• 3 minutes War for Taiwan?
  • 7 minutes How China Is Racing To Expand Its Global Energy Influence
  • 10 minutes Is it time to talk about Hydrogen?
  • 1 hour U.S. Presidential Elections Status - Electoral Votes
  • 1 hour Tesla Semi
  • 6 hours “Cushing Oil Inventories Are Soaring Again” By Tsvetana Paraskova
  • 11 hours WTI / ​​​​​​​Price Forecasting 
  • 1 day “Did Authorities Do Enough To Find Out Why Oil Prices Went Negative?” By Irina Slav – Nov 26th
  • 16 hours “Consumers Will Pay For Carbon Pricing Costs” by Irina Slav
  • 19 hours Mail IN Ballot Fraud
  • 7 hours Nord Stream 2 Halt Possible Over Navalny Poisoning
  • 12 hours Russia loses its chance to capture the EU gas market
  • 1 day Deceptions Revealed about the “Nord Stream 2 Pipeline” and Germany
Iran's Leading Nuclear Bomb Expert Assassinated

Iran's Leading Nuclear Bomb Expert Assassinated

Dr. Mohsen Fakhrizadeh, known as…

Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

More Info

Premium Content

Most Of BP’s $20.8 Billion Deepwater Horizon Fine Is Tax Deductible

The U.S. Justice Department touted its historic settlement with BP over charges related to the Deepwater Horizon disaster in 2010. BP will be forced to pay $20.8 billion, the largest settlement ever reached with a single entity. “BP is receiving the punishment it deserves,” U.S. Attorney General Loretta Lynch said in a statement.

But is it really?

BP will be able to write-off three-quarters of the total, taking a tax deduction on $15.3 billion of the total, as Robert W. Wood points out in Forbes. Only $5.5 billion out of the $20.8 billion total is not eligible for a tax deduction, as those charges stem from a Clean Water Act violation. Related: This Month Could Make Or Break The Oil Markets

Due to quirks in the tax code, the “historic” settlement is not as significant a penalty as the U.S. government is making it out to be. It is normal for companies to deduct the business costs. Even litigation costs are often tax deductible. Violations of law, however, are often in murky territory. Sometimes there needs to be explicit language in settlements that bars companies from writing off penalties paid to the government.

It appears that BP will be able to deduct quite a bit of its settlement with the U.S. government. In this way, it is essentially treated as any other cost of doing business. Similarly, the $32 billion that BP spent to clean up the Gulf area following the massive oil spill was also tax deductible, costing U.S. taxpayers $10 billion. Related: Has Oil Finally Bottomed?

Obviously, BP will do everything within its power to pay as little as possible. So, the fact that it will write off a significant portion of its settlement with the Justice Department is the fault of the U.S. tax code. Changes to the code would be needed to prevent companies from deducting penalties.

Also, some blame should be reserved for the Justice Department itself for trumpeting the settlement as a “historic” win. The Justice Department routinely boasts of large settlements with corporate offenders, with headline-grabbing fines. But the agency doesn’t necessarily discuss the fact that companies won’t actually be impacted as severely as the huge figures suggest. A 2014 report from U.S. PIRG highlights several settlements between the Justice Department and big banks in recent years that resulted in large settlements that ended up being tax deductible.

By Charles Kennedy of Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News