CALL TO ACTION – Help stop double taxation of US companies

Contributed by Shell Suber

Right now the Obama Administration is trying to sneak through a change to an important but little known part of the tax code. They are hoping voters won’t notice and they can get away with it. But this change could have enormous affect on your daily life and our national economy.

We all need to call Senators Lindsey Graham and Jim DeMint and urge them to fight this back door rule change before it costs us jobs and wrecks our economy.

Details below…


Most of us are unfamiliar with something called the “dual capacity taxpayer rule.” Unless you are in manufacturing, you wouldn’t have any reason to know about it but it is hugely important. Basically, the “dual capacity” rule says when a US company makes money overseas and has already been taxed by the “host country” on that income, the company is not taxed AGAIN by the US on that same money, preventing double taxation.


The Obama Administration – sensing there is little public sympathy for oil and gas companies in the wake of the BP oil spill – hopes to change the way they calculate the “duel capacity” rule for oil and gas companies.

The change would apply to ONLY oil and gas companies and effectively allow the IRS to tax income ALREADY TAXED by foreign governments.

As bad as double taxation is, singling out just one industry for it is even worse!

The Administration is hoping regular citizens just don’t notice.


Naturally, since this would only apply in the US, only our oil and gas companies would be affected, giving our foreign competitors a massive advantage.

And guess who would be at the front of the line to accept this freebee? You got it! BP… because they are not a US company.

That’s right. The same administration which vilified a Republican lawmaker for apologizing to a BP executive is now giving them a tremendous competitive advantage over US companies.

Who else? What about CITGO, owned by Venezuela and run by Hugo Chávez?

Meanwhile a maneuver of this magnitude could negatively affect US gas prices in the middle of the summer when our economy can least afford the hit.


Call Senators Graham and DeMint and tell them both to fight the proposed changes. Here is how:

  1. Call Lindsey Graham’s office at (202) 224-5972 then call Jim DeMint’s office at (202) 224-6121;
  2. Ask to speak about a legislative issue;
  3. Tell the staffer (in your own words): I want to urge the Senator to work hard to stop the Administration’s proposed changes to the “dual capacity” taxpayer rules… Our economy cannot sustain the job losses and spike in gas prices this change would cause.
  4. Write down the name of the staffer and anything they say in response.
  5. VERY IMPORTANT: So that we can ensure both our Senators remain firm in their opposition to this change, please report your call in the comments below or email them to Be sure to include your Name, Title, County, Email Address, the Name of the 2 Staffers, and Anything They Said in Response.

Thank you!!!!


One Comment to “CALL TO ACTION – Help stop double taxation of US companies”

  1. My cousin-in-law in Atlanta just asked me a good question on Facebook about this that I thought I might share here in case anyone wondered the same thing. – Shell

    The question was:

    Shell – Do you know if foreign energy companies, BP for instance, are taxed by the US for profits made in this country – I assume they are. Are they then taxed again by their governments (double taxed) or do they get a tax break at home the way the US companies currently do?

    My response:

    Jim – That is a very fair question with a somewhat complicated answer. Hope this helps make the bigger picture clear…

    The U.S. taxes the worldwide income of its corporations, but in order to prevent double taxation of such income, it extends a credit against the U.S. tax liability on foreign earned income for foreign income taxes paid on that income.

    Oil and gas companies operating abroad are subject to income tax by foreign governments and since, in many countries, the government also owns the oil and gas reserves in place, they are also subject to royalty or severance tax obligations. U.S. taxpayers obligated to pay income taxes and other taxes or royalties for government owned property are called “dual capacity” taxpayers and are already subject to specific, and restrictive, dual capacity taxpayer rules. These rules, in place for over 25 years, are explicitly designed to ensure that a dual capacity taxpayer will only be able to claim a credit for foreign income taxes paid, not for other non-income tax payments. They place the full burden of proof on the dual capacity taxpayer to prove that no part of what is claimed as an income tax is a royalty or other payment for the resource itself.

    The Administration’s proposal would change the dual capacity taxpayer rules (and ignore its own Treasury regulations) by denying a dual capacity taxpayer the right to treat tax payments as income taxes simply because they are imposed at a rate in excess of the tax rates that other, non-oil and gas, taxpayers face. Thus, even where a taxpayer could meet its burden of proof that any additional taxes paid are truly income taxes from a U.S. perspective (and could demonstrate that to a court of law), it will be denied the right to make that showing and will not be allowed to claim any of those additional payments as creditable income taxes. This proposal would significantly impact the competitive balance for U.S. based oil and gas companies operating outside the U.S., since many foreign countries do, in fact, levy higher tax rates on income from natural resource production than on other income.

    To illustrate, in a country that imposes an income tax on oil and gas income exactly like the U.S. (i.e., at a 35% rate), but imposes a lower tax rate, say 10%, on other industries, an American company would face an effective tax rate in excess of 50%, compared to the 35% burden borne by its foreign competitors on that same income. The foreign government’s income tax law would be completely disregarded by the U.S., the income tax paid under that law would be arbitrarily “re-characterized” as royalties or business expenses, and American companies would effectively be removed from the competitive landscape in a number of Middle East, African, and Asian countries.

    You still awake? Hope that helps


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