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Show V The National Enterprise , September 29, 1976 Page eleven Successor, to Supreme Food Barred by Order The Utah Trade Commission has issued a cease and desist order against a successor to Supreme Food Corp., a subsidiary of Micron Corp. (OTC), barring public representations that the new firm is separate and distinct from the now defunct discount food plan. Asst. Attorney General SALT LAKE CITY f t' ' David Schwendiman. Consumer Protection Division, explained that the order bars Western Food Plan and American West Acceptance Corp., both Utah corporations, from representing they have full rights to accept membership payments due and payable on old Supreme Food contracts. , On Heels of Legal Action Western Food Plan, he said was formed Aug. 4, only days after Supreme Foods closed its doors in Denver. On July 28, the Colorado Attorney General had filed a $10 million law suit against the company alleging deceptive trade practices, false advertising, and misrep- resentation. People involved with Western, Schwendiman said, are essentially the same as those who were working with Supreme Foods. The order bars the company from threatening legal action against customers with outstanding memberships until the new company can prove it has a legal right to accept such payments. To date, Schwendiman said, no evidence authorizing rights to those payments has been presented. Only Memberships Not Food The order doesnt apply to outstanding debts owed to either new or old companies for food already delivered to We think customers. people should have the option to either go with Western or choose a competiFor that he said. tor, reason, outstanding membership fees cannot be collected by Western, but payment for deliveries already taken, can. The new companies arc allegedly wholly owned subsidiaries of Hussel, A. G., Microns largest creditor and majority shareholder, said. Asst. Colorof General Attorney ado, Gene Lucero, had told the Enterprise in late August that the new companies were formed by Hussel and that they had asked his office to dismiss the charges against Schwendiman Micron. 'A i in Intangible Expenditures Jeopardy il li by D. Van de Graaff 'I Executive Director. Utah Petroleum Association 4 Since 1913, taxpayers have had the right to deduct from their Federal taxable i 1 i I income the intangible expenditures incurred in drilling crude oil and natural gas wells. Items deductible include amounts paid for labor, fuel, repairs, hauling, supplies, or other expenditures which do not ordinarily have any salvage value. The cost of physical equipment is not subject to the current deduction, but must be capitalized and , depreciated. Oil and gas wells are expensive to drill and are becoming increasingly expensive operations. The average per foot cost of drilling an oil or gas well in the U.S. in 1969 was $17.56, while the average cost per well (including dry holes) was $88,554. In 1974, the comparable costs were $28.93 per foot, and $138,718 per well. It is estimated that up to 70 of such costs fall within the IDC (Intangible Drilling Costs) provisions of the i ' i i t 4 ' i! ; i i i i : li ; i i 4 tax law. The significance of being able to deduct these costs immediately, rather than being i ; i : j t 5 i i t u required to capitalize them and deduct them gradually over a period of time, is evident in the economics of new drilling projects. Costs recovered this year are more valuable than costs recovered next year, and much more valuable than costs years from now. Lower after-ta- x costs mean more projects, and more projects can be measured in more oil or gas fields found andor developed. Many operators in the industry, particularly the small, independent operators, do not have the cash resources or borrowing ability to absorb the additional costs which would be caused by deferring deduction or The- option to idrilling expenditures. immediately take IDC deductions is an absolute necessity for many operators, if they arc to maintain a high level of exploration and development. Several changes in the IDC tax incentive arc under consideration in Congress. These proposals include the limiting of the IDC deduction to income from the same property; subjecting the IDC to recapture rules when the property is disposed of; limiting the IDC deduction to parties at risk; complete repeal of the IDC deduction (allowing recovery through cost depiction - and applying the limitation on y artificial losses on a basis. The proposed changes could seriously impair capital formation for financing petroleum exploration and development. They would cause the withdrawal of billions of dollars of capital which go into the search for needed oil and gas over the next several years. Further, they would force many operators without the backup capital or borrowing capacity out of the petroleum business, and that technical once lost would be difficult, if capacity not impossible, to replace. The tax revenue to be realized from repeal of the IDC option would be elusive. To the extent that IDC expenditures continue to be made, deductions would be reduced temporarily until annual depreciation or amortization increased to an amount equal to the annual IDC expenditures. only); property-by-propert- would-otherwi- sc Thereafter, the temporary revenue gain would disappear. Proponents of eliminating the IDC option would clearly be sacrificing an e investment incentive important for a temporary gain. long-rang- |