President Biden’s Energy Tax Proposals

William Stromsem, CPA, J.D. 

George Washington School of Business 

President Biden’s 2025 revenue proposals would eliminate fossil fuel tax preferences because they “distort markets by encouraging more investment in the fossil fuel sector than would occur under a neutral system. This market distortion is detrimental to long-term energy security and is also inconsistent with the Administration’s policy of supporting a clean energy economy, reducing our reliance on oil and reducing greenhouse gas emissions.” 

President Biden’s budget provides billions of dollars to support renewable energy development in a continuation of his climate change agenda. The renewable energy proposals were detailed in a FACT Sheet on March 11, 2024.  

The Energy Tax Proposals 

The Biden proposals would repeal the following oil and gas tax benefits after 2024: 

• the use of percentage depletion with respect to oil and gas wells; 

• the expensing of intangible drilling costs;  

• the expensing of exploration and development costs;  

• two-year amortization of geological and geophysical expenditures by independent producers, instead allowing amortization over the seven-year period used by major integrated oil companies;  

• capital gains treatment for royalties;  

• the deduction for costs paid or incurred for any qualified tertiary injectant used as part of a tertiary recovery method;  

• the enhanced oil recovery credit for eligible costs attributable to a qualified enhanced oil recovery project;  

• the credit for oil and gas produced from marginal wells;  

• the exception to passive loss limitations provided to working interests in oil and natural gas properties;  

• percentage depletion for hard mineral fossil fuels;  

• the exemption from the corporate income tax for publicly traded partnerships with qualifying income and gains from activities relating to fossil fuels;  

• the Oil Spill Liability Trust Fund (OSTLF) and Superfund excise tax exemption for crude oil derived from bitumen and kerogenrich rock; and  

• accelerated amortization for air pollution control facilities. 

The energy tax benefits repeal proposals are detailed in the Treasury Department's General Explanations of Administration's Fiscal Year 2025 Revenue Proposals, beginning at page 65.  

Prospects 

These proposals may sound familiar because they were also floated at the beginning of the Obama administration but were dropped because of the need for energy independence in the face of conflicts in the Middle East. The Middle East is still in turmoil, and the need for energy independence continues. Also, most Americans support the continued use of fossil fuels and believe that we are far from being able to shift to renewable alternatives. Even President Biden, in his 2023 State of the Union Address, said we would still need oil for another decade, with many believing that this short time frame was just aspirational cheerleading by the President.   

The legislation is unlikely to be enacted now any more than during the Obama administration. Even if the Democrats win both the House and Senate in the fall elections, the Senate is likely to still be fairly evenly divided, with all Senators from energy-producing states joining Republicans in opposing the Biden proposals.