Republicans drop energy tax provision
Measure opposed by oil industry would have changed how businesses account for tax purposes, report says; idea of $100 rebate checks under fire.

NEW YORK (CNNMoney.com) - Senate Republicans have withdrawn a tax provision in their energy legislation that would have generated billions of dollars by changing the way businesses treat inventories for tax purposes, according to a report in The New York Times.

Sen. Bill Frist of Tennessee, the majority leader, said he had decided - for now - to jettison the provision, which was met with widespread opposition in the business community. Instead, he indicated that the Senate Finance Committee would hold hearings on the plan "later this year, so the plusses and minuses of the provision can become well known," the newspaper said.

In addition, a key component of the overall package - a $100 rebate check to compensate taxpayers for higher gasoline prices - continued to receive a rough reception, the Times said. According to the newspaper, members of the public have been telephoning and writing to ridicule the idea, and even Republican lawmakers are finding fault.

The broad energy package also aimed to provide protection against price gouging and tax incentives for buying hybrid vehicles, the report said.

There are no estimates of how much money the energy tax provision would have produced, the Times reported, though it had been projected at more than $11 billion in the past. The proposal in a separate tax bill to bar the accounting practice known as last in, first out for the oil companies was estimated to raise about $4.3 billion from them alone, according to the newspaper. That idea is still part of the continuing tax negotiations. But whether it will be in the final measure is unclear, and President Bush has threatened to veto it.

The report also said that business advocates contend taxes could have been driven up significantly by ending the practice that allows companies to record sales from inventory at the higher, current cost of acquiring or producing the goods rather than a potentially lower original price.

According to the Times, some panicked executives told their Washington representatives the increase could be from $30 million to $60 million for their individual companies alone.

The newspaper said the Republicans backed off from their proposal after facing a torrent of objections from business leaders and the oil industry, who typically view Republicans in Congress as allies. They said they were blindsided by the inclusion of the proposal as a central element of the Republican leadership's energy package late last week.

The energy package was assembled quickly last week in response to public complaints about the rapidly rising cost of gasoline, the Times said.

But the paper added that Senate officials acknowledged privately that they were paying a price for rolling out the proposal before having time to vet it fully.

Beside the tax provision and the rebate, the measure includes new protections against price gouging, incentives to expand domestic oil refinery capacity, support for new energy incentives and tax incentives for buying hybrid vehicles.

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Click here for CNNMoney.com's "Gas Crunch" special report. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.