Lobbying spotlight – Inflation Reduction Act (IRA)
ExxonMobil is committed to helping meet the demand for affordable energy, while reducing emissions and managing the risks of climate change. Our Low Carbon Solutions (LCS) business is providing solutions to help reduce society’s emissions by developing markets in Carbon Capture and Storage (CCS), hydrogen and low-emission fuels. ExxonMobil believes the LCS business will help accelerate the broad-scale development of CCS investments by leveraging our project expertise and operating experience understanding geology and reservoir management with the CO2 pipeline infrastructure and sequestration sites we acquired through the Denbury acquisition to enable efficient and effective CCS solutions to be deployed across the Gulf Coast. While the company plans to invest more than $17 billion on initiatives to reduce greenhouse gas emission, it is critical that supportive policies facilitate commercial investment in CCS in a range of technologies that show promise to reduce emissions.
ExxonMobil’s government affairs team engaged with Congress on a range of provisions within the Inflation Reduction Act (further details contained in detailed federal lobbying disclosure on following pages), and specifically the inclusion of 45Q, a tax credit to benefit CCS projects. Prior to the enactment of the IRA, the 45Q tax incentive was $50/metric ton, which according to the National Petroleum Study, would only enable the capture and storage of about 50 million metric tons a year – mainly from highly concentrated sources of CO2 such as natural gas plants and ethanol production facilities, which are considerably cheaper streams to decarbonize. ExxonMobil advocated for the 45Q tax credit to be increased to enable CCS investments at the pace and scale needed to reduce emissions at levels significant enough to help meet national goals.
In order to preserve the competitiveness of U.S. businesses, ExxonMobil also engaged Congress to oppose a specific tax provision that was being considered for inclusion in the IRA. By way of background, the U.S. implemented a Global Intangible Low-Taxed Income (GILTI) tax in the 2017 Tax Cuts and Jobs Act aimed at ensuring foreign earnings of U.S.-based companies, especially income from highly mobile intellectual property was taxed at a minimum rate. Not a single other country had implemented a similar policy, leaving the U.S. alone in putting its own companies at an international competitive disadvantage. Under the IRA, several proposals were being considered to the GILTI tax that would have put U.S. companies at an even further disadvantage. ExxonMobil, along with many other companies, advocated for U.S. competitiveness, productivity and jobs, and that any changes to international tax structure or GILTI tax go no further or faster than the Organization for Economic Co-operation and Development (OECD)1 global minimum tax proposal or what the rest of the world implements.
1The Organization for Economic Co-operation and Development (OECD) is a unique forum where the governments of 37 democracies with market-based economies collaborate to develop policy standards to promote sustainable economic growth. The OECD provides a setting where governments can compare experiences, seek answers to common challenges, identify good practices, and develop high standards for economic policy. One area of focus for the OECD is international tax. The OECD has an Inclusive Framework group consisting of 144 countries that focus on Base Erosion and Profit Shifting (BEPS) measures. The global minimum tax proposal (“Pillar 2”) is one of those measures. https://www.state.gov/the-organization-for-economic-co-operation-and-development-oecd/