Originally Posted by koop

When John F. Kennedy became President in 1961, the oil industry felt secure. But President Kennedy then began to assault the power of the oil giants directly, first with a law known as the Kennedy Act, and later by attacking the oil depletion allowance. The Kennedy Act, passed on October 16, 1962, removed the distinction between repatriated profits and profits reinvested abroad. Both were now subject to US taxation. The measure also was aimed at preventing taxable income from being hidden away in foreign subsidiaries and other tax havens. While this law applied to industry as a whole, it particularly affected the oil companies, which were greatly diversified with large overseas operations.
By the end of 1962, oilmen estimated their earnings on foreign investment capital would fall to 15 percent, compared with 30 percent in 1955.

One of the most sacred of provisions in the eyes of oilmen was the oil depletion allowance, which permitted oil producers to treat up to 27.5 percent of their income as tax exempt. In theory this was to compensate for the depletion of fixed oil reserves but, in effect, it gave the oil industry a lower tax rate. Under this allowance, an oilman with a good deal of venture capital could become rich with virtually no risk. For example, a speculator could drill ten wells. If nine were dry holes and only the tenth struck oil, he would still make money because of tax breaks and the depletion allowance.

It was estimated that oilmen might lose nearly $300 million a year if the depletion allowance was diminished.

Attempts to eliminate or reduce the depletion allowance were rebuffed year after year by congressmen, many of whom were happy recipients of oil-industry contributions.

Speaking of his tax reform act of 1963, President Kennedy pointed the finger at the oil companies, saying: "… no one industry should be permitted to obtain an undue tax advantage over all others."

Included in Kennedy’s tax package were provisions for closing a number of corporate tax loopholes, including the depletion allowance. Needless to say, oilmen both in Texas and elsewhere felt threatened by Kennedy and his policies. Kennedy’s use of his personal power against the steel manufacturers had shown them that the young President meant the enforce his will in these matters.



(Jim Marrs, Crossfire, pp. 276-277)