Tim Charters, NSWA Vice President of Governmental Affairs

The new Republican Majority in the Senate, and the new House Ways and Means Committee Chairman Paul Ryan (R-WI) have finally settled in and have identified a path forward for discussions on comprehensive tax reform in the months ahead. Before moving to address tax reform, the House committees will work on international trade issues, including Trade Promotion Authority for the President, as well as focusing on potential revenue measures to support a transportation reauthorization. What “tax reform” will look like, and which path the legislation may take has yet to be determined.

But here is what we know right now.

HWMC Chairman Ryan facilitated a retreat for his Congressional committee members where they looked at the big picture of tax reform, and ended up with little sense of really where they are headed. The overwhelming consensus is that members are prepared to move forward with “comprehensive” tax reform, understanding that the conflicts and battles ahead may be tough…but the fundraising should be easy. There was a clear sense that they don’t want to start over, but that the “Camp Draft” which was produced by the Committee last year would not be a starting point. In addition, there was wide disagreement on which areas (business vs. personal taxes, international vs. domestic) should be the starting points for the discussions.

The new Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) have identified a tax reform strategy that is a bit clearer. The Finance Committee has established “working groups” to focus on different aspects of tax reform and report back to the Full Committee. These working groups are starting their process now with roundtable reports due back to the Full Committee in April, with final reports to be produced in May. After that, it is expected that the Full Committee will begin work on these consensus recommendations from the working groups. However, all of this is going to be done under the authority of Chairman Hatch who gave a Senate floor speech last December on his principals for tax reform which is based off the Senate Finance Republican Staff Report focusing on Tax Reform 2015 and beyond.

Since the Senate working groups are focusing on finding consensus issues to work off, the early strategy by NSWA is clearly to make the elimination of the percentage depletion allowance not a consensus item, as well as making the point that changes of this magnitude to the tax code with have impacts on constituents in their home states. The importance of the NSWA-commissioned IHS report on percentage depletion in accomplishing this cannot be understated. During meetings and presentations, multiple members have been surprised by the numbers in the report. I believe they are actually just not aware of the significant footprint that stripper oil and gas wells have in their states, as well as the jobs and revenue associated with this “small business sector” of energy industry.

Finally, this week, NSWA and the Texas Alliance of Energy Producers have secured support for a letter being circulated by Rep. Lamar Smith (R-TX) and Rep. Henry Cuellar (D-TX) focusing on the protection of percentage depletion, intangible drilling costs (IDCs) and the passive loss exemption through comprehensive tax reform. While the letter isn’t a clear line in the sand, it is a solid step to get members on record supporting the preservation of percentage depletion. NSWA will be working to get members to sign onto the letter. This early first step will help us start to roll back efforts to eliminate percentage depletion and protect American jobs, domestic energy production and NSWA members.