American Energy Independence and Tax Fairness Act

What it does

• •Includes foreign oil and gas extraction income in the calculation of net CFC tested income for U.S. tax purposes, affecting how certain foreign corporate income is taxed.
• •Expands the definition of foreign oil and gas extraction income to include income from extraction of minerals from oil shale and tar sands, subjecting these sources to the same tax treatment as conventional oil and gas.
• •Creates new rules for dual capacity taxpayers (entities that both pay foreign taxes and receive specific economic benefits from a foreign country) by limiting foreign tax credits for combined foreign oil and gas income unless a generally applicable income tax is imposed.

Why it matters

• •The bill aims to prevent U.S.-based energy companies from using tax preferences in foreign jurisdictions to reduce their U.S. tax liability on oil and gas operations.
• •By including oil shale and tar sands extraction in the definitions, the bill extends taxation rules to unconventional energy sources that were previously potentially excluded.

Who is affected

• •U.S. shareholders of foreign corporations engaged in oil and gas extraction operations abroad.
• •Dual capacity taxpayers—entities that are subject to levies in foreign countries and receive specific economic benefits from those countries while extracting oil, gas, oil shale, or tar sands.

What happens next

The bill was referred to the Senate Committee on Finance and requires committee action and full Senate consideration before proceeding.