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March 29th, 2012 
FAKE NEWS for the Zionist agenda WASHINGTON (Reuters) – President Barack Obama and some fellow Democrats want to slash tax benefits now enjoyed by large oil companies such as Exxon Mobil Corp and Chevron Corp to raise up to $40 billion over a decade in government revenues.
That effort hit a roadblock on Thursday when the Democratic-controlled U.S. Senate voted to hold back legislation backed by most Democrats to repeal some of the biggest tax benefits for the five biggest oil companies, in a 51-to-47 vote.
Four Democrats sided with Republicans in the vote against moving forward on the legislation.
With gasoline prices rising past $4 a gallon in some parts of the United States, energy and the companies that produce it are hot topics in the Republican race to take on Obama in November.
Below are major provisions of the tax code used by oil and gas companies. Revenue estimates are over a decade.
INTANGIBLE DRILLING COSTS
When Exxon Mobil wants to drill a well to look for oil, it can under present law “expense,” or quickly deduct, the costs for labor, drilling and rig time. These are known in the tax code as “intangible drilling costs.”
Oil companies say these costs are the equivalent of their research and development costs, like the effort and resources Apple Inc engineers expend to create their next big gadget.
Critics say this tax break, dating to the beginning of the code, is unjustifiable. As a general rule, though there are other exceptions, expenses incurred by a business for the intent of producing future income must be written off over time, not right away.
The code now allows independent oil companies — mid-sized competitors such as Marathon Petroleum Corp and Occidental Petroleum Corp — to recover 100 percent of intangible drilling costs in the first year.
The largest oil companies — including the “Big Five” players Exxon, Chevron, BP Plc, ConocoPhillips and Royal Dutch Shell Plc — can recover 70 percent of these costs in the first year.
DUAL CAPACITY RULES
The United States taxes companies on profits earned both inside the United States and abroad in a system known as worldwide taxation. To prevent companies from being taxed twice on the same income, they can claim a tax credit for taxes paid to a foreign country. The credit reduces their U.S. taxes.
Oil companies are known as “dual capacity” taxpayers because they pay taxes to foreign countries and they also get an economic benefit from those countries. Energy companies are often subject to higher corporate tax rates than other corporations doing business in a given country.
Obama and other critics say this higher rate amounts to a royalty or economic benefit for access to the country, not an income tax to be credited against U.S. taxes.
The industry says there is no evidence that companies are using royalties as foreign tax credits.
PERCENTAGE DEPLETION
The percentage depletion provision does not apply to the Big 5 oil producers, but independent firms can claim it.
The provision lets companies take a tax deduction of 15 percent a year for the depletion of oil and gas resources in the ground, instead of deducting the decline in the value over time.
The Obama administration wants to repeal this, citing its Pittsburgh G20 pledge to phase out subsidies for fossil fuels.
The administration argues that the provision causes market distortion, skewing investments toward oil and gas that might go elsewhere under neutral tax rules.
The industry says the deduction is a vital part of the economics of their cost recovery, and says the rules only allow the smallest producers to benefit because of quantity limits.
DOMESTIC ACTIVITIES DEDUCTION
Many big U.S. companies are entitled to a 9 percent tax deduction from their income from property manufactured, grown, extracted or produced in the United States.
Oil companies can claim a 6 percent deduction for this.
Critics say oil production is not manufacturing, and the oil industry does not need the deduction with oil prices so high.
The oil industry counters that taking the benefit away from it alone puts the government in the business of picking winners and losers.
(Reporting By Kim Dixon; Editing by Kevin Drawbaugh)
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