BP $9.9 billion tax credit

[Tempest]

Quote:
BP says it's claiming a $9.9 billion tax credit on costs related to the oil spill cleanup operation in the Gulf of Mexico. The energy giant said Tuesday that the tax credit is related to the $32.2 billion charge it's incurring from the Gulf disaster.

"We have followed the IRS regulations as they're currently written," outgoing CEO Tony Hayward said. The tax credit could effectively halve BP's contribution to the $20 billion escrow fund it set up to compensate victims of the spill

http://www.dailyfinance.com/story/taxes/bp-claiming-9-9b-tax-credit-on-gulf-clean-up-costs/19571518/

 

[Shannow]

If the clean-up is a business cost that has reduced BPs taxable profit by $30B, then they certainly should be paying less tax.

 

[genynnc]

+1

 

[Bill in Utah]

+2

 

[Nayov]

-1

OK then, you guys who posted '+' can we expect you to no longer complain ad infinitum that "taxes are too high" and cynically and (under the radar of course) blame the party in power? Because...guess who will pay that tax right-off? YOU.

 

[Shannow]

How do you expect a company to pay tax on profit that it never made ?

 

[d00df00d]

Originally Posted By: Nayov
-1

OK then, you guys who posted '+' can we expect you to no longer complain ad infinitum that "taxes are too high" and cynically and (under the radar of course) blame the party in power? Because...guess who will pay that tax right-off? YOU.


So what are you saying? We should make an exception in the law for BP's case?

 

[Nayov]

Originally Posted By: d00df00d
Originally Posted By: Nayov
-1

OK then, you guys who posted '+' can we expect you to no longer complain ad infinitum that "taxes are too high" and cynically and (under the radar of course) blame the party in power? Because...guess who will pay that tax right-off? YOU.


So what are you saying? We should make an exception in the law for BP's case?


No I'm not for punishing them, this isn't about BP from my perspective, but I am curious to see if the anti-tax crowd are going to walk the walk and willing to make up that 9.9 billion dollars with a smile on their faces. That $9.9B is in effect a tax increase after all.

 

[Shannow]

Unless as a result of BHPs misfortune, there's new legislation to make others pay more, it doesn't cost any one else a cent.

'cept maybe in interest.

But that's got nothing to do with your tax rate, or BPs WRT current taxation levels based on income or profit.

 

[TooManyWheels]

The question isn't about the tax, it is about the legality of claiming the cleanup as a legitimate business expense.

You can't claim illegitmate activites as being tax exempt. If (??) the law is you must not spill oil, then how does cleaning up after breaking the law qualify as legitimate?

The question, of course, is exactly what is the law on oil spills?

If the cleanup is viewed as a legitimate expense, you are using tax policy to reward irresponsible risk taking behavior, something people are generally against.

 

[Shannow]

A business doesn't pay tax on turnover like you and I do, they pay tax on what's left over (i.e. profit).

Less money left over = less profit = less money to be taxed on

 

[bullwinkle]

With the amount of coin that's been extended via the Fed's discount window (i.e. low to zero prime rate), and via "stimulus" & "TARP"-$9.9 billion is a drop in the bucket!

 

[d00df00d]

Originally Posted By: TooManyWheels
The question isn't about the tax, it is about the legality of claiming the cleanup as a legitimate business expense.

You can't claim illegitmate activites as being tax exempt. If (??) the law is you must not spill oil, then how does cleaning up after breaking the law qualify as legitimate?

The question, of course, is exactly what is the law on oil spills?

If the cleanup is viewed as a legitimate expense, you are using tax policy to reward irresponsible risk taking behavior, something people are generally against.

Aha. Now we're talking.

 

[TooManyWheels]

Originally Posted By: Shannow
A business doesn't pay tax on turnover like you and I do, they pay tax on what's left over (i.e. profit).

Less money left over = less profit = less money to be taxed on


In the U.S. the money left over is an accounting calculation, which is dependent on what expenses are legally deductible. I have difficulty believing that the cleanup costs are deductible.

 

[Shannow]

the kitty litter around a refinery is a legitimate business expense, as is the bloke with the shovel picking it up after it's soaked up the residue of a mechanical seal leak.

A fine is what they pay for the stuff going down the drain that didn't get soaked or swept up.

In this case, the kitty litter is the entire clean-up, which comes off the bottom line. The fine was the $20B.

Of course they are less profitable, and that's less taxable.

 

[TooManyWheels]

Originally Posted By: Shannow


In this case, the kitty litter is the entire clean-up, which comes off the bottom line. The fine was the $20B.

Of course they are less profitable, and that's less taxable.



That may indeed be the way the laws are currently written. It is the way BP interprets them. Possibly the laws should be rewritten.

Also, the national boundary under which it occurred almost certainly has a bearing on the issue. I have no idea whose territory applies to the DW Horizon, or the path of the fluids.

 

[FowVay]

What blows my mind is the fact that the $9.9 billion dollars is the tax that would have been paid on the profits of $32.2 billion, had they not had to write-off the cost of reparations (clean-up and subsidies going to local businesses).

Does anyone else find a corporate tax rate of 30.7% a bit high?

 

[d00df00d]

Some insights from my fiancée:

1. You have to pay taxes on illegal income; likewise, you can deduct illegal expenses as long as they are "ordinary and necessary" -- i.e. anyone else would have done the same thing in a similar situation, and it makes good business sense to do it.

2. Moreover, the cleanup obviously wasn't illegal, and it also seems clearly to be "ordinary and necessary" by the above definition.

3. The legality of incident that required the cleanup is another matter entirely. That's what fines and other legal action are for -- and fines cannot be deducted from your taxes.

 

[Gary Allan]

Originally Posted By: FowVay
What blows my mind is the fact that the $9.9 billion dollars is the tax that would have been paid on the profits of $32.2 billion, had they not had to write-off the cost of reparations (clean-up and subsidies going to local businesses).

Does anyone else find a corporate tax rate of 30.7% a bit high?


Does it really matter? The money comes from somewhere in the collective purse.

 

[d00df00d]

The above post from me was edited several times for accuracy, by the way. Hope everyone saw the final version.