,‘ CONGRESSIONAL ; RESEARCH A SERVICE RRRRRRR OF "1i".“',7'E7M‘ Illltiiifumfim 0 iflflflifllllll s ., gyff. gm OIL WINDFALL PROFITS TAX ISSUE BRIEF NUMBER IB80010 AUTHOR : Gelb, Bernard A. Economics Division Nelson, Richard A. Economics Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MA JOR ISSUES S YSTEH DATE ORIGINATED glgggggg DATE UPDATED g_§4g_6_4§9_ FOR ADDITIONAL INFORMATION CALL 287-5700 0826 CRS- 1 IB8001O UPDATE-08/26/80 Z§§!§-2§ElEl$lQE In an attempt to reverse the Nation's growing use of foreign petroleum and to encourage greater domestic oil production, the President began in June 1979 a gradual process of removing domestic petroleum price controls that have existed in some form since August 1971. Despite the steep world oil price increases and supply interruptions during the middle to late Seventies, U.S. consumption of petroleum and relative dependence on foreign oil had continued to exceed 40% through early 1979. Because an increasing share of domestically—produced oil will the allowed to sell at world oil prices, U.S. oil companies are anticipated to derive substantially higher revenues and profits from the new price levels. Many outside the oil industry hold that much of the, additional profit resulting from actions taken to achieve national energy policy goals will be an unearned "windfall" that should be recovered to assist in financing other energy objectives and related energy concerns, and for equity and income-distribution reasons. Opponents of the tax argue that it will yield at least two unwanted results. First, they say, the tax will remove some of the profits from oil operations that would otherwise have gone into exploration activities (both here and around the world), which would have increased the oil and gas supplies available for U.S. energy needs. Second, the tax will further reduce financial incentives to produce ,more oil, < gecially from higher—cost marginal properties, and some incentive to engage in more risky and/or deeper exploration activities. Even where there is agreement with (or acquiesence to) the levying of a "windfall profits tax," there are differences as to the rate structure and use of revenues from such a tax. The bill ultimately produced by Congress, the Crude Oil Windfall Proft Tax Act of 1980, was signed into law by President Carter on Apr. 2, 1980. E駧§BQQE2-AH2-BQLlQZ-AE&LZ§l§ Windfall profits tax (WPT) proposals are mechanisms for the redistribution of income and reallocation of resources -- the shifting of anticipated oil company revenues to the general public or to low-income groups, or for use in energy conservation and alternative energy development. There is concern that higher energy prices resulting from decontrol will redistribute income from low— and middle—income groups to oil company stockholders and other owners of oil producing properties, who tend to have higher than average incomes. The latter groups contend that such redistribution is an appropriate correction of distortions in real income distribution caused by oil price controls. It follows that much of the debate over WPT centers around questions of the extent to which any tax will discourage domestic production of oil, to whom the increased revenues from decontrol should an rue, and how the burden of any such tax should be apportioned among oil producers. Explicit in the proposals for a WPT is the contention that a substantial portion of the additional profits to be earned by the oil companies (as a result of decontrol) from properties that were producing oil before 1979 should be considered excessive. This is asserted on the grounds that the CRS- 2 IB80010 UPDATE-08/26/80 world price is an artificially set monopoly price, rather than a truly economic (free market) price, that much of the additional profits do nc represent a reward for risk undertaken, and that, for many properties already producing oil, higher prices and profits would provide little incentive for additional production since little additional oil can be obtained. Opponents of HPT respond that supply and demand interaction rather than production cost is the normal and appropriate determinant of price and replacement value, and that the price charged by an OPEC country - even though a monopoly price -- is the true replacement value. Only this true economic price, in this line of reasoning, will provide sufficient funds to undertake new exploration, development and production. The importance of prices in the debate is_ revealed in the approach to measuring "excess profits.” Usually, the measurement or assertion of excessive profit levels concerns a comparison with a base period income or a specified rate of return on investment. Such comparisons entail problems such as (1) determining the appropriate base period or the appropriate definition and valuation of assets, and (2) allowing for normal variations among firms in an industry. In contrast, the WPT proposals measure “excess profits" by using base price standards rather than base income standards. Also, in an attempt to handle the problem of intra-industry variations, special provisions for small and/or independent producers are added to the basic RPT structure. According to WPT proponents, a substantial portion of the revenues gained from decontrol should be redistributed because much of those revenues will be from oil that ,would have been produced profitably in the absence c decontrol. And WPT advocates say that the additional receipts should be used to further important goals of energy policy -- energy conservation, switching from oil use, and development of alternative energy sources - and to decrease hardship among low and middle-income families caused by higher energy prices. w on the other hand, some believe that certain categories of oil -- heavy crude, "stripper" oil (from wells producing 10 barrels per day or less), and oil produced by advanced ("tertiary") recovery techniques, for example -- reguire the economic incentive offered by world prices because of the higher costs associated with their production. Too great a reduction of the revenue gains resulting from decontrol, they say, might act to reduce significantly or eliminate producer incentives to raise domestic production. A departure from the above lines of argument for and against a IPT can be found in the thesis of analysts who contend that decontrol itself will result in little or no further rises in overall oil industry revenues. (This was originally postulated by Charles Phelps and Rodney Smith of the Rand Corporation.) Petroleum price controls and other regulations, they say, have not prevented domestic petroleum product prices from being set at world levels; but given their nature, have resulted in revenues being shifted from producers (or producing divisions of integrated companies) to refiners (or refining divisions of integrated companies). Starting from such circumstances, decontrol would merely shift revenues back from refiners +* producers, only the present level of revenues or those generated by futui OPEC price increases would be available for taxation of the kind being considered, and a HPT would greatly reduce present oil industry profitability and its capacity to invest in additional production and refining facilities. Opposing this approach are those who say that it has not been substantially proven that domestic petroleum product prices egual those abroad; or, if they are at world levels, it would indicate "excessive" oil industry profits that CRS- 3 IB80010 UPDATE-08/26/80 should be taxed, and redistributed. §§Q§E2-QlL_EBl§§-El§EQ§Z Federal controls on oil have covered virtually all phases of the production, refining, and distribution of crude oil and petroleum products. Controls originated in the Economic Stabilization Act of 1970, which provided the President with very broad powers to control wages, prices, rents and more. The Act also provided the President with the authority to allocate crude oil and petroleum products, to counteract any anti-competitive aspects of oil shortages, and to eliminate any windfall profits. Although the authority granted under this Act, as subsequently amended, expired in 197a, the approaches to petroleum issues taken by the Cost of Living Council under the authority of the Act (the tiered approach to oil pricing) formed the foundation for much of the subsequent Federal involvement in energy: and particularly petroleum. Since 1970, three key pieces of legislation have fashioned the guidelines for the system of controls on petroleum prices and industry operations: - The Emergency Petroleum Allocation Act of 1973 (P.L. 93'159); -- The Energy Policy and Conservation Act of 1975 (P.L. 9n-163); and -- The Energy Conservation and Production Act of 1976 (P.L. 94-385). Congress began work on the Emergency Petroleum Allocation Act (EPAA) as continuing mid-winter fuel shortages (1972*fl973) and inadequate supplies of vgasoline the following summer plagued most of the country. During the same period, prices for foreign oil rose sharply for the ifirst time. The Act refined some of the price and allocation authorities outlined broadly by the Economic Stabilization Act of 1970. And, to keep domestic oil prices from following those of imported oil, Congress extended the two-tier approach to oil pricing adopted earlier by the Cost of Living Council under the Stabilization Act. Specific authority for an entitlements program also made its debut in EPAA. After EPAA was enacted, Congress turned its attention to a number of other energy issues. The legislative result was the Energy Policy and Conservation Act of 1975 (EPCA), which included extensive petroleum pricing provisions as amendments to the earlier Allocation Act. The EPCA set out the criteria to be used by the Executive Branch in establishing ceiling prices for the first sale of crude petroleum, outlined a program for the program for the equitable distribution of lower-priced "old" crude oil. This act mandated, price controls on crude oil, natural gas liquids, and refined products (unless exempted) until May 31, 1979, and it provided for extensions of price controls until September 1981. The Energy Conservation and Production Act (ECPA) passed in 1976, exempted stripper oil from Federal price controls and allowed prices to reflect gravity differentials among crude types and costs of enhanced recovery ( stiary) operations. That same year, the Federal Energy Administration decontrolled the price of residual fuel oil and home heating oil. Today, the statutory force behind the control of petroleum prices is still the 1973 Emergency Petroleum Allocation Act, as amended and extended. On may 31, 1979, the mandatory price controls promulgated by these three laws expired, leaving the President with the option, through September 30, CRS- Q IB8001O UPDATE-08/26/80 1981, to continue price controls either by using BPCA's composite price approach or by devising a new control scheme. After the 1981 date, pric ceilings would be lifted. In actuality, prices of all major refined products had been decontrolled by May 31, 1979, except gasoline, which remains under price controls. But donestically-produced price-controlled crudes were priced significantly under world prices, and this gap was steadily enlarged by the 80% price increase OPEC countries implemented in 1979. The data in Table 1 provide a sense of the scope of price controls in effect and the relationship of controlled categories to the overall petroleum supply/demand structure in the United States through most of 1979. CRS- 5 IB80010 UPDATE-O8/26/80 TABLE 1 U.S. CRUDE OIL AND REFINED PRODUCT POSITION (as of September, 1979) Millions of Percent of Percent of Barrels Category Total Eel.-‘.2ez_.._.....1‘9ra;l.(s=1.)..._;..--2«2m§.uQ-.. §£2Qe_Q;l Total Net Demand 1fl.63 NA 100.0 met by Domestic Production(b) 3.5a 100.0 58.0 Lower Tier 2.79 32.7 19.1 Upper Tier 3.ou 35.6 20.8 Stripper 1.31 15.3 9.0 Alaskan North Slope 1.25 14.6 8.5 Naval Reserve 0.11 1.3 0.8 other 0.0a 0.5 0.3 net by Crude Oil Imports 6.08 100.0 41.6 §e£ine§-£r9Q29:$ Total Net Demand 18.45 NA 100.0 met by Domestic Refining ' 16.85 NA 91.3 Met by Product Imports 1.60 NA 8.7 “...---.--—n m- Note- Net crude demand equals inputs to refineries plus additions to the Strategic Petroleum Reserve; crude oil input figures are net of exports and include imports for the Strategic Petroleum Reserve. Refined product import figures are net of exports. NA -- Not applicable. (a) —- Averages of January through July (b) -— Production volumes by subcategory are based on percentages for the first seven months. SOURCE: U.S. Department of Energy, Monthly Energy Review, November, 1979. CRS- 6 IB8001O UPDATE-O8/26/80 Debate on some of the issues connected with WPT proposals has focused on prior tax treatment of the oil industry. It is held that oil and gas production have received favorable tax treatment for many years, although one special provision, dealing with percentage depletion, was repealed for most oil and gas producers in 1975. Even without percentage depletion, a substantial portion of capital investment can be deducted when incurred, resulting in a lower effective tax rate than would occur under the standard tax system. Specifically, income tax law allows certain expenses related to the exploration for minerals and the development of wells (and mines) to be deducted in full against current earnings rather than to be capitalized and deducted ratably over the life of the property. The advantage of deducting expenses currently ("expensing”) rather than capitalizing them is that current deduction results in a comparative understatement of taxable profits and a deferral of taxes. The value of the deferral is increased by the effect of inflation. (The provisions for oil and gas are quite different from those for hard minerals.) There is, however, a minimum tax of 10% levied on selected tax preferences, which reduces to some extent the tax savings that the oil and gas industries can derive from such preferences. Another provision alleged to be especially beneficial to the oil and gas industries is the foreign tax credit (Sections 0901-906 of the Interna Revenue Code), which allows the crediting of foreign income-related taxes against United States tax liability, thereby reducing that liability dollar for dollar. Its purpose is to prevent double taxation of income earned by U.S. companies abroad. In the case of the oil companies, production taxes (which may be in the nature of royalties) are treated as creditable taxes, although regulations on this matter are now being revised. The major oil companies, account for almost one-half of the foreign tax credits claimed by corporations. The effects of "expensing" and percentage depletion on tax liability have been calculated by the Congressional Research Service in order to compare the effective tax rates of oil and gas producers using one or both of these practices with the standard corporate tax rate (46% of annual profits over $25,000) and with the average effective tax rate of 30 to 35% for all industries. The results of the calculations indicate that oil and gas production enjoys a more favorable tax position than do other industries on average. Moreover, those producers receiving 22% depletion allowances may actually be subject to what, in effect, amounts to ‘a negative income tax. These producers probably account for no more than 20% of oil\production. A lower tax rate leads to a greater allocation of capital to the production of oil and gas than would occur under a high tax rate. Prior to the substantial price rises of foreign oil, a major reason advanced for special treatment of the petroleum industry (in tax policy and in other area“ as well, such as import quotas) was national security, because foreign or prices were relatively low and allegedly posed a threat to the existance of a domestic industry (vital in time of national emergency). Some contend now, however, that because foreign oil prices have increased substantially and the price of peg domestic oil has increased substantially as a result, favored treatment of oil and gas is no longer appropriate. The counter-argument is that HPT taxes amount to unfavored treatment of oil and gas, when the need CRS- 7 IB80010 UPDATE-08/26/80 for domestic production of oil and gas is as great as ever. Several windfall profits tax bills were submitted shortly after the President's April 1979 energy message. H.B. 3919, one of the modifications of the President's original proposal, was introduced by Representative Ullman (Chairman of the Ways and means Committee) on May 3 and passed the _House of Representatives on June 28, 1979 as the Crude Oil Windfall Profit Tax Act of 1979. The Senate approved a somewhat different measure on Dec. 17, 1979. The bills then went to a Conference Committee to work out a compromise on the differences. In late Dec. 1979, to apply pressure for quick resolution of differences and passage of the law, the President announced postponement of a rise in the price of oil from marginal ("almost stripper") wells scheduled for Jan. 1, 1980. T The Administration's proposal, the House bill, and the Senate bill (summarized in Table 2) are series of excise taxes placed on the differences between future decontrolled oil prices and base prices for the various categories of oil defined under the current regulatory system and in the bills. The tax on each category is calculated by multiplying the tax rate by the difference between the selling price and the base price, and multiplying that amount by the volume of oil produced in that category. with increasing amounts of oil in each category with the passage of time) and some costs of production growing less rapidly than price, producer profits are anticipated 1 rise substantially. ' cns- 3 IB80010 UPDATE-08/26/80 TABLE 2 WINDFALL PROFITS TAX BILLS A COHPARISON OF ADHINISTRETION, HOUSE, AND SENATE PROVISIONS 92229221 Adaiuiérrerigu Eeuse §2ue:. OLD OIL Rate: 50% 60% 75% Base: $6/barrel* $6/barrel* $6/barrel* HABGINAL OIL Rate: 50% 60% 60% Base: $13/barrel* $13/barrel* $13/barrel* NEW OIL Rate: 50% 60%‘ 75% Base: $13/barre1* $13/barrel* $13/barrel* NEW DISCOVERIES Rate: 50% 50% on first 10%, with A $9 per barrel deductions for over BP severance taxes 60% on higher amounts Base: 516* $17/barrel BP _ $20/barrel BP plus infla—i + inflation * tion + 2%/yr. 2%/yr. INCREMEHTAL TERTIARY . Rate: 50% Same as for new 20%, with discoveries deductions for severance taxes Base: $16/barre1* Same base as new y$16.30/barrel discoveries 6 base price, above a level plus inflation determined by and 2% year decline curve of 1% month until project starts; 2.5% month once begun STRIPPER Rate: 50% 60% 60% Base: $16/barrel* $16/barrel BP, Same base as plus infla— House bill tion and Misc.: Exempts quality and first 1,000 B/D location of any oil differentials produced by independent producers ALASKAN NORTH Rate: SLOPE Base: HEAVY OIL Total Revenues for 1980-1990 CRS- 9 IB8001O UPDATE-08/26/80 50% 50% 75%, with deduc- tions for severance taxes $16* $7.50/barrel Same as new oil ~ BP, plus base; exempts newly dis- covered North Slope oil inflation; exempts newly discovered North Slope oil Same as for tertiary oil Taxed in tier of origin $292 billion $277 billion $178 billion * Base price, plus inflation BP -- Base Price Congressional Budget Office, Congressional Research SOHICGSS Service; Joint Committee on Taxation CRS-10 IB80010 UPDATE-08/26/80 Under the Administration's proposal, revenues gained from prices receive above the base price would be taxed at the same rate (50%) for all categories. Thus, no tax rate distinction is made between the categories to allow for any differences in potential production incentives, nor any within the "tier three" category to allow for differences in oil quality or location. ~ The House and Senate bills would tax the revenue gains from decontrol and those from OPEC price increases at different rates. For the House, the tax on lower- and on upper-tier oil (60% each) would be levied on the difference between the decontrolled price and the price that would have been assigned these oils under an indefinite extension of controls. The taxes on stripper (60%), incremental tertiary (50%), and newly—discovered oil (50%) would be levied on the difference between tier future decontrolled prices and their price before the 1979 OPEC price increases. Already-discovered Alaskan North Slope (ANS) oil would be taxed on revenues from prices above its 1978 wellhead price, which was less than the upper-tier price it was allowed under EPCA. The Senate version would tax the revenue gains from decontrol relatively ' more heavily than the gains from OPEC price increases. It would do so by (1) using higher tax rates than the House for lower-tier oil (which was assigned the lowest controlled price and thus receives the largest gain from decontrol) and for upper tier; and (2) by imposing a much lower tax rate on heavy, tertiary, and newly-discovered oil, the latter two of which were assigned the highest price levels under controls and thus derive their gain mostly from OPEC price increases. The Senate bill would exempt from WPT the first 1,000 daily barrels of oil produced by any independent oil company, and would give already-discovered Alaskan North Slope oil upper-tier treatment. In sum, as an analysis by the Congressional Budget Office indicates, the bills differ in their views of the extent to which incentives should be offered to produce various types of oil and their views of how these revenue gains should be allocated between the public and private sectors. Relative to the House bill, the Senate version would provide rewards to tertiary production and newly discovered oil, which are generally thought to be more responsive to price increases, and would impose higher tax rates on lower—tier oil, which are thought less price sensitive. In aggregate dollar terms, the Senate bill would shift less revenue to public sector uses than the House bill —— $178 billion vs. $277 billion for the 1980-1990 period. The Senate bill, however, would begin to phase out the WPT when total net cash receipts reach $189 billion, which could be after 1990. It is estimated that the President's original WPT proposal would yield $292 billion (when account is taken of the OPEC price increases since April 1979). CRS-11 IB80010 UPDATE-08/26/80 TABLE 3 ESTIMATED REVENBE EFFECTS OF SENATE AHENDHENTS T0 HOUSE-PASSED VERSION OF H.R. 3919, 1980-1990 (millions of dollars) Item Total 1979-1990(a) lNet gain from the Windfall Profit Tax under the House bill.-. $276,821 §en2se-a222é2en:§-L2-:h2-§92§e.hill (1) No denial of percentage depletion....................... -12,931 (2) Exemption of 1st 1,000 barrels/day of independent producer and certain royalty oil production........... -82,675 (3) 75% rate on tier 1 oil-................................. 1,398 (fl) 75% rate on tier 2 oil.................................. 16,861 (5) Reduction of tier 2 base by 25 cents.................... 1,268 (6) Removal of phase-up of tier 2 base...................... _ 1,176 (7) Including certain Alaskan oil in tier 2.................- 1,897 baseOO O CO CO CO CO CO 0 C CO C. O‘C O0 OO O (9) Tax incremental tertiary oil at 20% on $17 base......... —19,599 COO C CC CC CO-CO CO CO CC C. CO 0 :2 (11) Including high water-cut oil in tier 2.................. -307 (12) Including Cook Inlet oil in tier 2...................... -103 (13) Exemption for oil income of Indian tribes............... -09h (1a) Exemption for oil income of charitable schools and hospitals......................................... -199 -(15) Exemption for front-end financing oil released to finance C02 and chemical surfactant incremental tertiary.............................................. -125 (16) Expansion of marginal oil definition.................... -22 Net gain from windfall Profits Tax , under the Senate amendment................................. $177,827 (a) The House and the Senate bills would raise a small amount of income tax revenue in 1979 because the estimates assume that the tax on newly discovered oil reduces intangible drilling deductions in that year. Note: Details may not add to totals because of rounding. SOURCE: Joint Committee on Taxation, Conference Comparison on H.R. 3919 (Crude Oil Windfall Profit Tax Act of 1979), Dec. 18, 1979, p. 08. (CBS-12 IB80010 UPDATE—08/26/80 An important aspect of the debate on the WPT concerns the degree to which decontrol of oil prices will stimulate additional production of domestic oil. One's belief as to the potential responsiveness to price increases by production of individual categories of oil (e.g., old, new, tertiary) as well as by overall domestic supply, will influence the kind of tax rate structure advocated. Differences in the Administration's, House's, and Senate's structures reflect to some extent differences in opinions about such responsiveness. Such disagreement hinges on one's perception or estimate of the price elasticity of supply of domestic oil. Estimates of oil supply price elasticity range as low as 0.05 for the short run (where there is insufficient time for investment to expand capacity) to around 0.5 for the long run. (Price elasticity of supply is the ratio of the percentage increase in production to a given percentage increase in price. Thus, an increase in supply of 10% in response to a 100% increase in price indicates an elasticity of 0.1.) Estimates of oil supply price elesticity are uncertain because of the great diversity of oil-producing properties (regarding location, depth and age of wells, quality of oil produced and other factors), the long lead times from initial exploration to production, and the uncertainty of discovery rates and levels. Estimates of the effect of decontrol on domestic oil supply have been mad by the Congressional Budget Office (CBO), which has calculated that decontrol without a WPT would result in 1990 production being 1.17 million barrels per day greater than under an extension of controls - 7.92 million barrels per day versus 6.75 million barrels per day. with the House-passed version of WPT, 1990 production would be 7.08 million barrels. The Senate's Finance Committee version, according to CBO would yield 7.63 million barrels (see Table 4). (CBO has not estimated production for the full-Senate version.) TABLE u PROJECTED CRUDE OIL PRODUCTION UNDER FOUR SCENARIOS, CALENDAR YEARS 1985 and/1990 (thousands of barrels per day) ésenerig 12§§ 1229 Continued Controls 7,530 6,750 House Bill 7,890 7,075 Senate Financt Committee Bill 8,155 7,625 Decontrol with No Tax 8,305 7,915 SOURCE: Congressional Budget Office, The Windfall Profits Tax: A Comparative Analysis of Two Bills, November 1979, pp. 76-79. ens-13 IB80010 UPDATE—O8/26/80 J-'..P.!..1?AQ.'1.'..Q1.’..2.T§£?..Q.1.4“2.Bi9.L..AE 2..!22_QE-Q.I.L.Q9.£1.£’.1.i.§--B.§! .EE!.3.§§. Decontrol and any of the various RPT scenarios that were under consideration will or would have a great impact on oil company profits. However, there has been considerable dispute over what fraction of additional gross revenue to oil producers and royalty-holders resulting from oil price deregulation and future OPEC price increases will be absorbed by higher State and Federal taxes and what fraction will be retained. For illustrative purposes, the Joint Committee on Taxation (JCT) developed a range of estimates of the net income to oil producers and royaltyholders after State and Federal taxes under various assumptions about the windfall profit tax rate, its tax base, and what fraction of income would be reinvested in deductible expenses. (The tax base is the amount or proportion of oil, and the derived revenues, in a category that is subject to the tax.fi For example, with 50% reinvestment, a tax rate of 75% on a 60% tax base leaves producers with 39 cents for every dollar of "windfall profit," under specific assumptions as to the rates of State severance and income taxes and of Federal income taxes. These assumptions are given, with estimates, in Table 5. ~ CBS-10 IB8001O UPDATE-08/26/80 TABLE 5 NET INCOME TO PRODUCERS AND ROYALTY OWNERS FROM A $1 WINDPALL PROFIT Assumed Reinvestment in Deductible Expenses (%) Windfall Tax Rate and Base 0 25 50 75 100 Comprehensive Base: ’ 0% rate.................. $0.50 $0.61 $0.73 $0.80 $0.95 25% rate................. .37 .05 ' .53 .62 .70 50% rate................. .20 .29 .30 .00 .05 75% rate................. .11 .13 .15 .18 .20 Base of 60% 0% rate.................. .51 .62 .70 .85 .95 25% rate................. .03 .53 .62 .72 .80 50% rate................. .35 .03 .51 .58 .65 75% rate................. .27 .33 .39 5.05 .50 SOURCE: Assunes 5% severance tax rate, 0% State income tax rate, 05% Federal income tax applied to taxable income. Percentage depletion is denied on windfall profit subject to tax and allowed on any windfall profit not subject to tax. (The various existing limitations on percentage depletion are assumed to reduce its effective rate to 5% of gross income.) Reinvestment percentages refer to the percentage of gross income after severance and windfall profit tax which is reinvested in expenses which can be deducted currently under Federal and State income taxes. Severance taxes and income taxes are assumed not to be deductible under the windfall profit tax. The tax base is the amount or porportion of oil in a category, and the derived revenues, that is subject to the tax. Joint Committee on Taxation, the Design of a Windfall Profit Tax, June 1, 1979, p. 10. CBS-15 ' IB8001O UPDATE—08/26/80 with the use of the JCT effective tax rates and Treasury Department estimates of the gross increase in oil company revenues due to decontrol, CBS has estimated the effect of decontrol and each of three WPT effective tax rates on aggregate oil company net income. The estimates, shown in Table 6, are for tax rates of 25, 50, and 75% applied to a 60% tax base, and are under the assumption that 25% of gross revenue is reinvested in deductible expenses. A relatively stiff tax of 75% on windfall revenues will permit the oil companies to earn an estimated $254.3 billion from 1979-198R, based on estimates made in the fall of 1979. This is significantly less than the estimated $327.8 billion earned under a relatively lenient tax rate of 25% on the $u63.1 billion they would earn under decontrol and no WPT. Yet even with the higher tax rate of 75%, projected net income for the years 1979-198u is 51% above the projected net income of $168.3 billion without decontrol and windfall profits tax measures. Under the Phelps-Smith thesis, very large future increases in oil company revenues would not be expected and tax revenues would be smaller. 2 WITH AND WITHOUT DECONTROL AND WINDFALL PROFITS TAX MEASURES 1922--- 1979 1930 1981 1982 1933 1934 Total Amount: % change from no decontrol C RS-16 TABLE 6 PROJECTED NET INCOME OF OIL PRODUCERS (millions of dollars) ...Ei.t.I.1.D.929;1.$;:9.1... IB80010 UPDATE’08/26/80 without without 25% 50% 75% _QggQgt;g;___ WPT WPT WPT WPT 18,974 --- 20,216 20,216 20,216 21,118 32,801 27,310 26,375 25,442 23,504 57,294 41,413 38,267 35,123 26,160 89,400 59,677 53,586 47,498 29,116 123,571 79,177 69,964 60,754 32,406 159,993 100,027 87,501 65,259 151,278 463,059 327,8201 295,909 254,292 NA 206.1% 116.7%‘ 95.6% 68.1% applicable NA -- Not SOURCES: Estimates of the gross increase in company revenues due to decontrol from Office of Tax Analysis, Department of the _ Treasury; Estimates of the proportion of "windfall" revenues to be retained by producers given the rate of oil company reinvestment in deductible expenses, the tax rate, and the tax base, from the Joint Committee on Taxation, U.S. Congress; estimates of revenues without decontrol made by CBS, by projecting forward historical trends in net income of oil producers, obtained from the Office of Tax Analysis, Department of the Treasury. CBS-17 y IB80010 UPDATE-O8/26/80 with the imposition of a windfall profits tax in the context of decontrol comes decisions on the disposition of the additional tax revenues. Alternatives include earmarking all or part of the funds for specific energy or nonenergy objectives such as greater energy efficiency, development of alternative energy sources and encouragement of their use, softening the burden on low—income families of higher energy prices, and simple placement in the general fund. Techniques include tax credits, grants, low-interest loans, and direct outlays for goods and services. Any one or all of these may be administered through a trust fund. It is beyond the scope of this issue brief to analyze the advantages and disadvantages of all the specific techniques for specific purposes, but we twill comment briefly on the trust fund mechanism since the House uses it in ’this case. Trust funds are sometimes used to finance projects that require large capital outlays through collecting charges paid primarily by the group that will largely benefit from the completed project; this mechanism has the advantage of tying users to project costs and easing acquisition of funds for specific goals on a continuing basis. However, the longterm earmarking of funds tends to limit budgetary control, since outlays are only partly affected by budget resolutions and the appropriation process; and changes in national priorities are not necessarily reflected without further legislative action. In the case of energy, there are already large Federal programs and a litional expenditures from a WPT trust fund would vary with future OPEC price increases; thus, there could be some difficulties in planning -and managing expenditures. Both the House and Senate bills allocate receipts from the. windfall profits tax for various energy-related programs. The House bill establishes an Energy Trust Fund to disburse the gross windfall tax receipts over the 1980-1990 period, but it does not spell out the particular uses of these funds. The Senate bill, on the other hand, makes a portion of the $177.8 billion net tax receipts generaated from the windfall tax over the 1980-1990 period available for assistance to low-income families, tax credits to stimulate residential and business energy conservation, the production of alternative energy sources, and the nonenergy objectives noted below. (Net tax receipts are the gross windfall tax liability plus the regular corporate tax liability on profits after the deduction of the gross windfall profits tax, less the liability that would have been incurred under the corporate income tax without a windfall profits tax.) The major categories of allocation total $72 billion and are as follows (estimates of program costs by the Joint Committee on Taxation): * Low-income energy assistance -4 $11.1 billion; * Residential investment tax credits for conservation, and for solar, wind and geothermal energy -- $8.7 billion; * Business and utility tax incentives for investment in conservation and the production and use of alternative energy forms -- $16.3 billion; * Residential heating cost tax credit available to renters and homeowners -- $3.8 billion; CBS-18 IB80010 UPDATE-08/26/80 * A not-energy-related exclusion of larger amounts of interest and dividends from gross income for personal income tax purposes -- $26.9 billion; and * A not-energy-related easing of property valuation procedures for estate tax purposes -— $fl.3 billion. Table 7 summarizes the estimated revenue effects of the House and Senate versions of H.R. 3919 for calendar years 1979-1990. CRS-19 IB80010 UPDATE-08/26/80 TABLE 7 SUMMARY COMPARISON OF ESTIMATED REVENUE EFFECTS OF HOUSE AND SENATE VERSIONS OF H.R. 3919, CALENDAR YEARS 1979-1990 (millions of dollars) 1222 222;; ' 1979-1990 House Bill: E Windfall Profit Tax 276,821(a) Senate Amendment: Windfall Profit Tax 177,827 Residential Energy Incentives -8,668 Business Energy Incentives -17,002(b) Home Heating Credit -u,ou5 Repeal of carryover Basis -fl,302 Interest and Dividend Exclusion -26,9u1 Total, Senate Amendment 116,069 (a) Funds to be deposited in an Energy Trust Fund. (b) These totals include $6 million revenue effect from 1978 liabilities. Note: A small amount of revenue is obtained in 1979 because it is assumed that it will have the effect of reducing intangible drilling deductions in that year. SOURCE: Joint Committee on Taxation, Conference Comparison on H.R. 3919 (Crude Oil Windfall Profit Tax Act of 1979), Dec. 18, 1979, page #7. CRS-20 IB8001O UPDATE-08/26/80 The Conferees' first significant action was to vote (Dec. 20, 1979) to split the difference between the revenue yields of the two houses for 1980 through 1990 ($276.8 billion for the House of Representatives and $177.8 billion for the Senate), arriving at a figue of $227.3 billion. Subsequent agreements, however, required an adjustment.of this figure to $227.7 billion. As passed by the respective houses, the tax would have started on Jan. 1, 1980. In the House bill, the tax on all oil other than newly-discovered and tertiary would have been permanent, and thus has an unlimited revenue yield. The Senate bill provided for a phase-out procedure triggered by a specified revenue yield. The combined results of agreements in early and late February was to begin the tax on Mar. 1, 1980, instead of Jan. 1, 1980, and to phase out the tax over a 33 month period, starting in Jan. 1988 or in the month after cumulative net revenues received as a result of the tax reached $227.3 billion, whichever is later. But the phaseout would start no later than Jan. 1991, and the tax must end by Sept. 30, 1993 regardless of whether it has «raised the targeted $227.3 billion. (As noted above, the $227.3 billion figure was subsequently revised to $227.7 billion.) In January, debate on how to scale the tax structure and rates ,to obtain the compromise figure focused largely upon the size of any exemption or other break to be given small producers ("independents") and the desirability and practicality of setting relatively low rates on newly-discovered, tertiary, and heavy oil. Under the. House bill, independents received no special treatment, whereas the Senate exempted their first 1,000 daily barrels ,of* production from the "windfall" tax. The respective provisions for taxation- of the various categories of production can be seen in Table 2. An agreement on the above matters was reached Jan. 22, 1979, and subsequently amended slightly. The main features of the final agreements on the tax structure are as follows: * Old Tier 1 is merged into old Tier 2 to form a new Tier 1; a tax rate of 70% is imposed on it, and the base price set at $12.81, adjusted for inflation; * "Stripper" oil and oil produced from a National Petroleum Reserve in which the U.S. has an economic interest are combined in a new Tier 2, which is taxed at 60% and assigned at base price of $15.20, adjusted for quality and location differences and for inflation; * newly discovered oil (oil discovered since Jan. 1, 1979), certain heavy oil, and incremental tertiary oil are combined in a new Tier 3, to be taxed at 30% and assigned a base price of $16.55, 1 adjusted for quality and location differences and inflation cns-21 IB800 10 ’ UPDATE-—0 8/26/80 plus 2% per year; Reduced tax rates are established for independents‘ first 1,000 daily barrels of production of Tiers 1 and 2 (50% on Tier 1 and 30% on Tier 2), prorationed according to total production in each category eligible for reduced rates. Given these rates, independents would pay about $23 billion of the total revenue target; Oil from lndian land is exempt from the tax, as is oil produced by State and local governments if the proceeds are used for a public purpose; That part of Alaskan North Slope oil produced from the Sadlerochit Reservoir on Prudhoe Bay is taxed as Tier 1, except that the base price is adjusted upward to reflect decreases in the Trans-Alaska Pipeline System tariff below $6.26. other oil produced north of the Arctic Circle is exempt; The windfall profit subject to the tax is reduced by the amount of state severance taxes on the windfall profit; and Base prices will be adjusted for inflation occurring after the second quarter of 1979, but lagged by two quarters, with the GNP deflator used as the measure of inflation. §s§idsn2i§l-2ner91 tax sreéiié A substantial number of details regarding residential energy tax credits were agreed upon, only some of which are noted here. * The principal residence requirenent under current law is I retained; Landlords are not permitted eligibility for the residential energy tax credit (but will continue to be eligible for the business energy investment tax credit; The tax credit for solar, geothermal, and wind energy property is increased to 40% of the first $10,000 of expenditures, from 30% of the first $2,000 and 20% of the next $8,000; equipment used to generate electricity from these renewable energy sources is made eligible for the credit. No items added to the list of property eligible for energy credits, and specific standards set for the secretary of Treasury to apply when exercising authority to add new items; Qualified expenditures and the expenditure limits per dwelling are reduced to the extend that property is financed by grants or subsidized energy loans. In the cases of joint ownership, the credit is available separately for the expenditure made by each taxpayer. §u§i22§§ energy taz-insen:ize§ All even CRS-22 IB8001O UPDATE-O8/26/80 of details business number energy tax larger relating to incentives were agreed upon by the conferees, and only some are noted here. * The tax credit on solar, wind, and geothermal energy property is increased from 10% to 15% for 1980 through 1985, and solar process heat equipment is made eligible; any refundable features are repealed; The 10% investment credits for equipment to produce a solid fuel from biomass is extended from 1982 through 1985; and the 10% credit for equipment to convert biomass to alcohol for fuel use is extended to 1985 is the primary source of energy for the converting equipment of a substance other than oil, natural gas, or products of oil or natural gas; In the transportation area, Senate—bill provisions granting credits for vanpooling, truck aerodynamic equipment, and electric motor vehicles were deleted, but certain intercity buses would get a 10% credit through 1985 to the extent that seating capacity is increased; The existing exemption from the H-cents-a-gallon excise tax on gasoline allowed blenders of alcohol with gasoline would be extended from 19eu to 1992. Where the exise tax exemption does not apply, gasohol blenders are provided an income tax credit of HO cents for each gallon of alcohol. other breaks for gasohol were also agreed upon. Subject to various conditions, producers of certain alternative energy sources would get a tax credit of $3 per barrel of oil equivalent, adjusted for inflation; the sources ‘ are oil from shale and tar sands, natural gas from certain nontraditional sources, synthetic fuels (other than alcohol) from coal, gas from biomass, steam from solid agricultural byproducts, and processed wood; Solid waste disposal facilities eligible for financing with tax-exempt industrial development bonds would include certain property used primarily to convert fuel derived from solid waste into steam as long as such property and that used for collection and processing of the waste is owned by the same person. Interest on an obligation used to finance a solid waste disposal facility and a related electric energy facility is also tax exempt under certain circumstances; Interest on industrial development bonds used to finance renewable energy property would be tax exempt in States that meet certain legal requirements. Small-scale hydroelectric facilities, including those of public utilities, are provided an 11% nonrefundable credit. The generating equipment must have an installed capacity of less than 125 megawatts and be installed at the site of an existing dam or at a site that does not involve the use of a dam or other water impoundnent structure; Under certain conditions, tax-exempt industrial development bonds may be used to finance hydroelectric facilities at CRS-23 IB80010 UPDATE-O8/26/80 existing dam sites or at sites where no dam or other water impoundment is involved; A new 10% energy credit through 1982 would be provided for "co-generation" equipment added to an existing boiler or burner in which less than 20% of the annual fuel consumed is accounted for by oil or natural gas. AQnsns£92-2r-:ind£all.222fi:-:ax-2£2!isi2n§ Action w related to It 9. The net assumptions accounting * * # of revenues in aid to provide reductions. as also taken by the conferees on a few other matters, some not energy. For example, Assistance to lower income families for heating and cooling costs is provided by means of an authorization of $3.115 billion for fiscal year 1981 (through block grants to States) and a general statement of intent that 25% of all WPT revenues will go to aiding lower income households; The Senate provision easing property valuation for inheritance tax purposes was adopted; It was agreed to remove the President's authority to impose oil import quotas whenever Congress has passed a joint . resolution disapproving such a quota. The resolution could be vetoed by the President, but the veto could be overridden by a two—thirds vote of both houses. The present exclusion of up to $100 in dividends ($200 for married couples) from income for tax purposes would be broadened and increased, so as to include interest and go up to $200 ($fl00 for couples). This would apply to 1981 and 1982. Taxpayers who liquidate their LIFO inventories in response to a Department of Energy regulation or request or to a major foreign trade interruption may apply for a refund of taxes paid on the LIFO inventory profits of such sale if the liquidated inventory is replenished within three years; A liquidating corporation (with some exceptions) must recognize as ordinary income the amount of its LIFO recapture. Also, a corporation selling its assets in the course of a 12-month liquidation must recognize the amount of its LIFO recapture. snsral_all92ati2n.2£-rs-sn2e§ present price Treasury, for revenues from the WPT from 1980 through 1990 under are to be allocated to a separate account of the purposes only, as follows: as 25% of net revenues; Aid to lower income households Income tax reductions -— 60% of net revenues; and transportation programs -- 15% of net revenues. excess of what is projected, one-third would be used to lower income families and two-thirds for income tax Energy cns-24 IB80010 UPDATE-08/26/80 Since enactment of the Crude Oil Windfall Profit Tax Act of 1980, some of the parties affected by the Act have begun to move for changes in or repeal of the law. There have been two main thrusts: (a) complaints by "small" owners and/or operators of oil producing properties, many of modest means, that they should not be subject to the same tax rates as the large oil companies; (b) activities by producer or State organizations aimed at challenging the law itself on constitutional grounds, and/or challenging the manner in which the law is being implemented. §912l2z-2!ns£§ Essentially, the Act subjects a royalty owner to the WPT the same way it does integrated companies. Royalty owners include any owners of economic interests in oil properties that are defined as royalties for income tax purposes. These include net profits interests, landowner royalties, overriding royalties, and similar interests. They pay their share of the tax (proportionate to their interest) by receiving a smaller amount from the payer of the "royalty"——usua1ly the company that is producing the oil. The company withholds the tax in much the same way that an employer withhold employees‘ Federal income tax. 0 In most cases, royalty and similar interests are" not eligible for the reduced windfall profit tax rates affordedw independent producers. Many royalty owners, however, qualify for the percentage depletion allowance, and can compute the deduction on the full price of the oil (including the "windfall profit" element). Integrated oil ,companies are prohibited from using percentage depletion deductions. Because the tax provisions of the Act were made effective March 1, 1980, royalty owners began to feel the impact of the tax on their royalty earnings as soon as royalty statements and checks for Harch_ oil production started arriving in early to mid-April. In late June, 1980, the Senate Finance Cbmmittee voted to recommend that royalty owners be given a tax credit (or refund) of up to $1,000 against the windfall profit tax on the removal of royalty oil during calendar year 1980. The credit would be available only to individuals, estates, and family corporations, and not to other corporations or trusts. To compensate for the revenue loss in FY81 that would result from the tax credit, the otherwise applicable base prices for each calendar quarter in FY81 would be adjusted downward by 0.8%. These proposals were part of the Finance Committee's recommendations to the Budget Committee in connection with First Concurrent Budget Resolution for F!81. The measure was adopted by the full Senate 0- July 23. 2;9dn2:i2n-£;9n.l92-z2lnme.2slls Nearly three-fourths of the oil wells in the 0.5. produce 10 barrels of CBS-25 IB80010 UPDATE—08/26/80 Pil per day or less. These generally are old wells whose production has rclined over the years as the oil remaining in the reservoirs they tap has decreased. As'a group, these "stripper" wells account for about 14% of total production. It is argued that there is a greater desirability to keep them operating than their volume would seem to indicate. Once closed up it is virtually never economical to reopen one, and the potential production is lost. And, the equipment of these wells is generally old and subject to frequent breakdowns. In an attempt to prevent or delay closure of the smallest of these wells (in terms of production) and to provide some tax relief to their owners and operators, the Senate also voted on July 23 to fully exempt from the WPT the first two barrels per day produced from stripper wells. This, too, is connected with the Budget Resolution. The royalty and ‘the small stripper measures must, of course, face reconciliation with any counterpart recommendations that come out of the House of Representatives. Le9el_§hellen9e Because the windfall profit tax applies to the first sale of a resource that is unevenly distributed geographically, the incurrence the tax will not be distributed uniformly on a geographic basis. Also, it is possible that x 3 complexity of the tax structure and related energy price regulations together with the diversity of owner and operator arrangements will make administration of and compliance with the law difficult. In May, members of the Independent Petroleum Association of America” (the national association of independent oil producers) voted to challenge in court the constitutionality and general validity of the Act, and the manner in which it is being implemented, administered, and enforced. The Governor of Texas announced that the State was studying legal action against the law. And, members of the Texas Independent Producers and Royalty Owners Association voted to support as individuals a separate industry effort to challenge the tax in court on constitutional grounds. As of mid-July, these potential challenges are still being studied. Judging from an analysis of previous court decisions by the American Law Division of the Congressional Research Service, it appears likely that any challenge on the basis of lack of geographic uniformity would not be upheld. MAJOR LEGISLATIVE EVENTS H.R. 3919 HOUSE ACTIONS May 3, 1979 may 9, 1979 Referred to House Committee on Ways and Means. Committee hearings held. (May 10, 1979; May 11, 1979; may 16, 1979; May 18, 1979). June 7, 1979 -- Committee consideration and mark-up session held. (June 11, 1979; June 12, 1979; June 13, 1979; June 19, 1979). Ordered to be reported (amended). Reported to House (amended) by House Committee June 19, 1979 June 22, 1979 June June June June June Feb. Feb. Feb. Mar. Mar. Mar. July July July July July Aug. 1979 1979 22, 26, 26, 1979 1979 1979 28, 28, 20, 1980 20, 1980 27, 1980 7, 1930 11, 1930 13, 1980 ACTIONS 2, 1980 10, 1979 10, 1979 16, 1979 18, 1979 2, 1979 —-Committee on Finance. CBS-26 IB8001O UPDATE'08/26/80 on Ways and Means. Report No. 96-300. Placed on Union Calendar No. 181. Rule granted provisions a modified rule with 3 hours of debate. Partial waiver of Points of Order. Rule Committee Resolution H.R. 336 reported to House. Rule passed House. House agreed to amendments adopted by the Committee of the Whole. Rejected motion to instruct conferees to concur in Senate amendments to provide tax credits for the use of alternative energy systems. Motion to table rejected by vote of 130-272 (Record Vote No: 59). Conference report considered. to instruct conferees not to amendments regarding the tax gasohol that would result in of taxes appropriated to the Fund. Conference report filed in House. Committee on Rules granted a rule providing for consideration of the conference report, waiving clauses 2, 3, and H of Rule XXVII and Section 302 (a) (2) of the Congressional Budget Act against the conference report. Rules Committee Resolution H.Res 605 reported to House. Conference report accepted by 302-107 vote. Tabled motion accept Senate treatment of a reduction Highway Trust Reported to Senate recommendations required by the reconciliation process in Section 3(a0(16) of H. Con. Res. 307. with committee print No. 96-37. Received in the Senate, read twice, and referred to the Committee on Finance. Committee onFinance. Hearings held. July 11, 1979; July 12, 1979); Committee on Finance requested executive comment from OMB; Treasury Department; Energy Department. Committee on Finance. Hearings held. July 19, 1979; July 31, 1979); Committee on Finance. Committee consideration and mark-up session held. (Aug. 1,1979; Sept. 6, 1979; Sept. 11, 1979; Sept. 12, Sept. 18, 1979; Sept. 19, 1979; Sept. 20, 1979; Sept. 21, 1979; Sept. 25, 1979; Sept. 26, 1979; Sept. 27, 1979; Sept. 28, 1979; Oct. 2, 1979; Oct. 3, 1979; Oct. 4, 1979; Oct. 5, 1979; Oct. 9, 1979; Oct. 10,-1979; Oct. 11, 1979; Oct. 12, 1979; Oct. 16, 1979; Oct. 17, 1979; Oct. 18, 1979). 1 1979; Oct. Oct. NOV. Nov. Dec. nar. Mar. Har. nar. Har. Mar. Dec. Dec. Dec. Dec. Dec. Dec. Jan. Feb. Feb. Feb. Mar. Mar. 19, 25, 1979 1979 1, 1979 1, 1979, 17, 1H, 24, 19, 25, 27, 27, 17, 18, 20, 17, 6. 26, 28, EXECUTIVE ACTIONS 27, 28, 1979 1980 1980 1980 1980 1980 1980 CONFERENCE ACTIONS 1979 1979 1979 1979 1979 1979 1980 1980 1980 1980 1980 1980 Apr. 2, 1980 CRS-2? IB80010 UPDATE-O8/26/80 Committee on Finance. Ordered to be reported with amendments favorably. Committee on Finance. Committee reconsidered its action of Oct. 19 when it ordered the bill favorably reported, and again ordered the bill, with amendments, favorably reported. Committee on Finance. Reported to Senate favorably with an amendment to the title. with written report No. 96-39h. Placed on Senate legislative Calendar under Regular Orders. Calendar No. 421. Passed Senate (amended) by a yea-nay vote (7u-2n). Record Vote no. #96. Message on House action received. Cloture motion presented. Conference report considered. Report also considered Mar. 20, 21, 24, 25, 26, 27. Cloture motion vitiated by unanimous consent. Motion to refer conference report to Committee on Finance rejected. Conference report approved, 66-31. Senate insists on its amendments by voice vote. Senate requests a conference. Appoints conferees. Long; Talmadge; Byrd, of Va; Nelson; Gravel; Bentsen; Moynihan; Dole; Packuood; Roth; Danforth. House insisted on its amendments by unanimous vote. ’ House agreed to request for conference and Speaker appointed Conferees: Ullman, Rostenkowski, Vanik, Corman, Gibbons, Pickle, Rangel, Cotter, Stark, Jones (OK), Conable, Duncan (TN), Archer, Vander Jagt, Moore. A Conference held. Conference held. Conference held. Jan. 18, 21-25. 7 Conference held. Conferences also held Feb. 6, 7, 19-22. Conferees agreed to file conference report. Conferences also held vconference report filed, "The Crude Oil Windfall Profit Tax Act of 1980 (as agreed to by the conferees)." * Measure cleared for White House. Heasure signed in Senate, presented to President. Heasure signed by President; becomes Public Law 96-223. CR5-23 IB8001O UPDATE-O8/26/80 0.5. Congress. House. Windfall Profits Tax and Energy Security Trust Fund. Message from the President of the United States. Washington, 0.5. Govt. Print. Off., 1979: 8 p. (96th Congress, 1st session. House) ---- Crude Oil Windfall Profit Tax Act of 1980, Conference Report Washington, 0.5. Govt. Print. Off. Mar. 7, 1980, 180 p. (96th Congress, 2d session) Report 96-817. ---- Committee on Ways and Means. Hearings, 96th Congress, 1st session. May 9-11, 16-18, 1979. Washington, 0.5. Govt. Print. Off., 1979. 803 p. ---- Joint Committee on Taxation. The Design of a Windfall Profit Tax. Washington, U.S. Govt. Print. Off. 1979: 43 p. (96th Congress, 1st session) _ At head of title: Joint Committee Print. ---- Summary of H.H. 3919: The Crude Oil Windfall Profit Tax Act of 1980, As Agreed to by the Conferees. Washington, 0.5. Govt. Print. Off. Feb. 28, 1980. I43 p. At head of title: Joint Committee Print. ----- Description of H.R. 3919: The Crude Oil Windfall Profit Tax of 1979 as passed by the House. Washington, U.S. Govt. Print. Off. 1979: 38 p. (96th Congress, 1st session) At head of title: Joint Committee Print. Conference Comparison on H.R. 3919 (Crude Oil Windfall Profit Tax Act of 1979). Dec. 18. 1979. 51 p. ---- Senate. Committee on Finance. Crude Oil Windfall Profit Tax Act of 1979. Washington, 0.5. Govt. Print. Off. 1979: 185 p. (96th Congress, 1st session) At head of title: Calendar No. 421. Revenue Increases, Recommendations of the Committee on Finance required by the Reconciliation Process in Section 3(a)(16) of H. Con. Res. 307, the FIRST BUDGET FOR FISCAL YEAR 1981. Washington, 0.5. Govt. Print. Off. July 2, 1980. 55 p. (96th Congress, 2nd Session) At head of title: Committee Print 96-37. §§§QEQLQ§l-QE_§E§!2§ 04/02/80 -- President Carter signed Crude Oil Windfall Profit Tax Act of 1980 into law (Public Law 96-223). 03/27/80 -- Senate accepted conference report. 03/13/80 -- House accepted conference report. 02/28/80 02/13/80 02/06/80 01/28/80 01/17/80 01/15/80 12/05/79 10/05/79 10/03/79 10/02/79 09/25/79 09/21/79 08/20/79 07/19/79 07/12/79 05/03/79 05/00/79 00/30/79 Ofl/05/79 IB30010 UPDATE-08/26/80 CBS-29 Conferees filed final conference report. Joint Committee on Taxation released a summary of conference decisions as of Feb. 8. Conferees reached agreement on tax phase-out date and/or ceiling amount (Jan. 1988 or $227.3 billion, whichever is later). George Horwich, Senior Economist for DOE's Office of Oil Policy, said WPT will not affect refiners‘ profits (letter to the ga;l_§;gg§t_J9g;nal). Fight between supporters of the majors and independent firms continue (we: who pays how much of the WPT. Joint Tax Committee offered options for conference compromises. Senate increased WPT for new oil. Administration raised its estimate of the cost of decontrol. Senate Finance Committee exempted the first 1,000 b/d produced by/independents. Senate Finance Committee exempted some stripper wells from WPT. Senate exempted new oil from tax. French government proposed a WPT on oil companies. wall Street Journal editorial scored WPT for economic impacts, inefficiences. Independent producers called for exemptions under HPT bill. Mayors sought one-fourth of WPT revenues for mass transit. National Association of Manufactures assailed rational behind WPT. People and Taxes‘ Magazine decried the "loopholes" in the WPT as suggested by the President. John Swearingen, chairman of the Standard Oil Company of Indiana, said the WPT will curtail some exploration, development, and production activities. President Carter announced his energy program including decontrol and the windfall profits tax. CRS-30 IB80010 UPDATE-O8/26/80 AQQLTIQEAL- §§.E_BE§.C.§-§..Q9.1.3.‘~.2.1i§ Cutler, Eliot R. Remarks before the Senate Finance Committee. Office of Management and Budget. Washington, D.C. 1979: 21 p. Independent Petroleum Association of America, Crude Oil Prices: ' Decontrol and the Windfall Profit Tax. Washington, D.C., march 1980. 23 p. Rain Hurdman and Cranston, Analysis of the Crude Oil Windfall Profit Tax. New York._ 1980. 31 p. E Phelps, Charles E. and Rodney T. Smith. Petroleum Regulation: The False Dilemma of Decontrol. Santa Monica, Cal.: The Rand Corporation. January 1977. Rivlin, Alice N. statement Before the Joint Economic Committee on the Windfall Profits Tax. Congressional Budget Office. Washington, D.C., 1979: 13 p. Schultze, Charles L. Testimony Before the Joint Economic Committee on the Windfall Profits Tax. Executive Office of the President. Washington, D.C., 1979: 21 p. 0.5. Congress. Congressional Budget Office. The Decontrol of Domestic Oil Prices: An Overview (Background Paper). Washington, ---- The Windfall Profits Tax: A Comparative Analysis of Two ‘ V Bills. Washington, Govt. Print. 0ff., November 1979. 79 p. 10.5. Library of Congress. Congressional Research Service. Tax Provisions and Effective Tax Rates in the Oil and Gas Industry. _ Jane G. Gravelle. Washington. Library of Congress. Nov. 3, 1977. #2 p. I Congressional Research Service. Historical and Projected Net Income of Oil Companies With and Without Decontrol and Windfall Profits Tax Measures. (by) William Morris. Washington. Library of Congress. Nov. 7, 1979. 5 p. --" Congressional Research Service. The Uniformity Requirement in Federal Taxation. (by) Howard Zaritsky. Washington. Library of Congress. January 1977. 8. p. .ommH .mm mumspnmm .nmmm.Hm.wcoo 93 an vmmnwm mm 9.3 .8 po.<. V89 pfloé 345.52 HA0 35.5 2:. 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