A Senate committee Wednesday announced an investigation into taxes paid by major oil companies and asked the Internal Revenue Service for the companies’ tax returns.
The Senate Finance Committee promised “a comprehensive review of the federal taxes paid” by the 15 largest oil and gas companies. The committee said it wanted to inspect their tax returns for the last five years.
Sen. Charles Grassley, R-Iowa, the committee’s chairman, said the panel was concerned about high profits and executive compensation at oil companies.
“I want to make sure the oil companies aren’t taking a speed pass by the tax man,” said Grassley in a statement.
With gasoline prices soaring and oil companies announcing record profits, “it’s relevant to know what the real financial picture is for this industry,” Montana Sen. Max Baucus, the ranking Democrat on the committee, said.
It’s highly unusual for the Senate committee to seek corporate tax records. The last time it was done was when the panel asked the IRS for the tax records of Enron Corp.
The committee announcement came as Congress showed increasing concern amid political fallout over high gasoline prices and oil industry profits. Lawmakers began moving on various fronts to eliminate loopholes and some tax provisions that save oil companies billions of dollars.
In a letter to the IRS, Grassley and Baucus said the tax records of the major oil companies are needed to conduct “a comprehensive review” of the companies’ compliance with tax laws.
“As pressure mounts to address extraordinarily high gas prices that consumers are facing at the pump, we feel we should better understand the federal tax posture of the industry,” the two senators wrote IRS Commissioner Mark Everson.
In their request, the senators noted not only the industry profits, but “an extremely lucrative retirement plan by one oil and gas industry executive, benefits which may have been subsidized in part by the taxpayers.”
The retirement compensation package given by ExxonMobil Corp. to outgoing Chairman Lee Raymond is said to total $400 million when all pension payoffs and stock options are included.
Congress feels the heat
Anger over soaring gasoline prices and record oil profits is putting pressure on Congress to eliminate loopholes and some tax provisions that save oil companies billions of dollars.
A House-Senate conference, negotiating a large tax bill, is considering a provision that would change accounting rules for oil inventories and require the five biggest oil companies to pay $4.3 billion more in taxes.
The measure passed the Senate but was viewed as essentially dead this week because of opposition from House GOP lawmakers. The White House opposed the idea, too, when it surfaced in November and threatened to veto the entire bill because of it.
Grassley said Wednesday that high fuel prices revived the inventory tax plan and it “is still being negotiated.”
His House counterpart in the negotiations, Ways and Means Committee Chairman Bill Thomas, R-Calif., said the issue has not been decided. He denied he had rejected it.
Broad support for ending deals
Additionally, there is broad bipartisan support for scuttling other breaks given to oil companies only eight months ago when President Bush signed an energy bill.
Bush on Wednesday urged Congress to remove those tax provisions, worth $2 billion over 10 years. He said people should not pay for such subsidies when the industry is wallowing in cash.
Sen. Pete Domenici, chairman of the Senate Energy and Natural Resources Committee, promised to press hard to repeal the subsidies. Domenici, R-N.M., said he cannot support tax breaks for oil companies “while some American families are searching their budgets for the extra cash they need to fill their gas tanks.”
Sen. John Kerry, D-Mass., said he intended to offer legislation repealing the tax breaks. They included subsidies for exploration in deep waters of the Gulf of Mexico and in geologically or politically difficult regions of the world, as well as royalty relief for certain oil and gas exploration.
Oil execs say tax breaks aren’t needed
Executives of the major oil companies said at a recent hearing they do not need those tax breaks.
“They feel they are not necessary. We are not involved in trying to hold them in place,” Red Cavaney, president of the American Petroleum Institute, said Wednesday at a news conference.
Cavaney criticized the proposed changes on oil inventory accounting, calling them “equivalent to a windfall profits tax” for the five largest U.S. oil companies.
The Senate-passed plan would change accounting rules for oil kept in inventory. The changes would raise $4.3 billion in additional taxes from the companies over five years, according to a congressional analysis.
Fingering the Big Five
Cavaney said it was unfair to single out the five companies — ExxonMobil Corp., Chevron, BP, Shell and ConocoPhillips — for an accounting practice widely used both in and outside the oil industry.
Congressional Democrats see the uproar over the surge in gasoline costs as a chance to renew their push for a windfall profits tax.
“When ExxonMobil can realize billions of dollars of profits at the expense of millions of American families, it’s time to step up” and tax more of those earnings, said Sen. Richard Durbin, D-Ill.
A few Republicans, including Sen. Arlen Specter of Pennsylvania, have said a windfall profits tax ought to be examined, but most GOP lawmakers — and Bush — strongly oppose it.
It “failed miserably” when it was tried in the early 1980s, and there is no reason to try it again, House Majority Leader John Boehner, R-Ohio, told reporters.