Client & Advisor Update - August 31, 2010

Oil & Gas Taxation Issues

On July 28, 2010, Senate majority leader Harry Reid released a draft of new proposed legislation, the Clean Energy Jobs and Oil Company Accountability Act. The bill focuses on removing the current limitation of $75 million on the liability for responsible parties in oil and gas spills, and in its place allowing unlimited liability. Currently, in the draft there are no provisions for the removal of tax deductions items specific to oil and gas companies. However, this legislation is still in draft form and subject to change. The overall intention of this act, as has been stated by Sen. Reid, is to reduce our dependence on fossil fuels. It is believed by many professional and energy industry organizations that this act or another future act will soon propose the elimination of certain tax deductions currently afforded to oil and gas companies. The elimination of these deductions is viewed by legislators as a funding mechanism for the costs of this proposed new law. The tax deductions that have most frequently been mentioned as a way of funding this legislation are the percentage depletion deduction and expensing of intangible drilling costs. The elimination of these provisions would affect primarily independent producers.

Texas Businesses Take Advantage of the HIRE Act

A report released Aug. 2, 2010, by the U.S. Department of Treasury shows that Texas ranks second in states with the highest number of newly-hired staff (364,619) whose employers may qualify for tax exemption under the Hiring Incentives to Restore Employments (HIRE) Act of 2010. The HIRE Act exempts employers from paying their 6.2 percent share of the social security payroll tax for the remainder of 2010 for eligible new hires and provides a $1000 tax credit to employers if they retain the workers for 52 weeks.