• Energy Tax Facts
  • 27 Jun 17

ACCF Touts Importance of Energy Tax Provisions

As Energy Week kicks into gear in Washington, D.C. this week, events and commentary from across the country continues to tout the important role of increased oil and natural gas development for our economy, security, and environment. Topics have ranged from the technology behind new energy development to the important role of the tax code for reinvestment in future production.

To discuss this important topic, Margo Thorning, Senior Economic Policy Advisor at the American Council for Capital Formation (ACCF), wrote in the Washington Examiner on the important role of tax provisions that support continued oil and natural gas development in our nation.  In her piece, Thorning highlights the important role of provisions such as the Intangible Drilling Cost deduction, a decades old part of the tax code that enables companies to continue to invest in new energy development. From the column:

While opponents of oil and gas have labeled these tax provisions as “subsidies,” the truth is that they are the same legitimate deductions for research and labor costs used by non-energy companies — technology companies, manufacturers, and other domestic industries. Yet, that doesn’t stop them from continuing to call for their elimination. In late May, 16 Democrats from the House Sustainable Energy and Environment Coalition sent a letter to the House Ways and Means Committee urging the elimination of many standard tax deductions, such as the Domestic Manufacturers Deduction, solely for oil and gas producers, even though this provision is widely used by virtually all manufacturers.

When a company invests in drilling for oil or gas, it is allowed to deduct those intangible expenses – labor and site preparation, for example – that don’t produce a physical asset, much like the research costs incurred by technology companies. These intangible drilling costs can be deducted immediately or over a period of 60 months, providing companies the flexibility to continue to reinvest in their core business of exploration. The federal tax code also allows oil and gas companies to deduct expenses for conducting geological and geophysical work, including the costs incurred for geologists, seismic surveys, and the drilling of core holes, for similar reasons.

… In the days, weeks and months ahead, policymakers should maintain their focus on permanent, comprehensive tax reform and remain committed to ensuring that no sectors of the economy are singled out for unfair treatment.

Tax reform efforts continue in Washington with many questions and answers still to come in months ahead. As debate continues, the critical intersection of energy prosperity and the tax code must remain a top priority for lawmakers and the administration for the benefit of all of us why rely on energy every day to fuel our lives.