US bill raising oil company taxes passes Senate, on way to Bush

US bill raising oil company taxes passes Senate, on way to Bush

Washington (Platts)--12May2006

Legislation that slashes US taxpayers' obligations by $70 billion, but
that ups the taxes of some of the largest oil companies, passed the US Senate
last night and is on the way to the White House for President Bush's
signature.

The tax reconciliation rolls back a tax break included in last year's
energy bill that allowed oil companies to amortize their geological and
geophysical spending over two years, instead of the previous five years. At
the time the energy bill passed in 2005, the Joint Committee on Taxation
estimated the change could cost the US Treasury between $190 million and $450
million annually in lost tax revenue.

The new bill, which passed the House earlier in the week, returns the
amortization period to five years, but only the largest companies -- those an
average daily worldwide production of crude of at least 500,000 barrels for
the taxable year, gross receipts in excess of $1 billion in the last taxable
year, and an ownership interest in a crude oil refiner of 15% or more.

But the bill did not include a Senate-passed provision that would have
changed for major oil companies the accounting method for valuing inventories,
which would have cost them an estimated $5 billion.

Oil companies argued that changing the last in, first out (LIFO)
accounting rules would have amounted to a windfall profits tax on the oil
companies. By using LIFO, companies pay taxes on the value of crude
inventories when they were established, rather than the value when they file
their taxes.

Bush is expected to sign the tax reconcilation bill.

--Cathy Landry, cathy_landry@platts.com

For similar news, take a trial to Platts Oilgram News at
http://oilgramnews.platts.com.

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.