Congress moves to close $10B oil-and-gas tax loophole

What it does

This bill eliminates ten major federal tax breaks for oil and gas companies, effective January 1, 2025. It removes deductions for geological surveys, drilling costs, and equipment depreciation; eliminates credits for marginal wells and enhanced oil recovery; repeals percentage depletion allowances; and bars major integrated oil companies (those producing 500,000+ barrels daily with $1B+ revenue) from using LIFO accounting. It also restricts foreign tax credits for dual-capacity taxpayers and expands the excise tax on crude oil to include tar sands and oil shale.

Why we flagged it

The bill's sole functional purpose is to eliminate ten specific federal tax preferences for oil and gas producers. It is a straightforward revenue-raising measure targeting a single industry sector, with no riders or unrelated provisions.

What the text implies

• The LIFO accounting ban applies only to 'major integrated oil companies' (500K+ barrels/day, $1B+ revenue, 75K+ refinery runs), potentially exempting smaller independent producers and creating a two-tier tax system within the industry.
• The foreign tax credit restriction on 'dual capacity taxpayers' may reduce U.S. oil companies' ability to offset foreign taxes, potentially increasing effective tax rates on overseas operations and affecting global competitiveness.

The full analysis lists 5 implications of this text.

Who it affects

Ordinary citizens benefit through reduced federal revenue loss (estimated $10–15B over 10 years based on prior CBO analyses of similar provisions), which can fund public services or reduce deficits. The bill targets only large integrated oil companies and does not raise consumer energy prices directly; it closes tax loopholes that shift costs to other taxpayers.