IPAA Responds to Chairman Camp’s Tax Reform Proposal Affecting Independent Oil and Natural Gas Producers

IPAA Responds to Chairman Camp’s Tax Reform Proposal Affecting Independent Oil and Natural Gas Producers

IPAA President & CEO Barry Russell issued the following statement in response to Chairman Camp’s tax reform proposal released today.

“IPAA appreciates the effort that Ways and Means Committee Chair Dave Camp has put into the development of a federal tax reform proposal. This document marks an early step in a long process to develop appropriate revisions to the federal tax code to both simplify taxes and continue to encourage U.S. economic development.

“Several elements of the proposal will affect America’s independent oil and natural gas producers. IPAA commends the proposal to retain the current tax treatment of intangible drilling costs (IDCs). This longstanding tax deduction provides producers with the ability to reinvest 150 percent of their cash flow into new U.S. production. Retaining this provision will enhance the American production that is now being recognized as driving much broader investment in U.S. manufacturing.

“Although still studying this proposal, IPAA is troubled by the change in the percentage depletion deduction and specifically its impact on America’s small business producers and royalty owners of oil and natural gas resources. These stakeholders have relied on the percentage depletion deduction to maintain America’s marginal wells, which generate 20 percent of American oil and more than 12 percent of American natural gas. IPAA is concerned that the overall result, notwithstanding the change in the individual tax rate, could imperil America’s essential marginal well production.

“IPAA is also concerned about the impact of the proposal’s change of the passive loss exception. This was originally instituted to ensure that small producers who rely on private investors for financing could compete with larger companies and their access to capital from banks and other larger financial institutions. As IPAA examines the proposal, it will be assessing its impact on the small businesses that must rely on these investors to develop their projects.”

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