- The Washington Times - Wednesday, April 26, 2006

ASSOCIATED PRESS

A Senate committee yesterday 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 oil companies on their record profits last year.

Sen. Charles E. Grassley, Iowa Republican and 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,” Mr. Grassley said.

With gasoline prices soaring and oil companies announcing record profits, “it’s relevant to know what the real financial picture is for this industry,” said Montana Sen. Max Baucus, the ranking Democrat on the committee.

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.

Mr. Grassley, negotiating a large tax bill, said yesterday a provision is being discussed that would change accounting rules for oil inventories and require the five biggest oil companies to pay $4.3 billion more in taxes.

But the prospects are tenuous.

The measure was passed by the Senate, but was viewed as essentially dead this week because of opposition from House Republicans. The White House also opposed the idea when it surfaced in November, and President Bush threatened to veto the entire bill because of it.

But Mr. Grassley said yesterday that high oil and gasoline prices revived the inventory tax plan and that it “is still being negotiated.”

His House counterpart in the negotiations, Ways and Means Committee Chairman Bill Thomas, California Republican, said the issue has not been decided. He denied he had rejected it.

Crude-oil futures eased for the third straight day yesterday, falling below $72 a barrel after U.S. government data showed motor-fuel demand weakening in what appeared to be a response to higher pump prices.

The data also showed domestic inventories of gasoline shrank for the eighth consecutive week.

There is broad bipartisan support in Congress for scuttling other breaks given to oil companies only eight months ago when Mr. Bush signed an energy bill.

Mr. Bush yesterday 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 V. Domenici, chairman of the Senate Energy and Natural Resources Committee, promised to press hard to repeal the subsidies. The New Mexico Republican 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, Massachusetts Democrat, 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.

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 yesterday at a press conference.

Mr. Cavaney criticized the changes pursued 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 that have allowed the companies to lower their tax bills. The changes would raise $4.3 billion in additional taxes from the companies over five years, according to a congressional analysis.

Mr. Cavaney said it was unfair to single out the five companies for an accounting practice widely used both in and outside the oil industry. The companies are Exxon Mobil Corp., Chevron, BP, Shell and ConocoPhillips.

A few Republicans, including Sen. Arlen Specter of Pennsylvania, have said a windfall-profits tax ought to be examined, but most GOP lawmakers — and Mr. 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 A. Boehner of Ohio told reporters.

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