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income, however, are allowed for what is referred to as uplift,
consisting of amounts equal to 35 percent of most capital
expenditures relating to a North Sea field (over and above the
current deductions allowed in computing PRT for 100 percent of
such capital expenditures).5 The deduction for uplift is
provided in lieu of a deduction for North Sea related interest
expenses.
Similar to the cost of capital expenditures to which uplift
relates and on the basis of which uplift is calculated, uplift is
allowable in full as a current deduction at the time the related
capital expenditures are incurred and fully deducted. Allowances
for uplift are computed and determined only during the period of
time prior to when an activity in a field becomes profitable, the
period during which interest expense relating to a field
typically is necessary. Once calculated and determined, unused
uplift may be carried back or carried forward without limit.
In calculating Exxon’s PRT liability, for 1975 through 1988,
the cumulative total amount of uplift deduction allowed to Exxon
was �1.8 billion, almost twice the cumulative total �900 million
interest expense that under PRT was not allowed as a deduction to
Exxon.
5 As originally enacted in the Oil Taxation Act of 1975 and
until amended in 1979, the rate of the uplift allowance was 75
percent.
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