Fossil Fuels Tax Enhance Proposals Detailed In Treasury’s “Greenbook” – Tax

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On May 28, 2021, the U.S. Department of the Treasury released

its General Explanations of the Administration’s

Fiscal Year 2022 Revenue Proposals, also known as the

“Greenbook.” The Greenbook provides additional detail

regarding the Biden Administration’s prior proposals (discussed

here and here) to increase taxes on fossil fuel

activities as part of its “American Families Plan.” It

remains to be seen whether these proposals will be enacted into


Repeal fossil fuel “tax preferences,”

including the MLP tax regime

The Greenbook proposes to repeal 13 identified “tax

preferences” currently enjoyed by the fossil fuels industry.

Such repeal is projected to raise $35 billion of tax revenue over

the ten-year period through fiscal year 2031. Six of those

proposals (all effective for tax years beginning after 2021) would

account for over 80% of that projected revenue:

  • repeal of the deduction for intangible drilling costs,
  • repeal of percentage depletion for oil and gas wells,
  • repeal of the 15% credit for eligible costs attributable to

    enhanced oil recovery projects,
  • repeal of the deduction for tertiary injectants used as part of

    a tertiary recovery method that increases the recovery of crude

  • increase of the two-year amortization period for geological and

    geophysical expenditures of independent producers to seven years,

  • repeal of percentage depletion for hard mineral fossil


The Greenbook also proposes to eliminate the passthrough tax

regime for MLPs/PTPs with qualifying income and gain from

activities relating to fossil fuels, effective for tax years

beginning after 2026. That proposal is projected to raise

approximately $1 billion over five years (2027 through 2031).

For a complete list of the 13 identified tax preferences, the

proposed effective date of their elimination, and the projected

increase in tax revenue, click here.

Reinstate, expand, and double the rate of Superfund

excise taxes

The Greenbook proposes to reinstate the Superfund excise taxes

that expired in 1996 (described in more detail below), at double

their prior rates. The scope of the excise taxes would also be

expanded beyond conventional crude oil and its products to

encompass other crudes such as those produced from sources such as

bituminous deposits and kerogen-rich rock. The reinstated and

expanded taxes would apply to taxable periods beginning after

December 31, 2021, and would expire after 2031. They are projected

to raise revenue of $25.3 billion over ten years.

Details Regarding Superfund Excise Tax on Crude Oil

The Superfund was financed in part by an excise tax of 9.7 cents

per barrel of crude oil that applied from 1987 through 1995. Click

here and here to view the expired statute. It was

collected from refiners, importers, users, and exporters in the

same manner as the current 9.0 cents per barrel Oil Spill Liability

Trust Fund excise tax (recently extended through 2025). The

Greenbook proposal to double the historic rate would mean that, if

enacted, the new excise tax rate would be 19.4 cents per


Details Regarding Superfund Excise Taxes on Select


From 1987 through 1995, an excise tax also applied to the sale

by the manufacturer, producer or importer of 42 specified

chemicals. Click here and here to view the expired statute. The tax rate

ranged from 22 cents to $4.87 per ton. The highest ($4.87 per ton)

rate applied to certain petrochemicals to the extent they were not

put to a “qualified fuel use”: acetylene, benzene,

butane, butylene, butadiene, ethylene, naphthalene, propylene,

toluene and xylene. A rate of $3.44 per ton applied to methane not

used as fuel, used in fuel, or put to a “qualified fertilizer


A similar tax applied to the importation of other chemicals sold

or used by an importer, to the extent the 42 specified chemicals

constituted more than 50% of the weight or value of the chemical,

including 50 chemicals specifically identified in the statute as

satisfying this requirement. Click here and here to view the expired statute.

The Greenbook proposes to reinstate these taxes also at double

their historic rates.

Modify Oil Spill Liability Trust Fund


The Greenbook also proposes to expand the scope of the 9.0 cents

per barrel excise tax that finances the Oil Spill Liability Trust

fund to (1) cover other crudes such as those produced from

bituminous deposits and kerogen-rich rock and (2) repeal an

administrative interpretation that currently allows a

“drawback” of that tax when products subject to the tax

are exported. Those provisions are projected to raise revenue of

$513 million over ten years.

Modify Taxation of Foreign Fossil Fuel


The Greenbook proposes to repeal the exemption under current law

from global intangible low-taxed income (“GILTI”) for

foreign oil and gas extraction income (“FOGEI”), and to

codify the safe harbor for dual capacity taxpayers included in the

current Treasury regulations for determining the portion of a levy

that is paid for a specific economic benefit (making the safe

harbor the sole method for determining the creditable portion of

the levy). Those proposals would generally be effective for tax

years beginning after 2021 and are projected to raise $86.2 billion

over the ten-year period through fiscal year 2031 (98% of which is

attributable to the repeal of the FOGEI exemption from GILTI).

For a broader discussion of the Greenbook’s international

tax proposals, click here.

We will continue to monitor developments and will provide

further updates as more details are released. In the meantime,

Baker Botts would be pleased to assist you in your analysis of

these proposals.

The content of this article is intended to provide a general

guide to the subject matter. Specialist advice should be sought

about your specific circumstances.

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