American Energy Independence and Tax Fairness Act

The **American Energy Independence and Tax Fairness Act** (S. 5350) amends the Internal Revenue Code to change how the U.S. government taxes foreign oil, gas, and mineral income earned by foreign corporations owned by U.S. shareholders. It expands the types of income included in U.S. tax calculations and restricts certain foreign tax credits that companies can claim against their U.S. tax liabilities.

This bill affects: * **U.S. shareholders** of Controlled Foreign Corporations (CFCs). * **Foreign oil, gas, and mineral companies** operating abroad that are owned by U.S. shareholders, including entities involved in extracting minerals from oil shale and tar sands. * **Dual capacity taxpayers**, defined as entities subject to a foreign tax or levy that also receive a direct or indirect specific economic benefit from that foreign government (such as resource extraction rights).

If enacted, the bill would make the following legal changes: * **Include Foreign Oil and Gas Extraction Income in GILTI:** Requires foreign oil and gas extraction income to be included when calculating net tested income for foreign corporations under the Global Intangible Low-Taxed Income (GILTI) tax rules. * **Expand Definitions for Foreign Oil Income:** Broadens the definitions of "foreign oil and gas extraction income" (FOGEI) and "foreign oil related income" (FORI) to explicitly cover income from extracting minerals from oil shale and tar sands. * **Limit Foreign Tax Credits for Certain Companies:** Denies foreign tax credits to dual capacity taxpayers for foreign payments related to combined foreign oil and gas income if: 1. The foreign country does not have an income tax that applies generally to non-dual capacity residents; or 2. The payment is larger than what the company would have paid under the foreign country's generally applicable income tax.

The bill does not authorize or appropriate specific federal spending. Instead, it alters tax rules: * It increases the income subject to U.S. tax calculations for foreign oil, gas, tar sands, and oil shale operations. * It reduces the foreign tax credits that certain companies can use to offset their U.S. tax bills.

* **Tax Credit Limit Exception:** Dual capacity taxpayers may still claim a credit for payments made to a foreign government, but only up to the amount they would have owed under that foreign country's generally applicable income tax. * **Different Effective Dates:** * Changes to GILTI inclusion and the definitions covering oil shale and tar sands take effect for foreign corporations' taxable years beginning after the bill becomes law. * The rules restricting foreign tax credits for dual capacity taxpayers take effect for taxable years beginning after **December 31, 2026**.

This bill increases U.S. tax obligations on foreign oil, gas, tar sands, and oil shale operations. It does this by counting more foreign extraction income under U.S. tax rules and limiting the tax credits companies can claim when making payments to foreign governments from which they receive business benefits.