Ernst & Young Creates Analytical Tool To Examine Effects Of Federal O&G Tax Law Changes

May 2009 Vol. 236 No. 5

An analytical tool has been crafted by Ernst & Young LLP to help clients quantify the effects of changes to oil and gas tax law that have been proposed by the Obama administration in the draft budget for fiscal year 2010 and in draft legislation, the “Oil Industry Tax Break Repeal Act of 2009,” filed in April 2009 by Sen. Charles Schumer (D-NY).

According to Deborah Byers, a transactions tax partner for Ernst & Young with 23 years of experience, the tool is a logic tree that helps tax advisers quantify the impacts of proposals made by Sen. Schumer’s bill and tax law changes that are implied in the proposed budget FY2010. According to the firm, some impacts that can be analyzed are:

  1. The repeal or limitation of percentage depletion.
  2. Repeal of the deduction for intangible drilling and development costs.
  3. Termination of credit for production of oil and gas from marginal wells.
  4. Revaluation of last-in, first out (LIFO) accounting for inventories by large integrated oil companies.
  5. Imposition of an excise tax on offshore oil and gas production.

“This analytical tool allows Ernst & Young to advise clients on capital investments by providing beneficial models and influencing indicators on a specific project,” Byers said.

Groups that can benefit from this tool include corporate development officers, chief executive officers and merger and acquisition teams.

For more information, contact Deborah Byers, Americas Oil and Gas Tax Leader,
Ernst & Young LLP, 1401 McKinney, Suite 1200, Houston, TX 77010, (713) 750-8138, deborah.byers@ey.com, www.ey.com/oilandgas.