BP Might Request $10 Billion Tax Credit For Clean-up Efforts

From the Washington Post:
The company disclosed its intentions as part of its second-quarter earnings report, in which it said it would record a $32.2 billion charge to reflect the costs of the spill.

Under U.S. corporate tax law, companies can take credits on up to 35 percent of their losses.

On Tuesday, White House press secretary Robert Gibbs said U.S. taxpayers would not be responsible for the cost of the spill. When asked whether BP should be claiming a credit, Gibbs said, "I don't think anybody would prefer that they do that."

Gibbs would not say whether the president would press BP on the tax deduction. He said, though, that "there are tax laws in this country that have been written for quite some time."

Policymakers crafted the tax code this way so that companies can spread their profits and losses over more than just one calendar year. Let's say a company makes $100 billion one year and pays the U.S. corporate tax rate of 35 percent, or $35 billion. The next year, the economy goes south, and the company loses $100 billion. Over those two years, the company made nothing but still paid $35 billion in taxes.

From the tax code's perspective, the company overpaid in previous years. To rectify this, companies can claim a credit, also at the 35 percent rate. Companies can seek a refund for taxes paid from the previous two years or, if there's money leftover, carry the credit forward up to 20 years.

Robert Willens, a corporate tax expert, said it's unlikely that BP will give up its tax credit, even if faced with public opposition. The company voluntarily established the $20 billion escrow account for victims of the spill and never promised the government that it would not seek any deductions associated with the spill, he said.

Considering all the damage the Gulf oil spill has done and the unforeseen effects it will have on the economy and ocean life in the future, this is very selfish of BP when it comes to the American tax payers.