The oil percentage depletion allowance / by kevin murray

Unless you are an actual tax authority, figuring out and knowing all the tax set asides, tax advantages, and tax subsidies that particular industries and companies get is virtually impossible to know, but those running those companies, for an absolute certainly know how exactly the tax codes can be manipulated and utilized for their advantage, for most companies make it their practical purpose to pay as little as they need to legally pay in taxes, per their tax statements each and every year.


In point of fact, the tax code is so convoluted, manipulated, and unfair, that some companies are entitled to special tax breaks that other companies do not have, and vice versa, whereas, individual tax payers, typically are stuck paying the full freight, so that most individual tax payers, do not really need any outside help in order to prepare their taxes, because their taxes owed are for the most part, fairly clearly delineated, and therefore straightforward.  On the other hand, no company of any real worth, and especially companies that are very large and of a lot of worth, hire people specifically to lobby for tax breaks, to interpret the tax code in a manner that will delay or reduce taxes, and do everything that they can to "legally" reduce their taxes.


One of the many unfair tax subsidies that really should be looked upon as corporate welfare is the oil percentage depletion allowance.  That is to say, oil companies must put forth capital investment in order to produce oil from a given property, of which, they are permitted, with certain restrictions, to deduct 15% from their gross income earned, not subject to the limitation of the capital investment so made.  That is to say, if an oil company puts forth $50 million in capital investment into a given oil property, they are entitled to deduct not 15%, from that capital investment made of $50 million but actually are entitled to deduct 15% per year in perpetuity of the gross income earned from that capital investment and the oil so produced, indicating that the oil percentage depletion allowance can far exceed the amount of capital investment put into that property to extract oil in the first place.


Whether the oil depletion percentage allowance was ever necessary in order to encourage domestic production, is debatable to begin with, but it isn't important to try to figure out why such a tax law was passed, what is important, is that the oil depletion percentage allowance should be phased out and eliminated posthaste, because it is grossly unfair to allow any corporation, for any reason, to deduct more than their actually capital investment from their net income liability so as to pay far less than what they should pay in their taxes to their country for perpetuity.


While the tax code stipulates that this oil percentage depletion allowance is only allowed for those that produce or refine less than 50,000 barrels of oil a day, 50,000 barrels of oil a day, is a serious amount of production, equating to millions upon millions of dollars, of which, any company, that is permitted to deduct from their net income more than their capital investment in the first place is selfishly benefiting themselves at the expense of the average American.