Obama Administration Seeks to Eliminate Special Tax Breaks for Oil and Gas Firms, such as GeoDynamics Inc.

Centennial, CO, October 02, 2011 --(PR.com)-- The Obama Administration submitted the American Jobs Act of 2011 to Congress on September 12, 2011. The act contains language that would repeal subsidies, eliminate tax credits claimed for foreign sales and operations, and do away with a variety of manufacturing deductions taken by oil and gas companies. (1) The elimination of these tax breaks and subsidies would help to pay for a number of job creating measures. For instance, the act would improve the prospects of small businesses by implementing tax breaks to support new hiring and stimulate oil production in the United States.

When Barack Obama ran for president in 2008, one of his campaign promises was to eliminate tax breaks for big oil. (2) In May 2011, President Obama's administration released his "Comprehensive Tax Plan." This plan contained a broad set of measures including, "Eliminating special tax breaks for oil and gas companies: including repealing special expensing rules, foreign tax credit benefits, and manufacturing deductions for oil and gas firms" and "repeal tax breaks and loopholes that reward corporations that retain their earnings overseas." (3) While this plan wasn't ultimately passed, the language has been reused in the President's September jobs act.

From the standpoint of GeoDynamics, the overall jobs act generally contains language that would support small crude oil producers. The repeal of subsidies and elimination of tax breaks is generally focused on the "Big Five" multinational oil companies: Exxon Mobil, Shell, Chevron, BP and ConocoPhillips. (5)

Some tax breaks that oil and gas companies currently enjoy include:

* Tax deductions for both tangible and intangible costs of drilling oil wells
* Tax deductions for purchasing leasing and mineral rights for new drilling
* Small producer tax exemptions add up to about 15% off a small oil company's total tax requirements (6)

The American Jobs Act of 2011 would cut the first two deductions, but because the jobs act is designed to positively impact small businesses, tax incentives for small producers would remain untouched. This could improve the market share of small crude oil producers like GeoDynamics. Indeed, according to a review of the plan by Thomson Reuters, the main tax change would consist of "Elimination of a set of tax preferences for the big five oil companies (intangible drilling cost deduction, Code Sec. 199 domestic production activities deduction, and last-in-first-out, or LIFO, accounting)." (7)

References

(1) http://ria.thomsonreuters.com/taxwatch/
(2)http://www.politifact.com/truthometer/promises/obameter/subjects/energy/
(3) http://halebobb.com/Obama/Factsheet_Tax_Plan_FINAL.pdf
(4)http://www.geodynamicsexploration.com/index.phpoption=com_content&view=category&layout=blog&id=8&Itemid=7
(5)http://www.politifact.com/truthometer/promises/obameter/promise/2/eliminate-all-oil-and-gas-tax-loopholes/
(6) http://www.investopedia.com/articles/07/oil-taxbreak.asp#axzz1Y9BtCYmJ
(7) http://ria.thomsonreuters.com/taxwatch/

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