Dallas, TX (PRWEB) April 29, 2011
With a budget deficit and expenditures exceeding nearly $1.4 trillion, 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.
This week, federal government officials have asked for specific details of how repealing multi-billion dollar tax subsidies currently used by oil companies would affect job creation, and the overall economy in America.
The Texas Society of CPAs’ Federal Tax Policy Committee addressed this issue in its “Analysis of Legislative Proposals to Repeal Certain Tax Treatments of Domestic Oil and Gas Exploration and Development”(see attached). 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 state’s oil and gas industry, and the economies of Texas and the U.S.
In addition, it also 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.
Currently in Texas, the oil and gas industry provides more than 1.7 million jobs and accounts for nearly 25 percent of the state’s economy. Nationally, the industry supplies jobs to 9.2 million workers, which 7.5 percent of the entire U.S. economy.
Also of note, the industry has invested more than $2 trillion in domestic capital in the last 10 years and has paid nearly $100 billion in federal income taxes in 2008 alone. When taken into consideration, off shore oil wells also account for 40 percent of oil consumed in the U.S. This action helps the country become less dependent on foreign energy outlets. Maintaining current tax policies that continue to promote domestic oil and gas exploration and development helps prevent revenue and jobs going to foreign producers.
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, economic recovery and 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 29,000 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 the behalf of it members when such action is in the best interests of its members and serves the cause of CPA in Texas, as well as the public interest.
The 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 view or policies of the TSCPA.
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