Tuesday, October 6, 2015
Fusion, The Gulf Oil Spill Settlement Lets BP Get Away With Not Paying $5.35 Billion in Taxes:
In announcing the final $20.8 billion settlement with BP over the 2010 Deepwater Horizon oil spill, Attorney General Loretta Lynch said on Monday, “BP is receiving the punishment it deserves.”
What she didn’t mention is that BP—which was found grossly negligent for the 2010 disaster, the worst offshore oil spill in U.S. history—will likely only pay about three fourths of that punishment once tax deductions are taken into account.
Just $5.5 billion of the settlement is a penalty under the Clean Water Act. The other $15.3 billion is other damages and payments that BP can treat as a cost of doing business, said Michelle Surka, an analyst with the U.S. Public Interest Research Group. That means that the oil giant can legally deduct 35% of this $15.3 billion from its taxes, for a total windfall of $5.35 billion. ...
The Department of Justice could have explicitly written a provision into the settlement guaranteeing that the entire $20.8 billion was not tax deductible. Not doing that may have been a negotiation point—it gives the DOJ a bigger number for its press release and lets BP tell its shareholders it’s deducting a cool $5.35 billion.
Moreover, BP will have 18 years to pay everything off, which reduces the real amount of what they’re paying—a dollar in 18 years will be worth less than a dollar today. ...
The tax deduction tactic is fairly common in big environmental and bank settlements—when the feds settled with J.P. Morgan Chase in 2013, the bank got a $2.45 billion deduction on a $13 billion settlement.
Michael Hiltzik (Los Angeles Times), BP's $20.8-Billion Oil Spill Settlement May Give It a Huge Tax Deduction