Tax Loophole

Reuters is reporting:

The story of the "check the box" loophole, which allows U.S. companies to choose for themselves how to classify their subsidiaries for tax purposes, and a companion policy known as the "look-through" rule, shows how Washington bureaucrats, lobbyists and politicians have worked together — sometimes wittingly - to save money for American corporations and deprive the federal government of billions in tax revenue each year.
What began in 1996 as an effort by the Treasury Department to simplify the U.S. tax code mistakenly ended up as a massive tax loophole for corporate America, which seized upon it and has never let go.

Besides fueling an explosion in earnings that U.S. companies keep abroad - now more than $1.8 trillion, the Commerce Department estimates, double the amount from less than a decade ago - the loophole has become a symbol of how difficult it can be to repeal a tax benefit once it becomes entrenched.

But that's not the reason I posted this story.

It has to do with ObamaCare.

This bill is 2,700 pages long, too long for the Supreme Court justices to read, but you can bet corporations and unions are reading every page looking for loopholes, and they will find them. 

It's happened before:

The section of the Internal Revenue Code that made 401(k) plans possible was enacted into law in 1978. It was intended to allow taxpayers a break on taxes on deferred income. In 1980, a benefits consultant named Ted Benna took note of the previously obscure provision and figured out that it could be used to create a simple, tax-advantaged way to save for retirement. The client he was working for at the time chose not to create a 401(k) plan.

It's my understanding that some employers have already found a loophole in ObamaCare that is extremely good news for employers; very bad news for employees.  Except they will be able to keep their jobs.

With regard to the original story linked:

Two of Apple's most aggressive questioners, Democratic Senator Carl Levin of Michigan and Republican Senator John McCain of Arizona, have called for closing the "check the box" loophole. But even they have voted to keep it alive several times in recent years when it has been inserted into other legislation.

Levin's office did not respond to requests for a comment. McCain declined to comment for this story.

I guess they voted for it, before they voted against it.

By the way, President Obama's economic adviser, GE/CEO loves the loophole, at least according to the linked story. I can't make this stuff up.

Permit Numbers Cancelled By Surge; It's Not About The Nail -- The Video -- For Guys Everywhere

The other day it was mentioned that Surge was canceling a number of permits. These are the permit numbers and the names of the wells. These are all in Bottineau County and would have been Spearfish wells, I believe:

• 24893, Haram 00 NWSE 31, 31-164-77
• 23899, Scandia 2S NWNW 35 02 SWNE 34H, 35-164-78
• 23898, Scandia 1S NWNW 35 00 SWNE 34H, 35-164-78
• 23897, Scandia 1N NWNW 35 02 NWNE 34H, 35-164-78
• 23896, Scandia 2N NWNW 35 00 NWNE 34H, 35-164-78
• 24876, Haram 00 NWSE 20, 20-163-77
• 24875, Scandia 00 SESE 11, 11-163-78
• 24950, Haram 00 SENE 23, 23-163-77

Some, if not all, are located in/near the Souris oil field, along the Canadian border in Bottineau County.

On May 9, 2013, Surge announced it was selling its non-core assets in North Dakota:

The company is pleased to announce certain senior management changes, effective immediately, a private placement of up to $2.5 million, and the sale of certain non-core, non-operated assets for proceeds of approximately US$42.75 million.

From the press release:

Surge has executed a formal purchase and sale agreement with a Canadian oil and gas producer to sell its non-core, primarily non-operated assets in North Dakota for a purchase price of approximately US$42.75 million.  Closing of this transaction is anticipated to occur on or around May 31, 2013.  The non-core assets being sold comprise production of approximately 650 barrels of oil per day, with independently engineered P+P reserves of 2.2 million boe, and a net present value of $36.8 million (discounted at ten percent before tax as of December 31, 2012).  The Company expects a reduction in its borrowing base of $13 million as a result of the sale, resulting in a bank line of $277 million.

The sale of Surge's assets in North Dakota is the first step in implementing changes in the Company's business plan to maximize shareholder value, strengthen the Company's financial flexibility and support a sustainable business model.

Back-of-the-envelope:

• 650 x $50/bbl x 365 days = $12 million/year
• at 5% interesting, $42 million costs about $2 million in interest

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For  guys everywhere, it's not about the nail...


It's Not About the Nail from Jason Headley on Vimeo

BRK

I wasn't going to post this story: Berkshire buys NV Energy, but when BRK-B hit another 52-week high (one of several over the past few weeks), it was impossible to resist.

So, Motley Fool is reporting:

There's a lot that's not surprising about the acquisition. The size, if anything, is small. Buffett's been very vocal about his desire to make "elephant"-sized purchases. Nor is it surprising that the conglomerate is expanding its reach with a steady utility business. These types of businesses add stability to the insurance and consumer-goods-heavy Berkshire. And it shouldn't be all that surprising that the price for NV Energy doesn't look all that cheap. If the Heinz deal reminded us of anything, it's that Buffett is willing to shell out a "full" price for a good buy.

But what may surprise a lot of investors is that by all appearances, Buffett had very little to do with this multibillion-dollar acquisition. Greg Abel, the CEO of MidAmerican, appears to have been firmly in the driver's seat on this one. Sure, Buffett knows that Abel is tapping MidAmerican's cash resources for the billions to purchase of NV Energy -- he even chimed in on MidAmerican's press release that the company is "a great fit for Berkshire Hathaway." But this was very much the Greg Abel Show.

"The size, if anything, is small." $10 billion.

Baghdad Bob Re-Emerges

Updates

June 6, 2013:  Investors.com is reporting -- "Fracking: The Death Knell Of OPEC"

If there was any doubt the U.S. shale revolution is breaking the dominance of unsavory energy producers on global oil supplies, look no further than last week's OPEC meeting, where the alarm bells were going off.

At Friday's Organization of Petroleum Exporting Countries meeting in Vienna, the mask of non-chalance about America's new fracking energy boom came off.

After years of dismissing U.S. energy production as insignificant and expensive, OPEC suddenly said it would "study" the growth in hydraulic fracturing and horizontal drilling, a deceptively bland response to the biggest challenge the cartel has ever faced on its monopoly.

The statement concealed the anything-but-tranquil tone of the meeting, in which members were attacking each other and warning of a split.

Nigeria Oil Minister Diezani Alison-Madueke declared U.S. shale oil "a grave concern," according to a report in the Wall Street Journal.

And the linked article goes on from there.

Original Post

Iraq: shale will have little effect on oil demand from OPEC. Rigzone is reporting:

Rising U.S. shale oil production will have only minimal effect on demand for crude oil from the Organization of the Petroleum Exporting Countries, meaning most members of the group want to leave their output ceiling unchanged at 30 million barrels a day, said Iraqi Oil Minister Abdul Kareem Luaiby Thursday. 

Iraq will continue to increase its oil production to 3.525 million barrels a day by the end of this year, compared with 3.125 million barrels a day currently, Mr. Luaiby said.

And that is according to Abdul Kareem "Baghdad Bob" Luaiby.

An earlier post links a story suggesting Iraq is on track to double production by 2020 or 2025. I forget which; I think 2020.

Baghdad Bob needs to look at this graph. 

Re-Posting Due To Significance

The original story was posted earlier tonight, and then a story came out which made the post even more relevant. In case folks missed the earlier post and the update, here is the link. This is a big story.