Trump's Tax Plan

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How Trump’s Tax Proposal Could Affect Oil and Gas. Texas Monthly.

On Wednesday, September 27, Republicans in Congress introduced a plan for sweeping tax reform, proposing to cut the corporate income tax from 35 percent to 20 percent, among other significant changes. Reducing the corporate income tax, currently among the highest in developed nations, seems like a home run for oil and gas producers in Texas. But for a national industry that receives over $4 billion of tax exemptions annually, simplifying the tax code to eliminate loopholes might not be uniformly positive. The fate of key exemptions during negotiations will determine how much Texas oil and gas producers actually benefit. The future of an allowance known as “percentage depletion,” which favors how smaller producers depreciate their assets, is uncertain. The exception is large, costing the U.S. government about $1.3 billion of lost revenue per year. The proposed tax plan is sparse on details, but could allow “special tax regimes” for certain industries, meaning even percentage depletion might survive. A statement from the Independent Petroleum Association of America suggests exemptions like the percentage depletion allowance are important and “will be crucial to evaluating this tax reform plan.”