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Today’s Top Headlines




BP Seeks USD10bn Tax Credit

by Leroy Baker, Tax-News.com, New York

29 July 2010

BP has included a tax credit claim of almost USD10bn in its second quarter results as the company seeks to mitigate the impact of the Gulf of Mexico oil spill on its finances - a move which is unlikely to pour oil on troubled political waters.

BP's group income statement for the second quarter reflects a pre-tax charge of USD32.2bn related to the oil spill and a tax credit of USD9.79bn.

Under US tax laws, BP, like any other company operating in America, is perfectly entitled to deduct a proportion of its losses against US tax, but there is likely to be a lively debate in Washington over the matter in the days ahead.

When asked whether pressure would be brought to bear by the administration on BP to forgo the tax credit, White House spokesman Robert Gibbs replied that: "American taxpayers will not be responsible for any costs related to the spill."

However, Gibbs refused to confirm that BP will be asked by President Obama not to claim the credit.

"The administration will ensure that any action that BP takes... respects the law as it is," he said. "I don’t think anybody would prefer that they do that (claim the credit). There are tax laws in this country that have been written for quite some time."

Gibbs somewhat opaque comments reflect perhaps the fact that legally, the US government can do very little to prevent BP from claiming the tax credit. However, rumblings of discontent are already beginning to surface among Congressional Democrats; Rep. James Oberstar, the Democratic chairman of the committee on transportation and infrastructure, remarked in a statement that BP's decision to claim the tax credit was "nothing short of reprehensible." It is thought that the tax-writing Ways and Means Committee, chaired by Michigan Democrat Sander Levin, may seek a change of law in this area.

There is also concern that BP could claim a deduction for the USD20bn escrow fund that it has agreed to set up to compensate victims of the oil spill along the Gulf coast, although the company is not expected to do so.

TAGS: tax | business | law | corporation tax | oil and gas | multinationals | United States

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