Explanation of the Obama Administration's General Business, International and Oil and Gas Tax Proposals
On May 11, 2009, the Treasury Department released a detailed explanation (the “Explanation”) of the Obama administration’s tax proposals for its fiscal year 2010 budget. The Explanation describes a number of amendments to the Internal Revenue Code that may be applicable to your business, including general business tax proposals, international tax proposals, and oil and gas tax proposals.
Regarding general business tax proposals, the Explanation includes proposals to: (a) expand the net operating loss carryback, (b) tax carried interests as ordinary income, (c) codify the “Economic Substance” doctrine, and (d) repeal the LIFO method of accounting for inventories.
Regarding international tax proposals, the Explanation includes the proposed: (a) limit on the use of “check-the-box” rules for foreign entities, (b) deferral of deductions of expenses related to deferred income, (c) determination of the indirect foreign tax credit on an aggregate basis, (d) prevention of the splitting of foreign income and foreign taxes for foreign tax credit purposes, (e) increase in taxation of intangible property transfers, (f) tightening of earnings stripping rules for expatriated entities, (g) expansion of the taxation of shareholders in certain cross-border reorganizations, (h) repeal of the 80/20 company rules, (i) expansion of the taxation of income from certain equity swaps, and (j) modification of the foreign tax credit rules for dual-capacity taxpayers and limitations with respect to foreign oil and gas income.
Regarding oil and gas proposals, the Explanation includes the proposed: (a) repeal of expensing of intangible drilling costs, (b) increase of the amortization period for geological and geophysical costs to seven years, (c) repeal of percentage depletion, (d) repeal of the domestic manufacturing deduction for oil and gas production, (e) repeal of the passive loss exception for working interests in oil and gas properties, (f) repeal of the credits for enhanced oil recovery projects and production from marginal wells, (g) repeal of the deduction for tertiary injectants, and (h) excise tax on certain offshore oil and gas production.
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IRS Circular 230 Disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any US federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
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