Dallas, Texas (PRWEB) May 20, 2013
With a budget deficit projected to exceed income by nearly $845 billion later this year, both Congress and the federal administration have recently proposed spending cuts and decreases of tax benefits to reduce the debt. Among the measures proposed are those that would have a direct impact on the oil and gas industry. If approved, such issues could include the repeal of expensing of intangible drilling costs, the percentage depletion allowance, the domestic manufacturing deduction, and the exemption to the passive loss limitations for interests in the industry.
The Texas Society of CPAs’ Federal Tax Policy Committee addressed these issues in its Analysis of Legislative Proposals to Repeal Certain Tax Treatments of Domestic Oil and Gas Exploration and Development. The committee agrees that reducing the deficit is of utmost importance, but any effort to cut tax incentives for oil companies and raising taxes on oil and gas exploration and development should be weighed against its potential to exacerbate the current underemployment issue and the need for a secure source of energy. As noted in the analysis, the committee believes repealing said tax benefits and allowances could adversely impact the oil and gas industry, and the economies of Texas and the U.S.
In addition, the committee feels that proposed changes to the tax code would result in a significant shift in the industry’s capital investment, contributing to slower economic growth and potential job losses for many small independent producers and drilling companies.
Nationally, the industry supplies direct and indirect jobs to 9.6 million workers, or 5.5 percent of all U.S. employment. A vast majority, 95 percent, of the nation’s oil and natural gas wells are actually drilled by small businesses. These independent producers serve an integral role in our nation’s oil and gas industry and rely upon the tax incentives that could be repealed.
Also of note, the industry has invested more than $2 trillion in domestic capital since 2000, and oil and natural gas companies pay nearly $100 million a day in income taxes. Oil is a key ingredient in making thousands of products that make our lives easier. Approximately 11 percent of U.S. oil goes into the making of petrochemicals for common everyday products like antibiotics, deodorant, clothing, computers, phones, plastics and tires. Maintaining current tax policies to encourage domestic oil and gas exploration and development by small business independent producers helps protect capital and jobs from shifting overseas.
Lastly, the committee concludes that tax policies and accounting treatments are appropriate and needed to attract investors to oil and gas exploration within the U.S. Without such tax treatments, capital and resources may not be available for future oil and gas projects, which will adversely affect employment and economic recovery, and increase the dependence on less stable foreign energy suppliers.
About Texas Society of CPAs
TSCPA (http://www.tscpa.org) is a nonprofit, voluntary, professional organization representing Texas CPAs. The Society has 20 local chapters statewide and has more than 27,000 members, one of the largest in-state memberships of any state CPA society in the United States. One of the expressed goals of TSCPA is to speak on behalf of its members when such action is in the best interest of its members and serves the cause of CPAs in Texas, as well as the public interest.
TSCPA has established a Federal Tax Policy Committee (FTP) to represent those interests on relevant tax matters. The FTP has been authorized by the TSCPA Board of Directors to submit comments on matters of interest to committee membership. The views expressed herein have not been approved by the TSCPA Board of Directors or Executive Board and, therefore, should not be construed as representing the views or policies of TSCPA.