     Separately, Josten said that if Congress fails to extend the tax credit
for foreign investments, US companies, which he said have been forced to
operate overseas because of policy limits on domestic production, will not be
able to compete with foreign oil companies for overseas supplies. 

		--Dan Whitten, daniel_whitten@platts.com

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