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  • Energy Tax Facts
  • 2 Sep 21

Illinois Petroleum Resource Board: The Most Targeted Oil & Gas ‘Subsidies’ Aren’t Subsidies at All

More than 50 lawmakers are pushing for the repeal of oil and natural gas industry “subsidies” as part of the budget reconciliation bill currently being hashed out in Congress. But ironically, the two most notable “subsidies” in their crosshairs – the expensing of intangible drilling costs (IDCs) and the percentage depletion allowance – aren’t subsidies at all.

A subsidy is defined as “a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.” In other words – a direct government handout. IDCs and percentage depletion are in no way, shape or form government handouts. They are actually tax provisions that have been part of the United States tax code for 108 and 95 years, respectively. The U.S. tax code has always allowed the oil and gas industry, along with a vast majority of the manufacturing sector and households, to utilize tax provisions so that they are only taxed on net income.

IDCs and percentage depletion are also anything but “Big Oil” tax breaks. IDC deductions and percentage depletion are used almost exclusively by small, independent producers who produce less 1,000 barrels of oil per day (BOPD). In Illinois, all but four of the state’s 15,000 operators produce less than 1,000 BOPD. The 50-plus lawmakers targeting these tax provisions say they “simply enhance profits of fossil fuel companies” and do “nothing” to create jobs and reduce dependence on foreign oil, but the opposite is true. …

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