President Carter is expected to propose legislation during his energy address this evening that would end a foreign tax allowance worth an estimated $500 million a year to major international oil companies, according to senior administration officials.
The tax proposal, according to one administration energy expert, "would stop the oil companies from using excess tax credits earned in one country to lower taxes on income earned elsewhere."
Advocated by White House domestic policy adviser Stuart E. Elizenstat, the plan faced limited opposition from the State Department and oil industry before Carter endorsed it in his speech, sources said.
A senior energy offical said one result of the tax change would be to "neutralize some of the advantages enjoyed by the majors." According to Treasury Department revenue estimates, the oil companies would have to pay additional U.S. corporate income taxes of $500 million on their 1979 earnings if the Carter proposal is enacted.
The plan being readied by the administration would limit the situation and amounts in which oil companies can deduct taxes they pay foreign governments for oil and natural gas produced abroad from their taxes paid in the United States.
Even with the proposed new restrictions the oil companies still enjoy hefty foreign tax offsets. For example, in 1976, the most recent year for which figures are available, the oil companies claimed $18 billion in foreign tax credits.
Yesterday congressional leaders were speculating openly that the Carter energy plan's most controversial measures-administrative decontrol of domestic oil prices by September 1981 and a companion tax to limit oil company profits-are headed for difficulty.
While Carter has power to begin decontrolling prices administratively June 1, Rep. John D. Dingell (D-Mich.) and others were saying the Carter oil tax package may already be in trouble. "I think it (the tax) is in serious difficulty," Dingell, chairman of the House Commerce subcommittee on energy and power, said in an interview yesterday.
Rep. Toby Moffett (D-Conn), a member of the House energy subcommittee, also said that "The closer you get to the tax committee, the more obvious it is they will not pass an oil tax."
And at a White House meeting last Thursday, Sen. Russell B. Long (D-La.), chairman of the Senate Finance Committee told President Carter that Congress was not likely to pass an administration-proposed oil tax.
Under the Carter energy proposal, oil companies would pay a two-step tax. As the average cost of domestic oil, now about $9 a barrel, is increased to the world price level of $16.25 a barrel, a portion of the oil company revenues would be paid to the Treasury as taxes. A second tax would also be applied in the event the oil cartel raised petroleum prices.
Carter, in turn, will propose that some of these tax revenues, which could mount to as much as $8 billion a year, would be paid into an Energy Trust Fund, and some set aside for the poor, for transit systems, and solar energy development.
One of the most prickly issues for the Carter speech, advisers say, will be the president's treatment of nuclear power. Some officials yesterday were saying that Carter may act on recommendations to name a presidential commission to look into the question of reactor safety and the Harriburg incident.
At the least, one official said, Carter "is expected to say light water nuclear reactors are with us and are a necessary part of our power supply." The Department of Energy was also urging the White House yesterday to stress that nuclear power reactors offset the equivalent of up 2.5 million barrels of oil a day.
Still another area of continuing uncertainty among the president's top advisers is whether he will announce a specific barrel-per-day consumption goal to match the U.S. commitment to an International Energy Agency pledge to cut oil use by 5 percent by the end of the year.
"The IEA goal was deliberately left vague so we could set whatever criteria we want to ensure that we meet the goal," one energy official said yesterday.