H.R.383 - End Oil and Gas Tax Subsidies Act of 2025 (119th Congress)
Summary
H.R.383, the "End Oil and Gas Tax Subsidies Act of 2025," aims to amend the Internal Revenue Code of 1986 to repeal various tax subsidies currently benefiting oil and gas companies. The bill targets several specific areas, including amortization of geological and geophysical expenditures, credits for producing oil and gas from marginal wells and enhanced oil recovery, and deductions for intangible drilling and development costs. It also seeks to repeal percentage depletion for oil and gas wells and the deduction for tertiary injectants.
Further provisions include ending the exception to passive loss limitations for working interests in oil and gas properties, disallowing qualified business income deductions for oil and gas activities, and prohibiting major integrated oil companies from using the last-in, first-out (LIFO) accounting method. The bill also modifies foreign tax credit rules applicable to dual capacity taxpayers and clarifies tar sands as crude oil for excise tax purposes.
The intended effect is to eliminate tax advantages for oil and gas companies, potentially increasing their tax burden and reducing their profitability.
Expected Effects
The bill's passage would likely lead to increased costs for oil and gas production, potentially impacting energy prices and investment in the sector. It could also incentivize a shift towards renewable energy sources due to the reduced financial advantages of fossil fuels.
Conversely, the elimination of these subsidies could lead to reduced investment in domestic oil and gas production, potentially increasing reliance on foreign sources. The changes to accounting methods and foreign tax credits could also significantly impact the financial reporting and tax liabilities of major oil companies.
Potential Benefits
- Reduced Environmental Impact: By removing subsidies, the bill may discourage fossil fuel production and consumption, leading to lower emissions and pollution.
- Increased Government Revenue: Repealing tax breaks could increase federal revenue, which could be used to fund other government programs or reduce the national debt.
- Fairer Competition: Eliminating subsidies could level the playing field between fossil fuels and renewable energy sources, promoting a more competitive energy market.
- Incentivizes Renewable Energy: By making fossil fuels less financially attractive, the bill could encourage investment and innovation in renewable energy technologies.
- Addresses Climate Change: Reducing support for fossil fuels aligns with efforts to mitigate climate change and transition to a cleaner energy economy.
Potential Disadvantages
- Increased Energy Costs: The elimination of subsidies could lead to higher energy prices for consumers, particularly in the short term.
- Job Losses: The oil and gas industry could experience job losses due to reduced production and investment.
- Reduced Domestic Energy Production: The bill could decrease domestic oil and gas production, potentially increasing reliance on foreign sources and impacting energy security.
- Economic Impact on Oil and Gas States: States heavily reliant on the oil and gas industry could face economic challenges due to reduced activity.
- Potential for Unintended Consequences: Changes to tax laws and accounting methods could have unforeseen economic consequences.
Constitutional Alignment
The bill primarily deals with taxation and regulation of interstate commerce, both of which fall under the powers granted to Congress by the Constitution. Article I, Section 8 grants Congress the power to lay and collect taxes, duties, imposts, and excises, as well as to regulate commerce with foreign nations and among the several states.
The bill does not appear to infringe upon any specific constitutional rights or protections. The changes to tax laws and regulations are within the purview of Congress's legislative authority.
However, some may argue that the bill could potentially impact individual liberties or property rights if it leads to significant economic hardship or infringes upon contractual obligations. Such arguments would likely need to be evaluated on a case-by-case basis.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).