LEGISLATIVE HISTORY: P.L. 95-623 HOUSE REPORTS: No. 95-1190 accompanying H.R. 12584 (Comm. on Interstate & Foreign Commerce) and No. 95-1783 (Comm. of Conference). SENATE REPORT: No. 95-839 (Comm. on Human Resources). CONGRESSIONAL RECORD: Vol. 124 (1978): June 26, considered and failed of passage in Senate. Aug. 9, considered and passed Senate. Sept. 25, H.R. 12584 considered and passed House; passage vacated, and S. 2466, amended, passed in lieu. Oct. 13, House agreed to conference report. Oct. 15, Senate agreed to conference report. C. Crude Oil Windfall Profit Tax Act of 1980, Public Law 96-223, April 2, 1980 (26 Except in the Table of Contents, Titles II through IV are omitted. An Act To impose a windfall profit tax on domestic crude oil, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, Section 1. Short Title; Amendment of 1954 Code; Table of Contents Crude Oil (a) SHORT TITLE.-This Act may be cited as the "Crude Oil Windfall Profit Tax Act of 26 USC 1 note. 1980". (b) AMENDMENT OF 1954 CODE.-Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1954. (c) TABLE OF CONTENTS. Sec. 1. Short title; amendment of 1954 Code; table of contents. TITLE I-WINDFALL PROFIT TAX ON DOMESTIC CRUDE OIL Sec. 101. Windfall profit tax. Sec. 102. Allocation of net revenues from windfall profit tax to certain uses. 26 USC 1 et seq. Sec. 201. General provisions relating to credit. Sec. 203. Provisions to prevent double benefits. Part II-Business Energy Investment Credits Sec. 221. Changes in amount and period of application of energy percentage. Sec. 222. Changes in energy property item descriptions. Sec. 223. Other changes with respect to the investment credit for investment in energy property. Part III-Production of Fuel from Nonconventional Sources; Alcohol Fuels Sec. 231. Production tax credit. Sec. 232. Alcohol fuels. Part IV-Energy-Related Uses of Tax Exempt Bonds Sec. 241. Solid waste disposal facilities. Sec. 242. Qualified hydroelectric generating facilities. Sec. 243. Renewable energy property. Sec. 244. Certain obligations must be in registered form and not guaranteed or subsidized under an energy program. Sec. 304. Home energy grants authorized. Sec. 306. Allotments. Sec. 307. Uses of home energy grants. Sec. 308. State plans. Sec. 309. Uniform data collection. Sec. 311. Withholding. Sec. 312. Criminal penalties. Sec. 313. Administration. TITLE IV-MISCELLANEOUS PROVISIONS Sec. 401. Repeal of carryover basis. Sec. 402. Disapproval of Presidential actions adjusting oil imports. Sec. 403. Qualified liquidations of LIFO inventories. Sec. 404. Exemption of certain interest income from tax. TITLE I-WINDFALL PROFIT TAX ON DOMESTIC CRUDE OIL Windfall Profit Tax Sec. 101. (a) IN GENERAL (1) Amendment of Subtitle D. - Subtitle D (relating to miscellaneous excise taxes) is amended by adding at the end thereof the following new chapter. "CHAPTER 45-WINDFALL PROFIT TAX ON DOMESTIC CRUDE OIL "(a) IMPOSITION OF TAX.—An excise tax is hereby imposed on the windfall profit from taxable crude oil removed from the premises during each taxable period. "(b) TAX PAID BY PRODUCER.-The tax imposed by this section shall be paid by the producer of the crude oil. 26 USC 4987. "Sec. 4987. "Amount of Tax "(a) IN GENERAL The amount of tax imposed by section 4986 with respect to any barrel of taxable crude oil shall be the applicable percentage of the windfall profit on such barrel. "(b) APPLICABLE PERCENTAGE. For purposes of subsection (a) "(1) General Rule for Tiers 1 and 2.-The applicable percentage for tier 1 oil and tier 2 oil which is not independent producer oil is— "Tier 1.. "Tier 2.... 70 .. 60 "(2) Independent Producer Oil.-The applicable percentage for independent producer oil which is tier 1 oil or tier 2 oil is— 50 30 "Tier 1.... "Tier 2..... "(3) Tier 3 Oil.-The applicable percentage for tier 3 oil is 30 percent. "(c) FRACTIONAL PART OF BARREL.-In the case of a fraction of a barrel, the tax imposed by section 4986 shall be the same fraction of the amount of such tax imposed on the whole barrel. "Windfall Profit; Removal Price "Sec. 4988. "(a) GENERAL RULE.-For purposes of this chapter, the term 'windfall profit' means the excess of the removal price of the barrel of crude oil over the sum of "(1) The adjusted base price of such barrel, and "(2) The amount of the severance tax adjustment with respect to such barrel provided by section 4996(c). "(b) NET INCOME LIMITATION ON WINDFALL PROFIT. "(1) In General.-The windfall profit on any barrel of crude oil shall not exceed 90 percent of the net income attributable to such barrel. "(2) Determination of Net Income.-For purposes of paragraph (1), the net income attributable to a barrel shall be determined by dividing "(A) The taxable income from the property for the taxable year attributable to taxable crude oil, by "(B) The number of barrels of taxable crude oil from such property taken into account for such taxable year. "(3) Taxable Income from the Property.-For purposes of paragraph (2)— "(A) In general.-Except as otherwise provided in this paragraph, the taxable "(B) Certain deductions not allowed.-No deduction shall be allowed for- "(ii) the tax imposed by section 4986, "(iii) section 263(c) costs, or "(iv) qualified tertiary injectant expenses to which an election under subparagraph (E) applies. "(C) Taxable income reduced by cost depletion.-Taxable income shall be reduced by the cost depletion which would have been allowable for the taxable year with respect to the property if "(i) all "(I) section 263(c) costs, and "(II) qualified tertiary injectant expenses to which an election under subparagraph (E) applies, incurred by the taxpayer had been capitalized and taken into account in computing cost depletion, and "(ii) cost depletion had been used by the taxpayer with respect to such property for all taxable periods. "(D) Section 263(c) costs.-For purposes of this paragraph, the term 'section 263(c) costs' means intangible drilling and development costs incurred by the taxpayer which (by reason of an election under section 263(c)) may be deducted as expenses for purposes of this title (other than this paragraph). Such term shall not include costs incurred in drilling a nonproductive well. "(E) Election to capitalize qualified tertiary injectant expenses "(i) In general.-Any taxpayer may elect, with respect to any property, to capitalize qualified tertiary injectant expenses for purposes of this paragraph. Any such election shall apply to all qualified tertiary injectant expenses allocable to the property for which the election is made, and may be revoked only with consent of the Secretary. Any such election shall be made at such time and in such manner as the Secretary shall by regulations prescribe. "(ii) Qualified tertiary injectant expenses.-The term 'qualified tertiary injectant expenses' means any expense allowable as a deduction under section 193. "(4) Special Rule for Applying Paragraph (3)(C) to Certain Transfers of Proven Oil or Gas Properties. "(A) In general.-In the case of any proven oil or gas property transfer which (but for this subparagraph), would result in an increase in the amount determined under paragraph (3)(C) with respect to the transferee, paragraph (3)(C) shall be applied with respect to the transferee by taking into account only those amounts which would have been allowable with respect to the transferor under paragraph (3)(C) and those costs incurred during periods after such transfer. "(B) Proven oil or gas property transfer.-For purposes of subparagraph (A), the term 'proven oil or gas property transfer' means any transfer (including the subleasing of a lease or the creation of a production payment which gives the transferee an economic interest in the property) after 1978 of an interest (including an interest in a partnership or trust) in any proven oil or gas property (within the meaning of section 613A(c)(9)(A)). "(5) Special Rule Where There is Production Payment.-For purposes of paragraph (2), 26 USC 4988. 26 USC 613. 26 USC 263. Post, p. 286. 26 USC 613A. 26 USC 103. 26 USC 613. 26 USC 613. if any portion of the taxable crude oil removed from the property is applied in discharge of a production payment, the gross income from such portion shall be included in the gross income from the property of both the person holding such production payment and the person holding the interest from which such production payment was created. "(c) REMOVAL PRICE.-For purposes of this chapter "(1) In General.-Except as otherwise provided in this subsection, the term 'removal price' means the amount for which the barrel is sold. "(2) Sales Between Related Persons.-In the case of a sale between related persons (within the meaning of section 103(b)(6)(C), the removal price shall not be less than the constructive sales price for purposes of determining gross income from the property under section 613. "(3) Oil Removed from Premises Before Sale.-If crude oil is removed from the premises before it is sold, the removal price shall be the constructive sales price for purposes of determining gross income from the property under section 613. "(4) Refining Begun on Premises.-If the manufacture or conversion of crude oil into refined products begins before such oil is removed from the premises— "(A) Such oil shall be treated as removed on the day such manufacture or conversion begins, and "(B) The removal price shall be the constructive sales price for purposes of determining gross income from the property under section 613. "(5) Meaning of Terms.-The terms 'premises' and 'refined product' have the same meaning as when used for purposes of determining gross income from the property under section 613. 26 USC 4989. "Sec. 4989. "Adjusted Base Price "(a) ADJUSTED BASE PRICE DEFINED.-For purposes of this chapter, the term 'adjusted base price' means the base price for the barrel of crude oil plus an amount equal to "(1) Such base price, multiplied by "(2) The inflation adjustment for the calendar quarter in which the crude oil is removed from the premises. The amount determined under the preceding sentence shall be rounded to the nearest cent. "(b) INFLATION ADJUSTMENT. (1) In General. For purposes of subsection (a), the inflation adjustment for any calendar quarter is the percentage by which— "(A) The implicit price deflator for the gross national product for the second preceding calendar quarter, exceeds "(B) Such deflator for the calendar quarter ending June 30, 1979. "(2) Additional Adjustment for Tier 3 Oil.-The adjusted base price for tier 3 oil shall be determined by substituting for the implicit price deflator referred to in paragraph (1)(A) an amount equal to such deflator multiplied by 1.005 to the nth power where 'n' equals the number of calendar quarters beginning after September 1979 and before the calendar quarter in which the oil is removed from the premises. "(3) First Revision of Price Deflator Used.-For purposes of paragraphs (1) and (2), the first revision of the price deflator shall be used. "(c) BASE PRICE FOR TIER 1 OIL.-For purposes of this chapter, the base price for tier 1 oil is "(1) The ceiling price which would have applied to such oil under the March 1979 energy regulations if it had been produced and sold in May 1979 as upper tier oil, reduced by '(2) 21 cents. "(d) BASE PRICES FOR TIER 2 OIL AND TIER 3 OIL.-For purposes of this chapter- "(A) All domestic crude oil were uncontrolled, and "(B) The average removal price for all domestic crude oil (other than Sadlerochit oil) were "(i) $15.20 a barrel for purposes of determining base prices for tier 2 oil, and "(ii) $16.55 a barrel for purposes of determining base prices for tier 3 oil. "(2) Interim Rule.-For months beginning before October 1980 (or such earlier date as may be provided in regulations taking effect before such earlier date), the base prices for tier 2 oil and tier 3 oil, respectively, shall be the product of |