Oil industry lobbyists are signaling support for President Donald Trump’s tax reform proposals, particularly those seeking to slash the corporate tax rate and write off capital investments.
The GOP’s push to allow companies to immediately write off business investments is a critical component that will allow the U.S. to dominate the energy market, according to industry officials. But other parts of the proposal could negatively affect energy pipeline investments.
Trump and the Republicans’ move to allow immediate expensing would be “critical to the continued American energy dominance,” Barry Russell, head of oil lobbying group Independent Petroleum Association of America, said in a statement Thursday.
Russell was referring to a tax deduction that can benefit business owners who purchase startup equipment that can cost hundreds of thousands of dollars. The tax deduction would allow companies to avoid writing off technologies only after they have diminished in value.
Prominent Republicans have also publicly supported the deduction. Republican Sen. Ted Cruz of Texas, for instance, told reporters Sept. 13 that he fully supports “a low, flat tax rate” and a tax proposal that would “allow full and immediate expensing.”
The proposal also compartmentalizes the country’s complex income tax structure. It would create three tax brackets — 12 percent, 25 percent and 35 percent — while giving congressional committees the option of adding a fourth for the highest earners.
Other industry insiders are willing to sacrifice some deductions so long as they can get a much smaller corporate tax rate. Trump’s proposal suggests ending the Section 199 deduction on domestic manufacturing income, a deduction Republicans and corporations have traditionally supported and Democrats have opposed.
“The driving number for us is the corporate rate — things become negotiable once that is set low enough and 20% sounds good,” an oil refining source told Axios. “This is not to say we can sign off on all trade-offs, but Section 199 starts to pale in comparison to the other fish on the grill.”
“I don’t see 199 as a deal breaker for oil-and-gas if everything else is a net plus,” another source said, adding that the deduction is primarily benefits only the largest integrated companies anyway.
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