Congress is currently working on the first comprehensive reform of the nation’s tax code in decades. The House of Representatives passed the Tax Cuts and Jobs Act of 2017 on November 16 and the Senate Finance Committee reported out its version of tax reform legislation the following week. Like the recently passed House tax bill, the Senate version will encourage capital investment by corporate taxpayers and promote economic growth that will benefit the U.S. economy and ConocoPhillips by:
- Cutting the corporate tax rate. The corporate tax rate would be decreased from 35 percent to 20 percent. Such a reduction would make companies like ours more competitive globally and would eliminate the current incentive for some U.S. companies to incorporate overseas for tax purposes.
- Encouraging domestic business investment. The bill would retain our ability to deduct 100% of our intangible drilling costs in the year incurred, as under current law. This provision is essential to get our cash out of a well to reinvest in the next well. On top of this, the bill would allow for first-year expensing of capital investments, excluding land and structures, for five years.
- Boosting U.S. global competitiveness. This bill levels the global playing field by shifting the U.S. from the current worldwide tax system to a territorial tax system, like that adopted by a majority of industrialized countries. The worldwide system encourages companies to keep money overseas. Under a territorial system, U.S. companies would not pay U.S. tax on the earnings of their foreign subsidiaries, encouraging companies to bring that money back for investment here.
Changes proposed in both bills would make U.S. companies and our economy more globally competitive while creating jobs and raising wages. Additionally, the lower corporate rate and the bill’s accelerated cost recovery provisions will keep the domestic shale renaissance going and growing.
