If death and taxes are the only sure thing in life, you might say that corporate lobbyists are spending a lot of time trying to avoid at least one of the two. Few industries understand this better than oil and gas. This has benefited for at least a century from several tax rules that save billions of dollars in payments per year.
Countries of the world I agreed to phase out Fossil fuel subsidies. The Biden administration has pledged to do them domestically. Still, they last.
Now, Congressional Republicans and the Trump administration have decided to enact a $4.5 trillion tax cut and are desperately searching for income and spending cuts to pay them. Some environmental advocacy groups highlight the tax benefits that flow into one of the world’s most profitable industries, estimated at $11 million at the end of 2034.
Meanwhile, the oil and gas industry plays both crime and defense, and is trying to maintain profits while working to enact at least one new thing.
One of the biggest sources of new revenue from IRAs was the alternative minimum tax for companies, which aimed to prevent companies reporting significant profits to investors from using loopholes to pay almost the tax.
Renewable energy surged in 2024, and so did fossil fuels
The minimum tax applies to all industries. In the case of oil and gas, it hit some of the large, independent excavators, especially (as opposed to “integrated” majors such as Exxonmobil and Chevron). The money involved is important: according to New analysis by United finishes handouts of contaminantsreported that it would pay nearly $200 million to the Treasury under the lowest tax, since it was enacted in 2022.
Sen. James Lankford (R-Okla.) has introduced a bill that changes the calculations by allowing oil companies to deduct some of their biggest expenses against the minimum tax.
Rankford invoices are included as a Policy Blueprint Priority of the American Exploration & Production Council, representing large independent oil and gas companies.
Lucas Shankar Ross, author of the new lowest tax analysis and deputy director of the Earth’s Friends of the Earth’s Climate and Energy Justice Program, noted that the Lankford bill would either deepen the deficit or force more cuts to programs like Medicaid and other support for low-income Americans.
“I think it’s embarrassing to imagine as much as I can now,” Shankar Ross said.
The oil and gas sector has been the industry’s leading contributor to Lankford’s campaign in recent years, offering more than $546,000 since 2019. According to OpenSecrets.
Oil companies are removing renewable targets – more importantly, expanding fossil fuels
A Lanchford spokesman said, “Promoting American energy independence is a reversal of the Biden administration’s policy: domestic energy production will be stronger and oil and gas producers will be stronger.
But when it comes to the biggest oil and gas companies, their focus may be elsewhere. When the American Petroleum Institute publishes a five-point policy roadmap for the Trump administration and Congress Novemberemphasised the need to maintain what is known as “significant international tax provisions.”
According to Biden administration estimates, one of these provisions, the so-called dual-capacity taxpayer regulations, is expected to save $71.5 billion over a decade.
Broadly speaking, federal tax laws allow businesses to tax taxes on US tax bills that they pay to foreign governments with foreign income in order to avoid being taxed twice. The double capacity taxpayer rules allow oil companies to have a wide range of latitudes in defining what exactly constitutes tax payments, and as a result, says Zorka Milin, policy director for the Financial Accountability and Corporate Transparency Coalition, which works to combat the harmful effects of illegal financial matters.
In fact, in some cases, US oil and gas companies Pay more with taxes and other payments More to foreign governments than they do to the US.
The fossil fuel industry is trying to make buildings hooked to gas. This is the way.
Exxon I paid billions of dollars Overseas royalties in 2023 alone include $1.8 billion to the United Arab Emirates, $1 billion to Alberta, Canada, and $761 million to Nigeria. Chevron I paid about $2 billion Royalties to foreign governments.
Millin said it is unclear that Exxon, Chevron and other oil companies may have charged these royalty payments as credits to U.S. taxes, but could hit billions of dollars each year.
“They pay a lot to governments around the world, and some of them are in pretty suspicious places. The humiliation of their injuries is used to offset the payments they pay in the US,” Millin said. “This is one way our tax laws go overseas to these companies and help them drill, babies and train, but not domestically.”
Exxon, Chevron, and the American Petroleum Institute did not respond to requests for comment.
Alex Museanu, a senior policy analyst at the Tax Foundation, supports growth-enhancing tax policies, but said many of the petroleum industry-specific tax rules are not eligible for subsidies. He argued that some of the rules that allow oil companies to deduct drilling costs ahead of time rather than exceeding the productive well life, put the industry on an equal footing with other sectors. Oil companies often have high costs in advances that generate returns over the years, which could put them at a disadvantage in other industries and taxes.
Regarding royalties, these payments to mineral owners are generally tax deductible. But the double capacity taxpayer rule offers a much better deal by turning them into credits. Company A won $100 million in profit, paid $5 million in royalties and paid 21% corporate income tax. Taking royalty payments as credits rather than deductions will save you nearly $4 million. (Remember that US tax laws are complicated, so restrictions may apply.)
Milin argued that Congress should consider foreign tax credits. Especially since these benefits effectively subsidize training abroad, as they are looking for more income.
“When we have more clearly America’s number one international economic policy on other issues, I think it’s more likely that they see the way tax laws that contradict it,” Millin said.
