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The Made in America Tax Plan - Fossil Fuels Tax Perspective

Client Updates

On March 31, 2021, President Biden introduced a $2 trillion “American Jobs Plan.”  The American Jobs Plan, as outlined by the Biden Administration in a simultaneously-released fact sheet, contains a sweeping set of proposals to increase investment in infrastructure while offsetting the costs of these proposals with a “Made in America Tax Plan” (the “Tax Plan”) that, among other changes, would eliminate “subsidies, loopholes, and special foreign tax credits for the fossil fuel industry.”  The American Jobs Plan also proposes to provide significant tax and other incentives to clean energy projects, discussed here.

The Tax Plan as outlined does not include any details regarding the specific fossil fuels provisions to be proposed, but past Democratic proposals attacking tax incentives for the fossil fuels industry have included the elimination of the deduction for intangible drilling costs, repeal of percentage depletion, repeal of two-year amortization of geological and geophysical expenditures for independent producers and elimination of the MLP tax passthrough regime for fossil fuels.  The Tax Plan is likely to revive at least some of these prior proposals.    

In addition, the Tax Plan includes significant changes to the tax treatment of corporations, including proposals to increase the corporate income tax rate, create a new corporate minimum tax regime, and incentivize corporations to remain organized in, and keep their earnings and profits in, the United States.  For a more detailed discussion of the proposals affecting C corporations, click here.

The Made in America Tax Plan includes limited details regarding these proposals, but the Treasury Department is expected to release its “Greenbook” containing specifics regarding these proposals in a matter of weeks.  We will continue to monitor developments and will provide further updates as more details are released.  In the meantime, Baker Botts would be pleased to assist you in your analysis of these proposals.

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