Title I — Close big oil tax loopholes

“(n) Special rules relating to major integrated oil companies which are dual capacity taxpayers

“(1) General rule—Notwithstanding any other provision of this chapter, any amount paid or accrued by a dual capacity taxpayer which is a major integrated oil company (within the meaning of section 167(h)(5)) to a foreign country or possession of the United States for any period shall not be considered a tax—

“(A) if, for such period, the foreign country or possession does not impose a generally applicable income tax, or

“(B) to the extent such amount exceeds the amount (determined in accordance with regulations) which—

“(i) is paid by such dual capacity taxpayer pursuant to the generally applicable income tax imposed by the country or possession, or

“(ii) would be paid if the generally applicable income tax imposed by the country or possession were applicable to such dual capacity taxpayer.

“(2) Dual capacity taxpayer—For purposes of this subsection, the term dual capacity taxpayer means, with respect to any foreign country or possession of the United States, a person who—

“(A) is subject to a levy of such country or possession, and

“(B) receives (or will receive) directly or indirectly a specific economic benefit (as determined in accordance with regulations) from such country or possession.

“(3) Generally applicable income tax—For purposes of this subsection—

“(A) In general—The term generally applicable income tax means an income tax (or a series of income taxes) which is generally imposed under the laws of a foreign country or possession on income derived from the conduct of a trade or business within such country or possession.

“(B) Exceptions—Such term shall not include a tax unless it has substantial application, by its terms and in practice, to—

“(i) persons who are not dual capacity taxpayers, and

“(ii) persons who are citizens or residents of the foreign country or possession.”

“(E) Special rule for certain oil and gas income—In the case of any taxpayer who is a major integrated oil company (within the meaning of section 167(h)(5)) for the taxable year, the term domestic production gross receipts shall not include gross receipts from the production, refining, processing, transportation, or distribution of oil, gas, or any primary product (within the meaning of subsection (d)(9)) thereof.”

“(c) Intangible drilling and development costs in the case of oil and gas wells and geothermal wells

“(1) In general—Notwithstanding subsection (a), and except as provided in subsection (i), regulations shall be prescribed by the Secretary under this subtitle corresponding to the regulations which granted the option to deduct as expenses intangible drilling and development costs in the case of oil and gas wells and which were recognized and approved by the Congress in House Concurrent Resolution 50, Seventy-ninth Congress. Such regulations shall also grant the option to deduct as expenses intangible drilling and development costs in the case of wells drilled for any geothermal deposit (as defined in section 613(e)(2)) to the same extent and in the same manner as such expenses are deductible in the case of oil and gas wells. This subsection shall not apply with respect to any costs to which any deduction is allowed under section 59(e) or 291.

“(2) Exclusion

“(A) In general—This subsection shall not apply to amounts paid or incurred by a taxpayer in any taxable year in which such taxpayer is a major integrated oil company (within the meaning of section 167(h)(5)).

“(B) Amortization of amounts not allowable as deductions under subparagraph (A)—The amount not allowable as a deduction for any taxable year by reason of subparagraph (A) shall be allowable as a deduction ratably over the 60-month period beginning with the month in which the costs are paid or incurred. For purposes of section 1254, any deduction under this subparagraph shall be treated as a deduction under this subsection.”

“(f) Application with respect to major integrated oil companies—In the case of any taxable year in which the taxpayer is a major integrated oil company (within the meaning of section 167(h)(5)), the allowance for percentage depletion shall be zero.”

“(d) Application with respect to major integrated oil companies

“(1) In general—This section shall not apply to amounts paid or incurred by a taxpayer in any taxable year in which such taxpayer is a major integrated oil company (within the meaning of section 167(h)(5)).

“(2) Amortization of amounts not allowable as deductions under paragraph (1)—The amount not allowable as a deduction for any taxable year by reason of paragraph (1) shall be allowable as a deduction ratably over the 60-month period beginning with the month in which the costs are paid or incurred.”

“(C) Certain successors in interest—For purposes of this paragraph, the term major integrated oil company includes any successor in interest of a company that was described in subparagraph (B) in any taxable year, if such successor controls more than 50 percent of the crude oil production or natural gas production of such company.”