End Oil and Gas Tax Subsidies Act of 2025
The End Oil and Gas Tax Subsidies Act of 2025 would repeal a wide range of federal tax subsidies and favorable tax treatments for oil and gas companies. The bill accelerates the end of many common industry tax benefits by repealing or narrowing numerous credits, deductions, and accounting rules for oil and gas activities, effective for taxable years and property placed in service after December 31, 2024. It also expands what counts as crude oil for certain taxes (tar sands and related sources) and adjusts foreign tax credit rules for dual-capacity taxpayers. The overall effect is to raise after-tax costs for many oil and gas producers and reduce government subsidies for fossil fuel activity, potentially affecting investment, production, and industry profitability. Key changes include ending enhanced oil recovery and marginal-well credits, eliminating intangible drilling costs and percentage depletion for oil and gas wells, repealing deductions for tertiary injectants, tightening passive-loss rules for oil and gas, removing the Section 199A (QBI) deduction for oil and gas activities, prohibiting LIFO inventory accounting for major integrated oil companies, and clarifying tar sands as crude oil for excise tax purposes. The package also tweaks foreign tax credit rules for dual-capacity taxpayers. Each provision generally targets activities that subsidize fossil fuel extraction or production and shifts those costs back onto private sector balance sheets.
Key Points
- 1Repeal and tightening of oil and gas subsidies and deductions
- 2- Repeals or removes several major subsidies: amortization of geological and geophysical expenditures (extends to 7-year period), marginal wells credit (Section 45I), enhanced oil recovery credit (Section 43), intangible drilling costs for oil/gas wells, percentage depletion (Section 613A), and the deduction for tertiary injectants (Section 193). Effective for amounts/tax years after December 31, 2024.
- 3Ending favorable tax treatment and limiting certain deductions
- 4- Repeals or disallows key tax benefits for oil and gas activities: deduction for intangible drilling costs; elimination of percentage depletion; ending QBI deduction for oil and gas activities (Section 199A); tightening passive-loss rules for working interests in oil and gas (Section 469).
- 5Inventory and accounting rules changes
- 6- Prohibits use of Last-In, First-Out (LIFO) inventory accounting for major integrated oil companies (defined by production, receipts, and refinery activity thresholds). Includes related conformity rules and transition provisions for taxpayers changing method.
- 7Tar sands and crude oil classification clarified
- 8- Tar sands, bitumen, kerogen-bearing oils, and related sources explicitly classified as crude oil for excise tax purposes, with regulatory authority to address other types of crude oil or fuel products as needed.
- 9Foreign tax credit and dual-capacity taxpayers
- 10- Modifies foreign tax credit rules for dual-capacity taxpayers (those who pay taxes abroad and receive a direct economic benefit from that jurisdiction), limiting foreign tax credit benefits in certain situations. Applies to years after 2024 and respects treaty obligations.
- 11Expanding revenue and policy implications
- 12- The combined effect is intended to reduce federal fossil fuel subsidies, potentially increasing after-tax costs for oil and gas producers, influencing investment decisions, and aligning the tax code with climate and energy-transition goals.