WASHINGTON (Reuters) - U.S. Senate Democrats
Thursday proposed repealing a tax break for some major oil
companies, including BP Plc, effective Dec. 31.

The proposal, which Democrats want to attach to a small
business jobs bill, will not be considered in the Senate until
mid-September, however, after lawmakers return from a five-week
recess.

Under the plan by Senate Finance Committee Chairman Max
Baucus, the integrated oil companies after the end of this year
would no longer be able to deduct 6 percent of their income
from oil and gas production from their tax liability.

The committee said this repeal "would only apply to the
five largest corporations with more than $1 billion of
before-tax income."

The companies are BP, ConocoPhillips, Exxon Mobil
Corp, Chevron Corp and Shell.

The five, according to the Senate Finance Committee, had a
combined profit of $25 billion during the first quarter of this
year. "In the five years since enactment (of the tax break) ...
these major integrated oil companies have posted $521 billion
in profits," the committee said.

"Furthermore, it is not clear the goal of this deduction,
which is to improve America's energy security by promoting
domestic production, has been reached," the panel said.

It noted that when the deduction took effect in 2005,
domestic oil production averaged about 5.5 million barrels per
day and now has fallen slightly, to 5.48 million barrels per
day.

The proposed tax change is aimed at helping to offset the
cost to the government of the small business jobs bill.

If embraced by Congress, the tax change would hit BP just
as it is figuring out how to deal with the massive costs it
faces in cleaning up after its Macondo well oil spill in the
Gulf of Mexico -- the biggest environmental accident in U.S.
history.

That cleanup effort could end up costing tens of billions
of dollars. Congress also is looking at ways to lift all
liability caps on BP for economic damages from the April 20
disaster. Legislation to lift the liability cap was passed by
the House of Representatives last week but is hung up in the
Senate.

(Reporting by Richard Cowan; Editing by Eric Walsh)