Think about this as you look at your tax bill this year:
The taxpayer picks up the tab for BP’s “gross negligence” and “the final settlement will allow BP to deduct a majority of the costs as an ordinary business expense.”
So, business as usual … It kind of makes you appreciate how the average Frenchman must have felt in 1789.
[QUOTE=Steamer;182860]Think about this as you look at your tax bill this year:
The taxpayer picks up the tab for BP’s “gross negligence” and “the final settlement will allow BP to deduct a majority of the costs as an ordinary business expense.”
So, business as usual … It kind of makes you appreciate how the average Frenchman must have felt in 1789.[/QUOTE]
not to argue, but the reporter is making an assumption when she says, “?.. the final settlement will allow BP to deduct a majority of the costs as an ordinary business expense.”
Unless she is in fact a tax attorney of some kind too. The $5.5B civil penalties are excluded from being deducted (as required by law). The other stuff is not penalty based, and may or may not be a deduction depending on the law. It wouldn’t be different it it went to trial, natural resource damages and such will still have been the same status.
From response to comments, DOJ:
This Consent Decree prohibits any BP entity from taking as a tax deduction any portion of thecivil penalty, just as the tax code expressly bars such deductions.2 The approach in the ConsentDecree follows the Department’s longstanding practice in settlement of civil penalty claims thatarise under federal pollution control laws (like the CWA). The practice compels a settlingdefendant to recognize the express prohibition of such deductions under the tax code. Byprohibiting BP from taking any tax deduction from its penalty amount, the consent decree fullyabides by existing law, is consistent with all other federal consent decrees of this type, andassures full compliance with the law.
Also consistent with the Department’s practice is this Consent Decree’s silence as to whethernatural resource damage and cost payments required by the Consent Decree can be deducted inany fashion. These types of damages and payments are not penalties, and should be examinedconsistent with tax law requirements based on their unique character. Some commenters may nothave considered this distinction, referring to all payments under the Consent Decree as fines orpenalties.
Commenters assume that such payments will be deductible absent a settlement term barring suchdeductions. That could be but is not necessarily so. If and when BP entities seek tax advantagefrom any payment under the Consent Decree (other than penalty payments), BP and the relevanttax authority can take up this legal question under the applicable tax law.[QUOTE=Jamesbrown;182863]not to argue, but the reporter is making an assumption when she says, “?.. the final settlement will allow BP to deduct a majority of the costs as an ordinary business expense.”
Unless she is in fact a tax attorney of some kind too. The $5.5B civil penalties are excluded from being deducted (as required by law). The other stuff is not penalty based, and may or may not be a deduction depending on the law. It wouldn’t be different it it went to trial, natural resource damages and such will still have been the same status.
From response to comments, DOJ:
This Consent Decree prohibits any BP entity from taking as a tax deduction any portion of thecivil penalty, just as the tax code expressly bars such deductions.2 The approach in the ConsentDecree follows the Department’s longstanding practice in settlement of civil penalty claims thatarise under federal pollution control laws (like the CWA). The practice compels a settlingdefendant to recognize the express prohibition of such deductions under the tax code. Byprohibiting BP from taking any tax deduction from its penalty amount, the consent decree fullyabides by existing law, is consistent with all other federal consent decrees of this type, andassures full compliance with the law.
Also consistent with the Department’s practice is this Consent Decree’s silence as to whethernatural resource damage and cost payments required by the Consent Decree can be deducted inany fashion. These types of damages and payments are not penalties, and should be examinedconsistent with tax law requirements based on their unique character. Some commenters may nothave considered this distinction, referring to all payments under the Consent Decree as fines orpenalties.
Commenters assume that such payments will be deductible absent a settlement term barring suchdeductions. That could be but is not necessarily so. If and when BP entities seek tax advantagefrom any payment under the Consent Decree (other than penalty payments), BP and the relevanttax authority can take up this legal question under the applicable tax law.
[/QUOTE]
I don’t know how their insurance is structured, especially for liability. Historically, BP is self insured, so the payout or some portion of it may be covered by some form of insurance, which would likely not be claimable. Now, can the Captive make a business expense claim? No idea. Not a tax guy. . .
Maybe we will see …
“The tax deductibility of settlements has rankled some members of Congress. Last September, the Senate passed a bill sponsored by Sens. Elizabeth Warren, D-Mass., and James Lankford, R-Okla., to require disclosure of how companies’ settlements are classified for tax purposes. A similar measure is pending in the House of Representatives”
[QUOTE=Steamer;182869]Maybe we will see …
“The tax deductibility of settlements has rankled some members of Congress. Last September, the Senate passed a bill sponsored by Sens. Elizabeth Warren, D-Mass., and James Lankford, R-Okla., to require disclosure of how companies’ settlements are classified for tax purposes. A similar measure is pending in the House of Representatives”
Yes, we will. Of course, Congress just could have made such natural resource damage payments non-deductible like they did penalties. BP and DOJ have to play by the rules, not make law. I don’t know why these reporters speak with such assurance about deductibility. The cases the blogger quotes above are from the mortgage crisis, and those weren’t entirely deductible and are a different animal from the additional costs to BP. I just wish we had an informative media instead of one that inflames. But that would actually require research, and no one has time for that in media anymore.