By Tom Ochsenschlager, CPA, J.D.
In late May, the Senate Finance Committee passed, with a tie vote 14 to 14, S. 1298, the Clean Energy for America Act. S. 1298 was based on many of the provisions in Treasury’s Green Book that was released earlier that week.
The bill includes many provisions that would provide tax benefits for conserving energy related to atmospheric emissions. But, perhaps most importantly for Texas and other energy producing states, S. 1298 repeals a list of tax incentives for fossil fuel production:
- the two-year amortization permitted for geological and geophysical expenditures,
- the deduction for tertiary injectants,
- the ability to expense intangible drilling costs,
- the percentage depletion deduction,
- the enhanced oil recovery credit,
- the marginal wells credit, and
- the ability for oil and gas publicly traded partnerships to avoid being taxed as corporations.
Of less importance to the Texas economy, the bill would also repeal the following:
- the advanced coal project credit,
- the seven-year cost recovery for Alaskan and natural gas pipelines,
- capital gains’ treatment for certain coal royalties, and
- the coal gasification credit.
It seems unlikely that S. 1298 will pass both the House and the Senate.
However, given the concurrent issues of climate control and federal budget excess, we need to be aware that some of these provisions could be included in other legislation that is more likely to become law.
TXCPA’s Federal Tax Policy Committee is monitoring this issue. Please email Staff Liaison Patty Wyatt at firstname.lastname@example.org if you see any tax proposals that are negative to Texas’ energy industries gaining traction.