Revenue Types

Companies that extract natural resources on federal lands and waters pay revenue to the Department of the Interior (DOI). Companies pay bonuses, rents, royalties, or fees and penalties (if incurred) to ONRR. In some cases, bonuses and rents are paid to the Bureau of Land Management. Royalties, a percentage of the sales value of extracted resources, make up most of the revenue paid to DOI.

Lease holders also pay different fees to the Bureau of Land Management, Bureau of Safety and Environmental Enforcement, and Bureau of Ocean Energy Management. They often reimburse the federal government for costs associated with awarding, administering, and enforcing leases. Companies pay fees for extracting locatable hardrock minerals on federal lands, but not royalties, under the Mining Law of 1872.

Corporate income taxes

Corporations operating in the extractive industries pay taxes to the IRS on their income. These companies pay federal corporate income taxes regardless of whether they extract natural resources from federal, state, or privately held lands, so long as they have a liability. These companies also pay taxes on income from extracting natural resources and processing them into other products and commodities. There are different types of companies operating in these industries, with different ownership structures. As a result, they are treated as different taxpayers:

• C-corporations with many shareholders who own the company. These companies pay corporate income taxes to the IRS.
• S-corporations with 100 shareholders or less who own the company. Shareholders pay personal income taxes to the IRS.
• Partnerships where two or more members own the business. Members individually pay income taxes to the IRS.
• Sole proprietorships with one individual owner. The individual owner pays personal income tax to the IRS.

Other taxes and fees

In the U.S., coal producers must pay a federal coal excise tax when they mine coal (a producer is any person or entity that owns the coal after it's mined from the ground). Producers pay the tax when the coal is first sold or used. The tax does not apply to lignite or to coal mined in the U.S. for export. The Abandoned Mine Land (AML) Reclamation Program uses fees paid by present-day coal mining companies to reclaim coal mines abandoned before 1977.

Revenue policy provisions

While royalty rates can reach as high as 18.75%, and the federal corporate income tax rate can reach as high as 21% depending on company income, companies may pay less. Revenue policy provisions, including royalty relief and tax expenditures, can result in smaller revenue and tax payments to the federal government to promote other policy goals.

Royalty relief

To create incentives for companies to produce additional oil and gas on certain leases on the Outer Continental Shelf where extraction is anticipated to be unprofitable, the federal government may grant some lease holders royalty relief. Royalty relief means that these lease holders do not have to pay royalties on some amount of production, or they pay a smaller percentage of royalties, for the oil and gas they extract. There are four situations in which a lease holder may gain royalty relief:

• Leases in deep waters with depths greater than 200 meters in the Gulf of America. (This type of relief has not been offered for several years, though existing leases currently include it.)
• Leases in shallow waters with depths under 400 meters for deep gas production.
• Leases toward the end of their lives in which halving royalties would encourage additional production.
• In special cases, continued production under existing terms is projected to be unprofitable.

Oil and gas prices can rise above certain thresholds. In some of these situations, leaseholders that previously gained royalty relief must start paying royalties at the regular rate.

Tax expenditures

Tax expenditures are "revenue losses attributable to provisions of the federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability." These exceptions may be considered alternatives to other policy instruments, such as spending or regulatory programs. The Treasury estimates the total dollar amount of each tax expenditure in a given year. It publishes a report of these estimates.

Federal budget process

The federal government collects the revenue. Next, it passes through a series of budgetary gateways before funding public services and community development. These gateways are described below. You can explore disbursement data.

 

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